Manohar Parrikar Institute for Defence Studies and Analyses
मनोहर पर्रिकर रक्षा अध्ययन एवं विश्लेषण संस्थान

Climate Change and State Responses

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Summary: The climate change is happening and the smaller and developing countries are facing the brunt despite zero-emission contributions. Meanwhile, the major carbon emitters/developed countries do not want to take ownership of the crisis. The developing countries have questioned the commitment of the developed countries towards a cleaner environment. While critical of the developed countries, many of the LDCs at the same time have failed to utilise the money allocated for mitigating the climate change impacts. Therefore, the onus lies in true commitments from the developed as well as developing countries to address the common problems, which cannot be prevented and mitigated by selective countries.

The United Nations Environment Programme (UNEP) in its November 2019 report stated that even if the commitments made under the 2015 Paris Agreement are met, the global temperatures are expected to rise by 3.2 degree Celsius by 2030. The report further stated that greenhouse gas (GHG) emissions have risen at a rate of 1.5 per cent per year over the last decade.1 The Global Climate Risk Index 2019, released in December 2018 at the UN Climate Change Conference in Katowice in Poland, had projected South Asia as a region most vulnerable to the impacts of climate change. Another scientific report published by the journal Nature has found that a large number of people living in the coastal regions of Bangladesh, India, Vietnam, China, Indonesia, Thailand, Japan and the Philippines are likely to be exposed to extreme coastal water levels (ECWL), even under the low-emission scenario. Therefore, Indian cities closer to the coastal region could be threatened by rising sea levels by 2050. 2

Earlier, the UN Intergovernmental Panel on Climate Change (IPCC) in its report Climate Change 2014: Impacts, Adaptation, and Vulnerability had also identified South Asia as a comparatively more vulnerable region.3 Several other scientific studies, both at individual and think-tank levels, have also referred to South Asia’s vulnerability.  As per the study by Nature, cities in two coastal states in South Asia — India and Bangladesh — are in the high-vulnerable list. Since the report has identified eight Asian countries located south of China as ECWL, the same could be applied to Sri Lanka and Maldives as well, which are already at high-risk due to rising sea levels. An Asian Development Bank (ADB) study of 2014 pointed out that “a potential ocean rise of up to 1 meter by 2100 will have devastating consequences for this island archipelago [Maldives], where the highest natural point is only a little over 2 meters above sea level.” As per the study, even a one-metre sea level rise would inundate 66 per cent of the Maldives’ total land area, causing widespread damage and displacement of communities and economic losses equivalent to over two per cent of its annual gross domestic product (GDP) by 2050, which could grow sharply to about 12.6 per cent by the end of the century.4 Sri Lanka is in second place after Puerto Rico in the climate risk index for 2019. 

While the coastlines of the South Asian countries are under serious stress, the Himalayan belt passing through various countries in the region is equally vulnerable. The IPCC 2019 special report observed that “future changes in the cryosphere – or frozen places such as mountain glaciers and arctic ice – will affect hydropower production, one of the main sources of energy and economic assets of the Himalayan region.”5

Thimphu LDC Ministerial Communiqué  

The effects of climate change are more severe for the developing countries than the developed and affluent ones, primarily due to lack of resources and capacity to adapt to adverse effects of climate change. Of the 47 least developed countries (LDCs), four are located in South Asia. The LDCs argue that despite their insignificant contribution to the global emissions (LDCs together emit less than one per cent of the global carbon dioxide or CO2 emissions per year), they face the disproportionate brunt of climate change. The group largely feels that its concerns either remain unheard or are ignored by the developed countries. In the run-up to the 25th UN Climate Change Conference (COP25) at Madrid, Spain in December 2019, a preparatory meeting of ministers from 47 LDCs was held on October 24, 2019 in Thimphu, Bhutan.  

The 47th ministerial meeting of the LDCs on climate change in Thimphu discussed and endorsed the following agenda for the COP25 in December 2019. First, there is a need to reduce greenhouse gas (GHG) emissions to limit global warming to 1.5°C. Second, referring to the IPCC special reports on land, climate change, and the ocean and cryosphere, the group felt the urgent need for rapid reduction in global emissions to avoid increased loss and damage, and scale-up support for the LDCs so that they can adapt and build resilience Third, to mitigate and build resilience to impacts of climate change in LDCs, the developed countries are mandated to support LDCs financially – US$ 100 billion annually by 2020. Fourth, the ministers also agreed to urge the developed countries and international partners to transfer technology and extend support in capacity-building to implement nationally determined contributions (NDCs) and long-term low GHG emissions development strategies, among others. Fifth, implement Article 6 of the Paris Agreement, which aims to promote an integrated, holistic and balanced approach that will assist governments in implementing their NDCs towards fighting climate change.6

Earlier, at the G-20 summit in Osaka in June 2019, the LDCs found the developed countries more focused on trade-related tensions, terrorism, and data free-flow. The language on climate change was rather loosely phrased in the declaration compared to the G-20 summit at Buenos Aires in 2018. Although the Osaka G-20 declaration emphasised the importance of “providing financial resources to assist developing countries with respect to both mitigation and adaptation in accordance with the Paris Agreement”,7 the developing countries were generally sceptical about the developed countries’ commitment towards action against climate change impacts.

