Covid shock brings again realisation of being prepared for climate shocks:
- The Covid impacted year 2020 teaches us that big shocks do not just come and go; they transform our ways of life.
- The climate crisis is another super shock, which will keep hitting harder going into the future.
2020 Climate Ambition Summit:
- The Climate Ambition Summit is scheduled for December 12.
- The summit, on the fifth anniversary of the Paris Agreement on climate, is co-hosted by the United Kingdom (UK), the UN and France, in partnership with Chile and Italy.
- UK has the presidency of the conference of the parties (COP-26) to UNFCCC, now scheduled for next year.
- World leaders are expected to make major announcements on mitigation, adaptation and support.
- Announcements are expected around upgraded Nationally Determined Contributions (NDCs) under the Paris Agreement; long-term ambitions for net-zero emissions; commitments for more climate finance; plans and policies for adaptation.
Financing climate action:
- The success of summit will be seen based on whether the world’s largest polluters pledge resources towards mitigating the climate super shock.
- As the capital of global finance, the UK, which will also host the CoP26, has a chance to connect climate ambition with sustainable recovery by triggering a real effort at sustainable finance.
Focus areas for financing climate action:
Clean energy access:
- Energy poverty remains one of the key barriers to sustainable development.
- Clean energy access must be made a centre-piece of climate action.
- Access to distributed clean energy is also a route to energising small businesses in rural and urban settings.
- In India alone, there is a $50 billion market for using clean energy for productive enterprises in rural areas.
- In Sub-Saharan Africa, mobile money has helped to push the adoption of solar home systems.
- Developing countries should be offered a package that offers access to capital to finance such systems.
- With the potential to power labour-intensive businesses, this will signal that high-level summits have the interests of common people in mind.
Making MSMEs more energy efficient:
- Small and medium industries should be provided help to become more energy-efficient.
- Due to lack of access to clean fuels or regular electricity, smaller businesses have no option but to often use polluting (and more expensive) fuels.
- This not only makes small industries uncompetitive, but also harm the economy and the environment.
- Energy-efficient production processes need access to cheap working capital. Due to higher upfront costs, this will take off only with dedicated attention from the financial industry.
Aggregating clean energy projects in developing world for financing:
- Financing costs are the largest component in the levelised cost of electricity in developing countries.
- Aggregation of clean energy projects across developing countries (with a common risk mitigation mechanism) could help reduce the cost of finance.
- Bundling projects for clean energy and sustainable transportation could increase their creditworthiness.
Help build climate resilience:
- As per some estimates, economic losses from natural catastrophes and man-made disasters in 2019 were $146 billion. But the insurance industry covered only $60 billion.
- This highlights the need is to fund the measures that can increase resilience against climate shocks.
- A global risk pooling reserve fund could combine climate risks across countries to spread them and ensure a payout when there occur climate disasters above severe thresholds.
- It is important to realize that plans to build resilience will be meaningless if the most vulnerable countries and communities have no insurance cushion against climate-induced loss and damage.
- The road to next year’s big climate talks (COP26) should be paved not just with empty promises but by achieving important milestones.