The $100billion refers to the commitments that industrialised countries made to mobilise each year under the United Nations Framework Convention on Climate Change (UNFCCC). This is not all about development assistance, it also includes a mix of other public and private finance, although what exactly counts as climate finance remains contentious.
Instead of begrudgingly creeping towards meeting their commitments, countries should embrace climate finance as a good investment. It is increasingly clear that low-carbon economic development is compatible with more equitable growth and poverty eradication. Climate finance can also avoid locking developing countries into a future of dead-end, fossil fuel-dependent assets.
Mobilising such resources may present a challenge for countries in the throes of austerity at home, but if we want continued global prosperity – not to mention an end to poverty – we have to find the money.
“The solution isn't just to raise new money, but to phase out high-carbon investments”
Deliberations on long-term finance at Bonn did not tackle the question of reaching the $100billion target – discussions were about scaling up and accessing adaptation finance – but they implicitly helped to make this point. Adaptation finance builds resilience to climate change, but it can also build resilience to other non-climate related shocks.
The Caribbean Catastrophe Risk Facility, for example, offers insurance solutions that go beyond climate risk, and provides vulnerable countries with risk management tools that impact wider production, investment and consumption decisions. These solutions, as part of greater investments in resilience and disaster risk reduction, are attracting growing attention.
The G7 communiqué commits to extend access to direct or indirect insurance cover against climate-related hazards for up to 400 million people, and support further development of early warning systems. It isn’t yet clear how these goals might be achieved as part of wider efforts to strengthen resilience and manage disaster risk.
As the host of the G7 Summit, Germany has sent an important signal on long-term finance in the lead up to the Paris negotiations. We now need to see a wider role for finance in implementing a new climate agreement. Estimates of how much money will be needed to get to a low-carbon, climate-resilient global economy are much, much higher – in the trillions.
The solution isn’t just to raise new money, but to phase out high-carbon investments. The renewed commitment to phase out fossil fuels and reform export credits to support climate action are welcome steps to this end. The commitment to expanding support for vulnerable countries in managing climate-related disaster risk is another step forward.
In practice, the $100billion figure is largely political, representing a commitment to solving a problem for which developed countries are mostly responsible. The communiqué affirms the $100billion goal and the central role of the Green Climate Fund in this context. But finding a practical way to meet this goal by Paris will be crucial. The G7 must now spell out how they will reach the target to inject much-needed trust and faith in a vital, but fragile process.