Fairer Futures: Financing Global Climate Solutions


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FAIRER FUTURES: FINANCING GLOBAL CLIMATE SOLUTIONS

Cover: Vanuatu: Leitamat, 50, at her home where she raises poultry and grows vegetables with support from Oxfam partner Farm Support Association. Credit: Artur Francisco/Oxfam NZ
This page: A woman leading clean-up efforts after Cyclone Pam devastated the island of Tanna, in Vanuatu. Credit: ActionAid/Jeff Tan

Contents

Executive Summary

05

1. Introduction

06

2. Recommendations

08

3. Building on Australia’s Leadership in International Climate Finance

09

4. Roadmap for Australia to Contribute its Climate Finance Fair Share

12

5. Standalone Loss and Damage Finance

18

6. Identifying Existing Resources to Channel into Climate Finance

20

7. Opportunities to Support Locally Led and Gender Responsive Climate Solutions

21

8. Conclusion

23

Annex 1: Methodology

24

Endnotes

28

Acknowledgements
Fairer Futures: Fairer Futures: Financing Global Climate Solutions was created through a collaboration within the Climate Action Network Australia (CANA) co-led by Oxfam Australia, ActionAid Australia, Climate Council, The Australia Institute, Edmund Rice Centre and Greenpeace. In collaborating, we drive collective action to seek major policy and practice changes that can improve people’s lives.
Co-authors: PJ Jacobs, Sophie Hardefeldt, Melissa Bungcaras, Rhiannon Verschuer and Simon Bradshaw.
Acknowledgements: We acknowledge the assistance of Alia Armistead, Corine Fagueret, Jale Samuwai, Jan Kowalzig, Ilisapeci Masivesi, Julie-Anne Richards, Kavita Naidu, Katherine Tu, Nina Crawley, Rod Goodbun, Steph Hodgins-May. Thank you to Oxfam in the Pacific for your insights, recommendations and illustrations of changes needed for climate finance in the Pacific.
Published: October 2021
Editor: Sophie Raynor Designer: Tahnee Le Pine