The developing countries also questioned the commitment of the developed countries towards cleaner environment goals. As per the Climate Change Performance Index (CCPI) 2019, “No country performed well enough to reach the ranking very good in this year’s index, meaning that no country has yet made it to one of the top three places in the rankings.”8 The United States (US), Canada, Australia and Russia, among others, were listed as ‘performing relatively well’ in terms of aggregated performance in the 14 indicators within the four categories— GHG Emissions, Renewable Energy, Energy Use and Climate Policy. India secured 11th position by joining the group of medium performers. However, India was rated as overall high in terms of its commitment towards taking resolute actions on the abovementioned categories.9

State Responses

While critical of the developed countries, many of the LDCs at the same time failed to utilise the money allocated for mitigating climate change impacts and managing natural disasters. For example, Nepal could not spend more than half the money it budgeted for the purpose. Similarly, Pakistan’s response to climate change has been half-hearted. It too has not been able to utilise the budget allocated under global climate finance.10 Although Bangladesh has performed better than the other two countries in terms of utilising climate-related budget, it needs to review its current approach since 19 million children are likely to be affected by climate change by 2050. Sri Lanka, being highly vulnerable to climate change, also needs to review its current activities under the INDC. For example, 48 per cent of its energy comes from the combined fossil fuel and coal.

In fact, according to CCPI presented at the COP25 in Madrid in December 2019, the developed countries, including major CO2 emitters like the US and some European Union (EU) member states, failed to keep their commitments to the 1997 Kyoto Protocol and also the 2015 Paris Agreement. The 2019 COP25 too failed to reach any conclusion due to the developed countries’ apprehensions about financial implications of the Paris Agreement, non-committal approach towards technology transfer and financial support to the developing countries, and also their failure to finalise a deal on carbon credit.

Financial Obligations and Constraints

One of the most important but also the most contentious issues is how nations should address and combat the effects of climate change. It involves the allocation of finances by various nations. Both the Paris Convention as well as the Kyoto Protocol, recognising the fact that the financial capacity of the nations to deal with effects of climate change varied widely, had stipulated that the parties that had more resources (i.e. developed countries) would provide financial resources to those less endowed and more vulnerable. To facilitate this, the Paris Agreement established a financial mechanism to provide funds to the developing countries.11 At COP17 in Durban, South Africa (November 28-December 9, 2011), parties had decided to designate the Green Climate Fund (GCF) as an operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC), in accordance with Article 11 of the Convention. The financial mechanism is accountable to the COP, which decides on its climate change policies, programme priorities and eligibility criteria for funding.12

The Kyoto Protocol too had recognised the need for such a financial mechanism to support the developing countries. Besides guiding the Global Environment Facility (GEF), the parties had established four special funds: The Special Climate Change Fund (SCCF), the Least Developed Countries Fund (LDCF) — both of which are managed by the GEF — the GCF under the Convention and the Adaptation Fund (AF) under the Kyoto Protocol.13

At COP19 in Warsaw, Poland (November 11-23, 2013), the decision to include activities on long-term climate finance for the period 2014-2020 was taken, including biennial submissions by developed countries on their strategies and approaches for scaling up climate finance for the designated period. Funding for climate change activities was also to be made available through bilateral, regional and multilateral channels.14

The Paris Agreement (COP21) too stipulated that the developed countries should provide financial resources to assist developing countries with respect to both mitigation and adaptation in continuance with their existing obligations under the Kyoto Protocol. Moreover, developed countries should continue to take the lead in mobilising climate finance from a wide variety of sources. The Paris Convention’s financial mechanism as well as the standing committee on finance were to serve as the financial mechanisms of the Agreement. In addition, the institutions and operating institutions serving this Agreement were to ensure efficient access to financial resources through simplified approval procedures and enhanced readiness support for the developing countries, particularly the LDCs and small island developing states, in the context of their national climate strategies and plans.15

It was also decided that prior to 2025, the COP, serving as the meeting of the Parties (CMA) to the Paris Agreement, would set a new collective quantified goal from a floor of US$ 100 billion per year, taking into account the needs and priorities of the developing countries. Furthermore, the COP resolved to enhance the provision of urgent and adequate finance, technology and capacity-building support. It strongly urged the developed countries to increase their level of financial support and work out a roadmap to achieve the goal of jointly providing US$ 100 billion annually by 2020 for mitigation and adaptation while significantly increasing adaptation finance from current levels and providing appropriate technology and capacity-building support.

