Adapting to climate change would cost half a trillion dollars in 2050

The United Nations Conference on Trade and Development (UNCTAD) has released this Thursday the second part of the Report on Trade and Development 2021 in which it proposes reforms to the international financial system to ensure that funds for adaptation to climate change flow to developing countries.

Released with a view to the UN's COP26 climate summit, the report calls for a transformative approach to climate adaptation, in which advanced economies must ensure that multilateral institutions can help developing countries manage the pressures of climate change without compromising their development goals.

Adapting to climate change

Estimates indicate that the annual costs of climate adaptation in developing countries could reach $ 300 billion by 2030. Furthermore, if mitigation targets are not met, the annual cost would add up to $ 500 billion by 2050. However, current financing is less than a quarter of the referenced figure for 2030, and the report warns that even with private financing, such a scale will not be reached, nor will it reach the countries most in need.

UNCTAD Secretary-General Rebeca Grynspan urged “to deliver on the promise of $ 100 billion a year for the Green Climate Fund. It is a must in Glasgow. But aligning ambition and action will require an even greater and concerted reform effort at the multilateral level. Ensuring adequate funding is essential for developing countries to adapt to the increasingly severe effects of continuing climate change. Climate change has no borders, so our strategy to adapt to it must be coordinated at the global level”.

Jaideep Mukherji, CEO at Smart Power India said that “the 26th edition of the Emissions Gap Report 2021 suggests that the world is on track for a global temperature rise of 2.7 degrees Celsius, which is well above the target of 1.5 degrees celsius. The world needs a 55 percent reduction in emissions in the next eight years that cannot be achieved without clearly planned mitigation measures".

He added "developing countries like India have the advantage of avoiding huge investment in infrastructure that is dependent on fossil fuels and can leapfrog to renewables. Mini-grids here play a pivotal role in replacing the regular usage of fossil fuels like diesel and ensure equitable access to electricity for both commercial and household purposes”

UNCTAD report proposes

• Official development assistance (ODA) commitments must be met and exceeded to increase the share of additional financing to adapt to climate change and build resilience. If the G7 countries had met the target of 0.7% ODA by 2020, an additional $ 155 billion would be available to meet development goals.

• Debt relief and restructuring for  developing countries must be firmly on the climate agenda. An obvious place to start would be the debt of the V20 group of countries vulnerable to climate change; But the link between the climate and debt crises highlights the need for more systemic reforms in the international debt architecture.

• Multilateral development banks need additional capital to finance climate adaptation through “extremely concessional loans and grants”. These could be financed by a green bond and a Tobin-type tax, or by redirecting subsidies to fossil fuels.

• Green bond markets  are a possible long-term financing mechanism. However, regulatory standards are lagging behind the advancement of these markets and “greenwashing” is widespread. Given the magnitude of the challenge, the regulatory framework for the green bond market must be supported by the availability of adequate funds and personnel, both domestically and internationally.

Trade at the service of climate adaptation

The Report notes with concern that many of the gaining traction reform initiatives in the international trading system continue to downplay the deep divisions and asymmetries that currently structure the global economy.

It suggests that national trade policies can, at best, play a complementary role in achieving climate goals, while poorly designed international trade rules will hamper a green transformation.

Expanding the policy space with legal instruments such as waivers and peace clauses in the World Trade Organization (WTO) could better help developing countries to deploy capacities to move towards climate goals.

Declaration on TRIPS

UNCTAD warns that the push to liberalize trade in environmental goods and services will primarily benefit exporters in developed countries and limit the fiscal space of developing countries.

The report estimates that developing countries and least developed countries will lose $ 15 billion annually in tariff revenue if such a liberalizing approach is applied. (Adapting to climate change)

He warns against the Border Carbon Adjustment Mechanism (CBAM) which would only compound the damage of climate change in many developing countries by undermining their export capabilities, making the challenge of structural transformation even more uphill. UNCTAD says that critical green technologies must be classified as public goods and accessible to all.

The international community could support initiatives to modify the rules governing intellectual property rights, expanding the flexibilities of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS; TRIPS) for developing countries, so that they cover climate-related goods and services. Such support could be given, for example, through a Declaration on TRIPS and Climate Change at a WTO ministerial meeting.

This would offer a platform that sparks innovative mechanisms to promote access to critical green technologies protected by patents to support adaptation and mitigation efforts.

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