Solving the climate crisis requires increased capital spending, both public and private. And much more money is needed than is being invested now.
Funding for the fight against climate change averaged $632 billion in 2019 and 2020, an impressive amount at first glance. However, against these rough estimates, the Climate Policy Initiative 1 calculates that to meet the goal of limiting global warming to 1.5˚C, capital spending on sustainability projects would need to increase five or six times, to exceed 4 trillion dollars in 2030.
Where should this money come from and what are the priorities in terms of investment?
It is not yet clear whether governments will make real progress at the United Nations Climate Change Conference (COP26), but we do know that they are backed by a large number of companies, financial institutions and youth groups advocating for action more decisive. With the right public policies, the private sector will be able to commit investment capital more quickly.
Despite the fact that financing against climate change has increased and new commitments have been announced, the UN Secretary-General has called it “illusory” to think that these commitments will be enough.
Nearly half of the emissions reductions needed by 2050 depend on technologies that are still in the early stages of development.
How much money?
The report, commissioned by Britain and Egypt as past and current hosts of the UN summit, says developing countries alone need $1 trillion a year in combined external funding to meet the targets set out in their Nationally Determined Contributions, o NDC (the climate action plan established in the Paris Agreement).
Estimates of how much money it would take to end global climate change range from $300 billion to $50 trillion over the next two decades.
This funding, in addition to countries’ own spending, is needed for things like reducing emissions, coping with deadly disasters, and restoring nature. In an encouraging development, it was reported on November 11 that the United States and Japan would provide Indonesia with at least $15 billion to help retire some coal-fired power plants early.
Climate action in developing countries
To make it a reality, significant investments are needed and international cooperation is essential. More than a decade ago, developed countries pledged to jointly contribute $100 billion a year by 2020 in support of climate action in developing countries.
That may sound like a lot, but compare it to global military spending in 2020, which was estimated at just under $2 trillion, or the trillions of dollars spent by developed countries on COVID-19- related aid to their citizens.
According to an expert report prepared at the request of the UN Secretary-General, the goal of allocating 100,000 million dollars to those nations is not being met (the latest data available for 2018 is 79,000 million dollars), despite the fact that the Climate-related finance is on an “upward trajectory.”
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