However, ensuring the availability of funds required for projects aimed at adaptation and mitigation measures continue to be one of the most contentious issues in the climate meetings. In 2009, at a UN summit in Copenhagen, the developed countries had opposed direct compensations for the developing nations affected by growing carbon emissions that they did not contribute to. They did, however, agree to provide $100 billion annually to these countries up to 2020 to help them deal with effects of climate change, and the GCF was set up as one of the ways to distribute the money.16

A decade after the 2009 Copenhagen Summit, the $100 billion per annum goal remains a contentious issue among the parties. According to a study conducted by the Climate Policy Initiative (CPI) —an international think tank that publishes annual analyses — global climate finance has dropped by 11 per cent from $612 billion in 2017 to $546 billion in 2018 due to reduced public money for low-carbon transport and lower private investment in renewable energy.17 Moreover, the GCF is running out of money. Contributions from the developed countries have come down substantially in the year 2017 and 2018. The good news, however, is that some funds are available but not necessarily from international financing. More than half a trillion dollars per year is going into climate-related activities, although much of the money remains within borders, and is spent by private investors on renewable energy projects like solar plants.18

According to an Organisation for Economic Cooperation & Development (OECD) assessment released in early September 2019, public spending was around $56.7 billion in 2017 while the UNFCCC stated that the developed countries had already channeled more than $70 billion in climate finance to the developing nations in 2016, of which around $56 billion was public money.19 Nonetheless, according to an IPCC report, an annual investment of $2.4 trillion will be required until 2035 to limit the temperature rise below 1.5?°C from pre-industrial levels. Neither the amount of financial flows nor the projects that they are being directed to are sufficient to keep temperatures below 2?°C.20 According to another study conducted by CPI, renewable-energy and energy-efficiency projects along with sustainable transport currently make up the bulk of climate financing.21 Moreover, while the figures are rising, researchers believe that banks, investors and governments are not spending enough to alleviate the impact of climate change.22

Several financial instruments are available for investing in projects for the adaptation and mitigation of emissions. One of the main financial instruments undertaken under the Kyoto Protocol in 2007 was the Clean Development Mechanism (CDM), whereby developing countries can earn credits through certified emission reductions (CERs) for each tonne of CO2 they reduce or avoid. So far, around 1,014,000 CERs have been sold and cancelled and developing country projects using CERs have earned more than $1,084,000.23 However, the CDM system will be coming under review from 2021 when the market mechanisms mandated under the Paris Agreement come into play. The developed countries are opposed to carrying over the CDM projects into the new mechanism.

The green bonds were first issued in 2007 to fund projects with environmental and/or climate benefits.  Majority of the green bonds issued are asset-linked bonds, the proceeds of which are earmarked for green projects but backed by the issuer’s balance sheet. Within a decade of their emergence, green bonds have become one of the fastest-growing segments.

According to the International Carbon Action Partnership (ICAP) report, released on March 19, 2019, interest in pricing emissions through Emissions Trading Scheme (ETS) has grown in recent years as countries consider ways to meet their commitments under the Paris Agreement. Around 20 carbon markets are now active worldwide, operating in economies that make up close to 40 per cent of the global GDP. A further 18 jurisdictions are actively considering the instrument.24

However, despite various clean energy projects being implemented, emissions continue to increase. Several recommendations are being made to reduce the use of fossil fuels, as against employing green projects to tackle the issue of climate change. Recently, the International Monetary Fund (IMF) published a study which recommended that a global tax agreement to make the burning of fossil fuels more expensive was the most efficient way of fighting climate change. It suggested that a tax of $75 per tonne should be imposed by 2030 as it would increase the price of fossil-fuels, especially coal-based power. The report recognised that there would be economic disruptions, but this could be offset by routing the money raised straight back to the citizens.25

In November 2019, the European Investment Bank (EIB), the world’s largest multilateral financial institution, after a year of debate, agreed to phase out lending for all fossil fuel projects after 2021 and align all funding decisions according to the Paris Agreement. Projects that applied for EIB funding would, henceforth, have to show that they can produce a one-kilowatt hour of energy while emitting less than 250 grams of CO2. However, some gas projects with less than 250 grams of CO2 emissions per kilowatt-hour will be permitted.26 Other multilateral development banks like the World Bank and the European Bank for Reconstruction and Development (EBRD) have also increased their funding for climate change programmes, and have stopped funding new coal power plants.

Conclusion

There is no doubt that the spectre of climate change and global warming beyond the 2-degree Celsius range has spurred more action. However, with the global economic outlook not likely to pick up any time soon, the temptation by many countries including major powers like the US, Russia and China to opt for cheaper but dirtier fuels could further complicate the ongoing climate change negotiations. The US withdrawal from the Paris Agreement too could affect the global climate change governance since other countries might follow its footsteps. The latest edition of the International Energy Agency’s (IEA) World Energy Outlook states that the energy efficiency levels were lowest in 2018.27 Therefore, without more robust policy interventions, the demand for carbon-intensive fuels will continue to make up a large segment of the energy basket, despite the rapid growth of clean energy technology.

Views expressed are of the author and do not necessarily reflect the views of the Manohar Parrikar IDSA or of the Government of India.

Keywords: Climate Change
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