Climate Finance

Syllabus: GS3/Environment

Context

• India has emerged as a vocal leader among developing nations, reigniting the debate over climate finance obligations, at the ongoing climate talks in Bonn, Germany.

About Climate Finance

• It refers to local, national, or transnational funding — sourced from public, private, and alternative channels — that supports mitigation and adaptation actions to address climate change.
• It is grounded in the principle of Common But Differentiated Responsibilities (CBDR), recognizing that developed countries must provide financial support to those with fewer resources and greater vulnerability.

Roadmap of Climate Finance

• At COP29 in Baku, the global community adopted the Baku to Belém Roadmap (B2B Roadmap) as part of the New Collective Quantified Goal (NCQG) on climate finance.
• It aims to scale up climate finance to $1.3 trillion annually by 2035, a significant leap from the unmet $100 billion annual pledge made in 2009.
  • Rio Declaration (1992) formally introduced the polluter-pays principle.

Why Climate Finance Is Essential?

• Bridging the Adaptation Gap: Adaptation remains underfunded compared to mitigation.
  • Developing countries need financial support to build resilient infrastructure, climate-smart agriculture, and early warning systems.
• Enabling Mitigation at Scale: Transitioning to clean energy, improving energy efficiency, and reducing emissions in sectors like transport and industry demand large-scale investments.
  • Without climate finance, many developing nations cannot meet their NDCs under the Paris Agreement.
• Addressing Equity and Justice: Developed nations, historically responsible for the bulk of emissions, are obligated to support those who contributed least but suffer most.

Key Concerns

• For Developing Nations:
  • Sovereignty and Conditionality: Developing countries, including India, have raised concerns about the imposition of external conditions on finance delivery.
    • The G77 and China bloc emphasized that climate finance must respect national priorities.
  • Shift from Provision to Mobilization: India, speaking on behalf of the Like-Minded Developing Countries (LMDCs), reiterated that climate finance is a legal obligation, not an investment opportunity.
  • Adaptation vs. Mitigation Imbalance: While mitigation projects — like renewable energy — attract more funding, adaptation efforts remain underfunded.
    • It affects vulnerable communities in the Global South, who face the brunt of climate impacts.
• For Developed Nations:
  • Expanding Donor Base: Some developed countries argue that emerging economies like China and Gulf nations should contribute to climate finance, citing their economic strength.
  • Private Sector Reliance: Developed nations increasingly advocate for private-sector-led finance, raising concerns about transparency, equity, and alignment with public interest.

India’s Climate Finance Landscape

• India’s Global Advocacy: India has consistently emphasized the legal obligation of developed nations under Article 9.1 of the Paris Agreement to provide climate finance.
• India has received approximately USD 1.16 billion in climate finance through UN mechanisms — comprising funds from the Green Climate Fund, Global Environment Facility, and Adaptation Fund.
  • Most of India’s climate action, including large-scale renewable energy deployment and adaptation programs, is financed through domestic resources.
• India & Adaptation: The Economic Survey 2024–25 highlights the development of a National Adaptation Plan (NAP) and the submission of an Initial Adaptation Communication (IAC) to the UNFCCC. These include:
  • Climate-resilient agriculture through improved seeds and soil health.
  • Urban adaptation via the National Mission on Sustainable Habitat (NMSH).
  • Water body rejuvenation under AMRUT, with over 3,000 projects approved.

Source: IE