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Loreto Island, Malaita Province, Solomon Islands: An aerial view from a drone of Loreto Island, off the coast of Malaita, which is under threat from rising sea levels. Credit: Collin Leafasia/Oxfam
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Pakistan: Gudi (in red) and her family have experienced poor crop yield due to drought and salination worsened by climate change. Credit: Oxfam in Pakistan
executive summary
How we respond to climate change over the next decade will determine the fate of billions of people globally, and the stability and prosperity of our region. Ambitious international climate finance pledges, alongside bold domestic emission reduction targets, is critical for successful and just global climate solutions.
Wealthy governments have fallen short in meeting the USD 100 billion climate finance commitment by 2020 and current pledges up to 2025 will leave low-income countries up to USD 75 billion out of pocket. This finance shortfall is unfairly pushing the costs of the climate crisis on to those least responsible for it. Australia has had important periods of climate finance leadership over the past decade, but it is currently not contributing its fair share towards global climate solutions. Australia has the responsibility and capability to expand climate finance commitments and ensure that low-income countries, including our Pacific Island neighbours, can adapt to worsening climate impacts. Based on Australia’s wealth and greenhouse gas emissions, Australia’s fair share is estimated at 2.5 per cent of global climate action. Australia can achieve this fair share by immediately doubling its climate finance commitments to $3 billion over 2020-2025; recommitting between $700-900 million to the Green Climate Fund by 2023; and progressively increasing its financing to achieve its fair share of $12 billion annually by 2030. Australia’s domestic and international response to the COVID-19 pandemic demonstrates our willingness and capacity to mobilise resources in times of great need. Providing its fair share will ensure that Australia and lowincome countries across the world can implement the Paris Agreement and limit global warming to 1.5° Celsius.
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1. Introduction
Climate change is the single greatest threat facing humanity. From deadly cyclones in Asia and Central America, to huge locust swarms across Africa, to unprecedented heatwaves and bushfires across the United States, Europe and Australia, climate change is turbo-charging weather-related disasters and threatening the very existence of communities worldwide. The August 2021 Intergovernmental Panel on Climate Change (IPCC) report confirmed global warming of 1.1o Celsius has already taken a severe toll on communities globally – with worse to come.1
The outlook is particularly bleak for low-income countries,2 which already bear the brunt of some of the most severe aspects of climate change, despite not being responsible for the majority of greenhouse gas emissions. Across the Pacific, where communities face the existential threat of rising sea levels, leaders have described climate change as “the single greatest threat to the livelihoods, security and wellbeing of the peoples of the Pacific”.3 Low-income countries must meet this threat while simultaneously responding to the devastating COVID-19 pandemic on an already stretched public budget and rising levels of debt.
International agreement to increase climate financing would support the rights, needs and interests of affected communities as they face the compounding impacts of the climate crisis and COVID-19 pandemic. The 26th Conference of the Parties (COP26), to be held in Glasgow in November 2021 offers a critical opportunity for governments to set the agenda for future climate change action. The historic pledge of USD 100 billion per year in international climate financing made by wealthy countries4 at COP15 in 2009 will be high on Glasgow’s agenda. Now, more than ever, fair, accessible, and reliable climate finance is critical to the sustainability and resilience of lowincome countries as they prepare to face these compounding crises.
It is estimated that climate change could drive a further 122 million people into extreme poverty by 2030.5
Climate change is undermining human rights for communities around the world. The environmental degradation and extreme weather events caused by climate change threaten livelihoods, food security, homes, and safety – imperilling people’s human rights. The need for financing to enable communities in low-income countries to respond to the climate crisis is becoming increasingly urgent and stark. Yet international climate finance pledges have fallen far short of global need. COP26 provides the opportunity for a new level of global ambition and collective action.
Actions taken at COP26 will inform subsequent international negotiations and will need to be strengthened as the decade progresses. Australia’s leadership is critical to ensure this opportunity for global collective action is not missed. This report provides a pathway for Australia to provide its fair share of international climate finance through a progressive expansion of commitments over the coming decade. By increasing its international climate finance commitments, Australia can play a leading role in strengthening regional and global responses to climate change, improving relationships with our Pacific Island neighbours, and ensuring that the world’s poorest communities are not saddled with the rising costs of the climate crisis.
How we respond to climate change over the next decade will determine the fate of billions of people globally, and the stability and prosperity of our region. Ambitious international climate finance pledges, alongside bold domestic emission reduction targets, is critical for successful and just global climate solutions. Adding enhanced climate financing to its suite of engagement measures will also enable Australia to fully achieve its foreign policy objectives, including by activating greater trade and investment into the region.6 Australia can benefit greatly in terms of its reputation and influence globally and in the Pacific region by reclaiming its leadership role in climate finance. Ultimately, this will also play an important role in facilitating global peace, stability and prosperity.
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Dorah sells her produce at the women’s climate resilience markets in Eton, Vanuatu established by the Women I TokTok Tugeta forum to support alternative livelihoods. Credit: ActionAid
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2. recommendations
To adapt and respond to the climate crisis, wealthy countries must rise to the challenge and demonstrate global leadership. As a leader in the Asia-Pacific region, Australia has a unique role to play in mobilising climate finance to shape and strengthen the way our world responds to climate change.
Australia was instrumental in discussions at COP15 that led to the establishment of the USD100 billion climate financing goal. Since then, the strengths of Australia’s climate finance have included the equal distribution of finance between mitigation and adaptation and its delivery thought grants rather than loans.7 However, Australia currently sits near the bottom of global rankings for financing commitments and broader climate action.8 This report outlines the actions needed to bring Australia back to the forefront of global climate cooperation and to reclaim its place as a global leader on climate finance. It provides a roadmap for Australia to contribute its fair share of reliable and accessible climate finance through a progressive expansion of climate finance commitments over the coming decade, including for mitigation and adaptation as well as for loss and damage financing.
