By Boluwatife Oshikoya
What is Climate Finance?
The United Nations Framework Convention on Climate Change (UNFCCC) does not have a definition of climate finance. Although they have common aspects, data collectors and aggregators have distinct operational definitions. A convergence that can be summarized as follows: “Climate finance aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts.” This conclusion is drawn from an analysis of the definitions of climate finance that have been adopted by the data collectors and aggregators identified in this report.
“Climate finance” is a multifaceted notion. Generally speaking, it refers to financing for programmes aimed at mitigating or preparing for the effects of climate change. Still, it is sometimes confused with the closely related concepts of sustainable, green, and low-carbon financing. Climate financing is the flow of funds to any global initiatives, programmes, or projects that address adaptation and mitigation of climate change across all economic sectors.
Notably, this definition covers only funding that flows directly to assets and operations; it does not include financial market activity like bank loans to enterprises or investments in private and public equities. This adheres to the basic principle of not “double counting.” (calculating bank loans to energy utilities in addition to the recipient company’s investments in renewable energy generation generated with the loan proceeds, for example, would constitute calculating finance for the same activity twice.)
LEGAL FRAMEWORK
The requirement to lower risk and vulnerability to climate change, build resilience, improve wellbeing, and increase one’s ability to foresee and effectively adapt to change. The United Nations Framework Convention on Climate Change was developed in 1994 as a result of the global leaders’ convergence due to the unfavorable and harmful impact of climate change. This framework becomes operative on March 21, 1994. The Convention is the main piece of international law pertaining to climate change and money.
United Nations Framework Convention on Climate Change
When Parties ratify the Convention, they acknowledge that climate change poses a threat and commit to taking action to mitigate it. The goal of the Convention is the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” within a timeframe that allows both human and environmental adaptation as well as the sustainable development of economies.
There are no specific objectives set forth by the Convention. Instead, it was meant to serve as a foundation for upcoming accords and regulations. Through a few key mechanisms, the Convention mandates continued research, discussions, agreements, and obligations.
One of the mechanisms created by the Convention is establishment of a basic framework within which the Parties can collaborate to achieve its objectives. The highest authority to review, develop, approve, and carry out climate policy on a regular basis is the Conference of the Parties. A secretariat organizes the Conference of the Parties’ sessions, writes reports, gathers data, and helps developing nations. Subsidiary bodies evaluate the effectiveness of the Convention’s implementation and offer scientific and technological advice.
The Convention recognizes the notions of respective competence and common but differentiated responsibility (CBDR) as additional tools utilized by the treaty. This idea can serve as a foundation for discussing the necessity for all governments to take action against climate change, taking into account their differing degrees of historical and current accountability for greenhouse gas emissions and their ability to find “equitable and appropriate” solutions. It recognizes that each state has unique needs and obligations when it comes to addressing climate change.
Furthermore, Building knowledge is another essential mechanism to the UNFCCC process. To create evidence, establish objectives, and monitor greenhouse gas reduction progress, parties must collect and exchange data. Developed nations must also provide comprehensive mitigation plans along with their anticipated results. Building a solid body of information and a scientific understanding of climate change and the effects of different mitigation strategies has been made possible by this process, and this understanding has been instrumental in informing subsequent policies and important international agreements like the Paris Agreement. Achieving national and international transformation also requires public understanding and participation, and the Convention mandates that nations encourage public climate education, awareness, and training.
KYOTO PROTOCOL
December 11, 1997, saw the adoption of the Kyoto Protocol. It took a while to ratify, but on February 16, 2005, it became official. The Kyoto Protocol has 192 Parties as of right now. By requiring developed nations and economies in transition to set and adhere to individual targets for limiting greenhouse gas (GHG) emissions, the Kyoto Protocol operationalizes the United Nations Framework Convention on Climate Change. The Convention merely requires those nations to adopt mitigation policies and measures and to submit periodic reports.
The Kyoto Protocol adheres to the Convention’s annex-based structure and is founded on its provisions and guiding principles. Under the tenet of “common but differentiated responsibility and respective capabilities,” it only binds developed nations and places a greater burden on them.
THE PARIS AGREEMENT
The Paris Agreement is a legally binding international treaty on climate change. On December 12, 2015, at the UN Climate Change Conference (COP21) in Paris, France, it was adopted by 196 Parties. It became operative on November 4, 2016.
Leaders from around the world have emphasized in recent years how important it is to keep global warming to 1.5°C by the end of this century.
This is due to the UN’s Intergovernmental Panel on Climate Change’s warning that going over the 1.5°C threshold runs the risk of causing far more severe climate change effects, such as an increase in the frequency and intensity of heatwaves, droughts, and rainfall.
Greenhouse gas emissions must peak before 2025 at the latest and decline by 43% by 2030 to keep global warming to 1.5°C.
The Paris Agreement is a landmark in the multilateral climate change process because, for the first time, a binding agreement brings all nations together to combat climate change and adapt to its effects.
To highlight progress in adaptation and mitigation, Countries created an enhanced transparency framework (ETF) with the Paris Agreement. Starting in 2024, countries will be required by the ETF to report openly on their progress and actions regarding mitigation of climate change, adaptation strategies, and assistance given or received. Additionally, it lays out international protocols for the examination of the reports that are turned in.
