Issues in provision of adequate level of climate finance

The World Bank Group (WBG) in its 2023 released ‘Pakistan – Country climate and development report’ pointed out that’The total investment needs for a comprehensive response to Pakistan’s climate and development challenges between 2023 and 2030 amount to around US$348 billion… This consists of US$ 152 billion for adaptation and resilience and US$196 billion for deep decarbonization…’

Although the Report rightly indicates the estimate to be on the lower side as follows ‘due to the unavailability of data on the investment needs of key transformations, such as a sustainable agri-food system, flood risk management plan, shock-responsive social protection system, and climate-resilient rural connectivity’ even then the estimated amount of US$348 billion for eight years (2023-2030), or around US$43.5 billion annually is a gross underestimation.

This is because Pakistan is among the top-ten climate change vulnerable countries where, according to United Nations Development Programme (UNDP), Pakistan is the 8th most climate change vulnerable country and that the global estimation of climate finance needs are astronomical, whereby according to the ‘Third report of the independent high-level expert group’ [IHLEG] annual climate finance needs to reach US$1 trillion by 2030, and US$1.3 trillion by 2035!

Moreover, the WBG’s Report itself highlighted significant changes already being seen in the shape of heat waves, and floods for instance, which means likely increases in initial estimates of climate disasters over time, and also an overall upward-evolving climate finance related amounts for creating resilience, and adaptation as the pace of climate change crisis continues to pick up. Hence, the WBG needs to see the likely immense under-estimation of Pakistan’s climate change related needs with regard to even adaptation, resilience, and decarbonization.

For instance, in the Report’s preface, it was pointed out that ’In 2022, Pakistan endured devastating droughts and floods that destroyed assets, lives, and livelihoods on a massive scale.

First, a severe heatwave, previously a 1-in-1000-year event, saw temperatures continuously above 45°C, resulting in crop losses, power outages, and forest fires. Then came the unprecedented monsoon rains, the heaviest and most concentrated ever recorded. …The recently published Post-Disaster Needs Assessment (PDNA) for the 2022 floods estimates total damages in excess of US$14.9 billion and total economic losses of about US$15.2 billion…Estimated needs for rehabilitation and resilient reconstruction are at least US$16.3 billion…’Having said that, according to a February 2025 released report by ‘Germanwatch’ that figure increased to US$54 billion on account of economic loss by floods in 2022, which once again points out very low estimation by the WBG of climate change needs of the country.

There is also a race against time. Scientific evidence indicates climate change has already turned a corner in terms of increasing pace, generally in terms of the last few decades, and particularly during the last few years, where each successive year has broken previous years’ average annual global warming temperature.

According to the ‘Climate Change 2023 Synthesis Report’ by Intergovernmental Panel on Climate Change (IPCC), it was pointed out in this regard that ’It is virtually certain that hot extremes (including heatwaves) have become more frequent and more intense across most land regions since the 1950s…, while cold extremes (including cold waves) have become less frequent and less severe, with high confidence that human-caused climate change is the main driver of these changes.

Marine heatwaves have approximately doubled in frequency since the 1980s (high confidence), and human influence has very likely contributed to most of them since at least 2006.

The frequency and intensity of heavy precipitation events have increased since the 1950s over most land areas for which observational data are sufficient for trend analysis (high confidence), and human-caused climate change is likely the main driver… Human-caused climate change has contributed to increases in agricultural and ecological droughts in some regions due to increased land evapotranspiration (medium confidence)… It is likely that the global proportion of major… tropical cyclone occurrence has increased over the last four decades.’

Not only that, 2024 even likely broke the threshold of 1.5°C, as pointed out by World Meteorological Organization’s (WMO’s) secretary-general, in her foreword to WMO’s recently released ‘State of the global climate 2024’ report, where Prof. Celeste Saulo pointed out that ’The annually averaged global mean near-surface temperature in 2024 was 1.55 °C ± 0.13 °C above the 1850–1900 average. This is the warmest year in the 175-year observational record, beating the previous record set only the year before.

While a single year above 1.5°C of warming does not indicate that the long-term temperature goals of the Paris Agreement are out of reach, it is a wake-up call that we are increasing the risks to our lives, economies and the planet.

Over the course of 2024, our oceans continued to warm, sea levels continued to rise, and acidification increased.’

Hence, not only is the provision of adequate level of climate finance to developing countries paramount, it is important that both the Bretton Woods institutions, and the sovereign debt restructuring framework are reformed, given over-board austerity policies, under an overall neoliberal policy framework, negatively impact both domestic resource mobilization, and stress current account, and together with lack of proper debt relief/restructuring framework takes away from already stressed fiscal space – especially in terms of foreign exchange reserves, which also pushes upward imported- and cost push inflation – of developing countries.

Mia Amor Mottley – PM, and finance minister of Barbados – while leading the important ‘Bridgetown Initiative’ calls through it, and otherwise as well, and among other proposals to reform the global climate finance architecture, the annual release of climate change related International Monetary Fund’s (IMF’s) special drawing rights (SDRs) for highly climate change vulnerable developing countries.

In her Project Syndicate published article in February, titled ‘Climate action demands global fraternity’ she points out in this regard the following: ’As it stands, the global financial architecture is ill-equipped to address the climate crisis. …The Bretton Woods institutions, for example, were established more than 80 years ago to help European economies recover from World War II. But the unprecedented scale and urgency of the climate crisis requires a new approach to unlock the financing that developing countries need for mitigation and adaptation.

The system must be reformed to make sustainable development, climate resilience, and equitable access to finance its top priorities. This is not charity; it is an investment in our collective future.’