Specifically, we recommend that the Australian Government:
1. Scale up Australia’s contributions to global climate finance in three stages to 2030; these stages are:
· Immediately double Australia’s current climate finance to $3 billion over 2020-2025. · By 2023, shape regional and global climate responses by committing an additional $700 - $990 million to the
Green Climate Fund. · By 2030, scale up Australia’s climate finance to meet its fair share of $12 billion annually.
2. Support a standalone finance arm for loss and damage in the United Nations Framework Convention on Climate Change (UNFCCC):
· Provide financial support and compensation to the most vulnerable communities, who are already experiencing loss and damage.
· Ensure this finance is met through public and innovative sources that adhere to human rights principles.
3. Channel fossil fuel subsidies into climate finance
· Cease federal subsidies to fossil fuel industries and reallocate funding to climate finance. · Cease providing any official development assistance, foreign investment, export credit or trade promotion that
supports fossil fuel extraction.
4. Prioritise locally led, gender-responsive climate finance to ensure projects:
· Align with the priorities of countries and communities that receive climate finance, including Pacific Island Countries. · Support local leadership including women, men, gender-diverse and young people to lead efforts to adapt to
climate change. · Prioritise the most vulnerable countries and communities. · Promote gender justice, human rights and social inclusion. · Ensure support to communities is adequate and accessible, particularly to diverse groups, including feminist and
women-led organisations. · Supporting the goals of the Paris Agreement, in particular, keeping warming to less than 1.5o Celsius.
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Support worker Oliver teaches rural communities in Vanautu new agricultural and farming techniques. Credit: Artur Francisco/Oxfam NZ
3. Building on Australia’s Leadership in International Climate Finance
More than a decade ago, Australia, along with other wealthy countries, committed to mobilising USD 100 billion per year by 2020 to support low-income countries adapt to the impacts of climate change and reduce their emissions.9 This was an historic agreement that came after many years of advocacy from low-income countries, and remains a critical component of the Paris Agreement. While wealthy countries have mobilised significant funds to meet this target, they are expected to fall up to USD 75 billion short of fulfilling their pledge over 2020-2025.10 COP26 is a crucial milestone to take stock of action to date to meet the global climate finance target.
Based on current plans and pledges, annual contributions up to 2025 are predicted to reach between USD 93 billion and USD 95 billion per year – still falling short of the USD 100 billion goal, five years after it should have been first met.11 This means that climate-vulnerable countries will miss out on USD 68 billion and USD 75 billion in total between 2020-2025.12 Leadership from wealthy countries at COP26 is vital to resume progress towards this target and ensure recipient countries receive the financing they need to meet the challenge of climate change.
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Australia enters COP26 with the opportunity to re-establish itself as a climate finance leader – a position akin to the leadership role it played in establishing the USD 100 billion target in the breakthrough discussions at COP15 in 2009. In these discussions, Australia’s contributions were instrumental in the establishment of the Green Climate Fund (GCF). The GCF is a key multilateral channel for delivering on the global USD 100 billion target and is a critical source of funding for low-income countries, including Australia’s Pacific Island neighbours. Australia’s leadership, including its early role on the GCF board, saw USD 165 million directed to the Pacific region by 2016, building the resilience of livelihoods, homes and communities to protect people’s basic human rights in the face of disaster.13
Recently, Australia has favoured funding bilateral climate finance through its aid program, with the Government directing $1 billion to climate finance between 2015-2020.14 This has reflected an increasing focus on Australia’s national interest in both aid and climate financing. Australia’s withdrawal from the GCF in 2018 represents a lost opportunity to work in collaboration with low-income countries to ensure that global climate financing reflects the needs and priorities of those most impacted by climate change, and to assist partners across the region to access a fairer share of global climate financing.15
The launch of the Department of Foreign Affairs and Trade’s (DFAT) Climate Change Action Strategy in 2019 demonstrated Australia’s ongoing commitment to supporting international climate responses, and provides a sound framework for addressing climate change through the Australian aid budget.16 However, Australia’s climate finance commitments remain well below its international fair share17, even after increasing its climate financing contribution to $1.5 billion over 2020-2025, including $500 million to the Pacific.18
Climate finance also continues to come from within Australia’s aid budget, which has been cut dramatically since 2013. This is contrary to the agreement reached in the Copenhagen Accord in 2009, which stated that ‘scaled-up, new and additional, predictable and adequate funding shall be provided to developing country Parties.’19 Taking climate finance from an already stretched aid budget puts additional demands on aid funding, which at 0.21 per cent of gross national income (GNI) is already well below Australia’s international obligation of 0.7 per cent of GNI.
A hallmark of Australia’s contribution to climate finance to date is the equal distribution of funding between climate mitigation and adaptation, and its delivery through grants rather than loans. This has distinguished Australia’s support from that of many other wealthy countries, and bucks the worrying global trend of climate finance being heavily skewed towards mitigation at the expense of adaptation efforts, despite low-income countries consistently calling for an increase in adaptation financing.20 Australia’s focus on grant financing also contrasts with other wealthy countries’ increasing reliance on climate financing loans, which risks saddling low-income countries with additional debt. In a context where COVID-19 has increased low-income countries’ debt distress, including across the Pacific, Australia should continue to prioritise grant funding so that climate responses do not compound existing challenges.
Australia’s approach to climate financing has significant strengths. However, as low-income countries battle the COVID-19 pandemic and extreme poverty rises for the first time in a decade, leadership on climate financing is more critical than ever. A strong outcome at COP26 will not be possible without concrete and robust climate finance pledges from wealthy countries. Australia has an opportunity to rise to this challenge by announcing an immediate doubling of its climate finance contribution. Such an increase would signal its commitment to global cooperation and coordination, which is critical to support truly ambitious and equitable climate solutions that are vital for global peace, stability and prosperity.
Bold and ambitious climate finance pledges from wealthy countries are critical in ensuring that those least responsible for the climate crisis are not left bearing the worst impacts.
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Fairer Futures: Financing Global Climate Solutions