THE NIGERIAN CLIMATE CHANGE ACT
Nigeria’s 2021 Climate Change Act establishes a net-zero target for 2050–2070 and offers an ambitious framework for mainstreaming climate actions in accordance with national development priorities. The Act codifies national climate action by requiring the Ministry of Environment to establish a carbon budget, maintain a 2oC average global temperature increase, and pursue efforts to keep the increase in temperature to 1.5oC over pre-industrial levels, among other requirements. In order to make sure that the country’s emission profile is in line with the carbon budget goals, it also approves the creation of a National Climate Change Action Plan every five years, which lays out guidelines for choosing mitigation and adaptation strategies.
The Act establishes the National Council on Climate Change, which the Nigerian President shall chair. People from the public and corporate sectors, as well as members of civil society, women, young people, and persons with disabilities, will make up its membership. It grants the Council significant power to oversee the recently established Climate Change Fund, raise money for climate action, and collaborate with the Nigerian Sovereign Green Bond to meet Nigeria’s Nationally Determined Contribution. Additionally, it allows the Council to organize national climate initiatives. The purpose of the Climate Change Fund is to provide cash for prioritized climate interventions and initiatives. It is advised that using natural methods to reduce greenhouse gas emissions and slow down climate change.
According to the Act, any organization working inside Nigeria’s borders, whether public or private, must set up systems to support a society that is low-carbon, environmentally sustainable, and resistant to climate change. Any private company with fifty or more employees is required by law to appoint a climate change officer, who will be in charge of putting in place measures to meet the annual targets for reducing carbon emissions in accordance with the Action Plan and submitting annual reports to the National Climate Change Secretariats regarding the company’s progress towards meeting its carbon emission reduction and climate adaptation plan.
FORMS OF CLIMATE FINANCE
Climate finance are financial resources allocated to support projects, initiatives, and policies aimed at mitigating and adapting to the impacts of Climate change.
It can be broadly divided into two. Namely;
- Public Climate funds
- Private Climate funds
Public Climate Funds
- The Green Climate Fund (GCF)- The largest climate fund mechanism in the world, which is tasked with helping poor nations raise and implement their Nationally Determined Contributions (NDCs) towards low-emission, climate-resilient pathways, is one of the key components of the historic Paris Agreement. The United Nations Framework Convention on Climate Change (UNFCCC) established the Green Climate Fund as a worldwide financing mechanism to aid developing nations in mitigating and adapting to climate change.
- Green Environment Facility to provide grants and concessional funding to cover the costs associated with turning a project with national benefits into one with global environmental benefits, the Global Environment Facility (GEF) was established in 1991. In collaboration with non-governmental organizations, the private sector, and international organizations, the GEF brings together 183 member government. Right now, it is the biggest donor to environmental projects worldwide, offering funding for initiatives pertaining to international waters, chemicals and waste management, biodiversity, land degradation, and climate change adaptation.
- The Climate Investment Funds are a set of multilateral funds, including the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF), which aim to provide financing for climate-related projects in developing countries.
These funds are administered by the World Bank and regional development banks and support projects in areas such as renewable energy, energy efficiency, and climate resilience.
- Adaptation Fund (AF)
The Adaptation Fund was established under the Kyoto Protocol to finance concrete adaptation projects and programs in developing countries that are particularly vulnerable to the adverse effects of climate change.
The fund is financed through a share of proceeds from the clean development mechanism (CDM) project activities and other sources.
Private Climate Funds
- Climate Bonds – Governments, businesses, and financial institutions can issue climate bonds to raise money for projects aimed at mitigating and adapting to climate change. Usually, these bonds are connected to climate or environmental goals, like energy efficiency, renewable energy, or sustainable transportation.
- ESG Initiatives – Environmental, social, and governance (ESG) initiatives are voluntarily undertaken by businesses to integrate ESG principles into their operations and stakeholder relations. Through their ESG initiatives, some businesses set aside a portion of their profits to fund projects aimed at mitigating the effects of climate change and adapting to them.
- Philanthropic Foundations Philanthropic foundations, such as the Rockefeller Foundation and the Climate Works Foundation, provide grants and other forms of financial support. Support for organizations working on climate change mitigation and adaptation projects, as well as climate policy and advocacy.
CONCLUSION
The conversation over climate change will continue to revolve around finance for the foreseeable future. It is becoming more dominant through major efforts and in all for a where heads of state meet, such as the G7 and G20. Major economies should bear their fair share of the burden, according to a growing chorus of voices, particularly when it comes to funding for loss and damage, debt reduction and restructuring, and funding for adaptation. As catastrophic climate disasters increase in frequency, there is an increasing need for large financial commitments to support vulnerable nations in their fight against climate change.
Boluwatife is a law graduate with keen interest in Intellectual property, finance, climate change and energy.
You can reach me via this channels.
O9034397747
http://linkedin.com/in/boluwatife-oshikoya
oshikoyasolomon7@gmail.com
REFERENCE
- https://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/global-environment-facility-gef
- https://www.iucn.org/news/commission-environmental-economic-and-social-policy/202203/a-review-nigerias-2021-climate-change-act-potential-increased-climate-litigation#:~:text=Overview%20of%20the%20Climate%20Change%20Act%202021&text=The%20Act%20codifies%20national%20climate,C%20above%20pre%2Dindustrial%20levels.
- https://climatepromise.undp.org/news-and-stories/what-climate-finance-and-why-do-we-need-more-it#:~:text=Examples%20of%20climate%20finance%20include,carbon%20trading%20and%20carbon%20taxes.
- https://www.carboncollective.co/sustainable-investing/climate-fund
- NIGERIAN CLIMATE CHANGE ACT