It’s been seven years! In Paris, all countries agreed to shift finance flows to be consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. Despite this pledge, countries have done the opposite. Fossil fuel subsidies have continued to increase and 2.1c has been kept away from the agenda.
Since the Paris Agreement was adopted, G20 governments have continued to finance more than US$77 billion dollars annually in fossil fuels – three times the support they provide to clean energy. These high emitting countries use multilateral development banks (MDBs), bilateral development finance institutions (DFIs), and export credit agencies (ECAs) to support the expansion of projects that are making us poorer and more vulnerable to the climate crisis.
We need political courage. The Paris Agreement has called for a new global paradigm of how finance flows both domestically and internationally, echoed in many of the contributions at the world leaders summit. And yet we see countries coming to COP27 to sign new, dangerous, fossil finance deals. This must stop. There is no space for exceptions.
The trillions (trillions!), are there. ECO is calling for a process that helps identify what’s blocking us from aligning financial flows, both public and private, with a real zero future and keeping the global warming below the 1.5°C limit. 2.1c is a crucial element in that discussion and ECO can’t believe that it has thus far been left off the agenda.
So… shift the trillions…
In Glasgow we started a discussion to phase down fossil fuels. We now need to move faster. We need to phase out all the harmful financial flows, including those going into fossil fuels and harmful industrial agriculture, that are literally setting the world on fire.
We indeed need to shift all the trillions to the green pathway, which does not include gas or any other fossil fuel, despite what the EU taxonomy may say. ECO sees increasing the cost of harmful capital flows that are not consistent with the global pathway towards low greenhouse gas emissions and climate-resilient development, as a crucial step towards fulfilling article 2.1c of the Paris Agreement.
It’s not rocket science – and does not have to happen overnight – but we need to start that discussion now at COP27, not put it off in what seems like perpetuity. And so, we need a permanent agenda item on article 2.1c that will discuss this shift in a properly balanced manner. One that does not undermine or distract from climate finance negotiations.
While delivering billions…
ECO reiterates that delivering on the commitments under climate finance are essential to regain trust of developing. Countries can do this by delivering on their $100bn commitment. Although Article 2.1c offers opportunities to generate new flows of climate finance to this end. The global shift in financial flows does not get donors off the hook – as greening the finance is one thing, but channelling proper funding to developing countries, especially the most vulnerable ones, is something else. The New Collective Quantified Goal and new Loss and Damage Finance Facility must still be finalised and deliver on their objectives, to prove that developed countries are acting in good faith.
The finance must flow to developing countries in line with obligations and in full spirit of solidarity, cooperation, historical responsibility and equity. ECO highlights that the eventual cost of financial inaction now will be much higher than the trillions of dollars required for operationalization of both NCQG and LDFF.