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Global Financial Pact on Climate Change: Key Takeaways

GS Paper 3

 Syllabus: Environment Change

 

Source: IE, DTE

Context: Recently, a summit called the ‘Global Financial Pact on Climate Change’ was held in Paris. Prior to the summit, we had covered expectation from it: Here. This article covers the agreements reached at the summit.

 

Aim of the summit: To boost crisis financing for low-income states and ease their debt burdens, reform post-war financial systems and free up funds to tackle climate change.

 

Outcomes of the summit:

Description
Additional lending capacity An additional lending capacity of $200 billion for Multi-Development Banks (MDBs) to support emerging economies in addressing climate challenges.
World Bank: Suspension of debt payment The World Bank announced disaster clauses for debt deals, suspending debt payments in case of extreme weather events, and providing financial relief.
IMF measures $100 billion is to be provided to poorer countries through Special Drawing Rights (SDRs), an international reserve provided by the IMF.
Proposal to recycle SDRs from rich countries to poor countries, expanding the amount of concessional finance available for developing countries.
Just Energy Transition Partnerships (JETP) for Senegal Announcement of a new 2.5 billion Euro Just Energy Transition Partnerships (JETP) deal for Senegal, aimed at increasing the renewable share in the energy mix.
Polluter taxes Momentum on polluter taxes accelerated, promoting the implementation of pollution taxes as a means to discourage environmentally harmful practices.
Review on Debt Proposal for a Global Expert Review on Debt, Nature, and Climate to assess the impact of debt on low- and medium-income countries’ capacity.
EU measure EU unveiled a call to action on ‘Paris Aligned Carbon Markets’ with the goal of covering at least 60 per cent of global emissions with carbon pricing mechanisms for climate alignment.
$100 billion climate finance goal Commitment to delivering the long-overdue $100 billion climate finance goal in the current year (2023) to support developing countries efforts.

 

Concerns with the Pact:

The current commitment of $100 billion represents a fraction of the amount required by the Global South to develop resilience against climate change (estimated to be $2 trillion annually by 2030 for developing countries (excluding China)).

 

Conclusion:

Instead of support from the developed nation, loans currently constitute the primary source of funds for climate financing. Therefore, financing support from developed countries must be fulfilled as soon as possible.

 

Insta Links:

Issues with Climate Finance

 

Mains Links: 

Discuss the significance of climate finance for developing countries and the key challenges they face in accessing climate finance. (15M)

 

Prelims Links:

“Climate Action Tracker” which emission reduction pledges of different countries are a: (UPSC 2022)

(a) Database created by a coalition of research organisations
(b) Wing of “International Panel of Climate Change”
(c) Committee under “United Nations Framework Convention on Climate Change”
(d) Agency promoted and financed by the United Nations Environment Programme and World Bank.

Answer – A