Yet the multilateral spirit is quite evidently missing – the promised target US$100 billion annual provision by 2020 to developing countries by rich advanced countries was missed by two years, for instance, while the provision of even US$100 billion as ‘re-cycled SDRs’ – from the original enhanced allocation of SDRs to the tune of US$650 billion in August 2021 that wrongly being based on usual quota-sharing formula went mostly to already rich countries – through IMF’s ‘Resilience and Sustainability Facility’ (RSF) window on one hand received only less than half amounts – US$46.8 billion by November 22, 2024 – and where Pakistan, an otherwise highly climate change vulnerable country, has been allocated as loan under RSF only a paltry amount of around US$1.3 billion, and that is to be received over a period of around two-and-a-half years, or 28 months to be precise!

At home, there is a serious problem in terms of approach of unlocking climate finance, whereby it is being assumed at least in the reported statements of the finance minister, Muhammad Aurangzeb, that the country needs to come up with climate change-related projects to obtain increasing level of climate finance, and that it will have to increase its institutional capacity in this regard.

No doubt the country needs to enhance its capacity, but the problem of climate change can surely not wait for developing countries to travel their improvement/learning curve, and it is mainly their coming up of projects that they will receive climate finance.

Contrary to this, the fast-unfolding climate change crisis, which is a global existential threat, and where the window of keeping average annual global warming below the desirable level of 1.5C – an important tipping point after which climate change crisis will likely produce significant irreversible consequences in terms of frequency, and intensity of climate change related natural disasters –is fast-closing, and unlike what was estimated in 2015 at the ‘Paris Agreement’ whereby this threshold had up till 2045 to be tackled, has already been pushed back to 2031 by ‘Intergovernmental Panel on Climate Change’ (IPCC), and by 2034 according to ‘European Earth Agency’, it is therefore necessary that advanced countries as major polluters, and multilateral institutions should take the lead, given their relatively much higher technical and technological prowess, in both identifying spending areas, and project conception and other modalities.

Although it is important that developing countries like Pakistan understand the urgency of coming up with projects, given after all their countries are at risk, but it will be naïve to think that developing countries will be financed in terms of climate change related needed investments upon their coming up with viable projects, given after all, developing countries are developing because they lack capacity, institutional depth, and focus to come up with timely projects to the extent needed, or anywhere near it, given the hugely expansive scope of the climate change crisis – from glaciers, to wildfires, to heatwaves, to smog, to floods, to increasing the likelihood of the spread of zoonotic diseases, and enhancing their scope from epidemics to pandemics, or the ‘Pandemicene’ phenomenon.

In fact, policy and finance need to cover the whole space of environment, economy, and epidemiology, since in an age of polycrisis they heavily overlap, and therefore require an interconnected response. No country, not even the most developed ones can safeguard by mostly looking inwards in terms of countering existential threat of climate change. It requires a truly global effort, both in terms of technical expertise, and climate finance.

The ‘Bridgetown Initiative on the reform of the international development and climate finance architecture’ holds immense significance in terms of addressing needs assessment, and issues surrounding adequate provision of climate finance, whereby it points out that ‘An additional $1.8 trillion annually is needed to address the climate crisis and nature related investments in emerging markets and developing countries (EMDEs) and $1.2 trillion annually to achieve the [Sustainable Development Goals] SDGs. About $950 billion of the climate and nature financing gap is expected to be closed by domestic sources; the remaining $850 billion must come from external sources.’

Moreover, the same Document asks leading rich, advanced countries, and Bretton Woods institutions to significantly enhance their efforts in supporting developing countries in their efforts to fight climate change as ‘We call on the G20 to reform the Common Framework which falls woefully short of addressing borrower needs in a timely way… Debt relief should be sufficiently robust to ensure countries are able to finance their development and climate goals.…We call upon the IMF to boost country capacity to invest in resilience, including by re-channeling SDRs through [Multilateral Development Banks] MDBs. We call upon the IMF and its shareholders to agree on a new issuance of at least $650bn in SDRs to expand the balance sheets of MDBs to support SDGs and climate action. We call upon the IMF to reduce the cost of lending including by making it easier to access the Resilience and Sustainability Facility (RSF) on a stand-alone basis and extending the Extended Fund Facility repayment period to match the RSF. …We call upon new and existing donor countries to replenish IDA21 by at least $120 billion and triple IDA by 2030.’

In addition, the ‘Bridgetown Initiative’-related document emphasizes the need to enhance finances for supporting investments into climate change mitigation and adaption efforts by developing countries, as follows: ‘We call for new sources of progressive finance to fund [Global Public Good] GPGs and loss and damage including through: a. An international tax on the super-rich. b. Repurposing harmful subsidies. c. Taxing fossil fuel company windfall profits and implementing an emissions levy on hard-to-abate sectors like aviation and shipping, along with international financial transactions underpinned by a comprehensive UN Tax Convention to create a forum for truly inclusive tax negotiations. d. A philanthropically-funded Global Compact for GPGs.’

Last but not the least, the same Document calls upon developed countries to appropriately support countries in terms of loss and damage due to climate change. It makes the following plea in this regard: ‘We call upon developed countries to meaningfully capitalize and effectively operationalize the Loss and Damage Fund and deliver on the commitment to increase international biodiversity finance to least $30 billion per year by 2030.’

It is highly unfortunate that the government has not forged any significant level of partnership with regard to an otherwise very important ‘Bridgetown Initiative’ in terms of shaping both domestic climate change, and SDG- related policies, and to better reflect these concerns in its discussions with development partners.

Here, the lack of focus on ‘Bridgetown Initiative’ in either print or electronic media locally also highlights the poverty of discussion of development issues of global nature, especially the existential threat of climate change crisis, and related climate finance needs, which is unfortunate and needs to change quickly.

Copyright Business Recorder, 2025