Today, the shift to a low-carbon economy will take creative thinking and innovative financing. Climate finance is a key instrument for green investments, for increasing the use of renewable energy and building a low-carbon future, especially at a time when the coronavirus pandemic and falling fossil fuel prices threaten progress on climate action.
With each passing year, as greenhouse gas emissions continue to accumulate in the atmosphere at alarming rates, the planet continues to warm. The lives and livelihoods of vulnerable communities are being disrupted by negative impacts: from wildfires, to drought, to extreme rainfall and sea level rise.
Until global pollution falls to zero, global temperatures will continue to rise, and climate impacts will become more frequent and severe. On current trends, some 700 million people could be dragged back into extreme poverty by 2050 by climate change.
However, investments in sustainable infrastructure will be key for building more resilient societies after the COVID-19 pandemic while also creating millions of jobs. These 10 principles provide a framework for decision-making on infrastructure spending for post-COVID-19 recovery and stimulus packages.
African countries have supported low carbon and climate resilient development measures through domestic financing by national budget reallocations, the establishment of national climate funds and partnerships with local private sector, civil society and local authorities. Many countries on the continent are also looking to improve access to international climate finance sources.
Green Investments can change life’s in Africa
Investments in renewable energy, green transport systems, and sustainable construction must be prioritized in the post-pandemic recovery path to resilience. The COVID-19 pandemic has left economies reeling and has underlined the fragility of communities already vulnerable to climate change.
National and regional energy transitions can help to build resilient economies and societies in Africa. Energy transition investment can boost GDP and create jobs in the 2021-23 recovery phase. Green investment will be vital to mobilise upfront finance for the transition.
For the economic recovery from the COVID-19 crisis to be durable and resilient, a return to ‘business as usual’ and environmentally destructive investment patterns and activities must be avoided. Unchecked, global environmental emergencies such as climate change and biodiversity loss could cause social and economic damages far larger than those caused by COVID-19.
Seeking out innovative financing approaches such as developing “green market-ready products”, and a green growth fund that will be replenished through proceeds from trading credits from emission reduction projects, to finance other adaptation and sustainable development projects.
The case for investing in climate business has never been stronger. As more governments put in place targeted policies and incentives to achieve their climate change and green growth ambitions, the private sector has an unparalleled opportunity to deliver the investment needed to spur innovation and create thriving markets for climate-smart industry.
The COVID-19 pandemic and its immediate health, social, and economic impacts require an urgent response.Beyond this, however, public stimulus packages to relaunch the economy are already being developed, requiring crucial decisions on where these substantial financial flows should be directed, or through which channels and vehicles, in order to bring the most benefits.
In Africa and across the world highly risky and environmentally destructive investments in fossil fuels and related technologies dwarf investments in the green technologies and infrastructures that can protect the most vulnerable. Low-carbon and climate resilient asset classes are underserved by public and private capital markets, and climate risks are often ignored or underplayed by key decision makers.
While countries across the African continent are working fiercely to address climate change, access to climate finance at scale remains one of the biggest challenges.
Some of the key barriers to accessing climate finance
- Lack of clear policies and regulatory frameworks on climate change, or if policies exist they are not fully implemented;
- Low provision of climate funding in national budget lines;
- Low government capacity in terms of complying with requirements, standards and procedures of funding sources, developing “bankable” projects, and absorbing funding through the bureaucratic processes;
- Lack of awareness of the various sources of climate finance and limited stakeholder engagement, including from the private sector; and
- Siloed approaches due to perception of climate change as an environment issue rather than a development issue, impeding multi-functional solutions and sources of funding.
Potential solutions to overcome barriers to climate finance
- Countries must treat climate change as a development issue and systematically address it in their development strategies and policies in order to promote low carbon development, resource use efficiency and resilience building. Investment plans and projects, created with the support of development partners, should be based on countries’ climate commitments.
- Development partners and international community should promote capacity building of the African regional institutions to better access climate finance. The interplay between multilateral and national climate finance in the context of the Paris Agreement is increasingly important, to overcome the shortage of financing. Hence there is a need for African countries to overcome the barriers to finance by achieving stronger synergies between international and national sources of finance.
- Scale up public funding and attract private sector climate-resilient investments through an improved policy and regulatory environment and by creating market-based mechanisms to incentivize the private sector investments in mitigation action.
- Foster regional, cross-border and multi-country cooperation between African countries on climate change-related issues in a more harmonized and integrated approach.
- African governments should also look into innovative climate finance approaches that can raise capital and drive down mitigation costs by harnessing the capacity of the private sector to compete for delivering climate investments.
- Ensure a mechanism is in place for channeling climate finance to cities and local actors as it will reach a greater number of the population and has potential for better climate impact and poverty reduction benefits.