This year’s climate negotiations were held in Dubai, 20th of the world’s wealthiest cities, home to over 68,000 millionaires and 15 billionaires. The embodiment of wealth and luxury contrasted starkly with some of the discussions inside the negotiation room: the flagrant lack of financing for the fight against climate change. 

Back in 2009 wealthy nations committed to mobilize $100 billion by 2020; six years later in Paris, they decided to extend this to an annual pledge through to 2025. Today, based on OECD data, we can firmly say that this promise hasn't been met in 2020 nor in 2021. Financing for adaptation, part of the $100 billion promise, has even declined by 14% in 2021. Despite claims that the goal will be finally met this year, there is no verified data to confirm this. 

In the meantime, needs have massively increased. Over 50 countries are highly dependent on fossil fuels, representing more than 85% of their energy mix — and many people rely on this industry for their jobs. At the same time, one out of 10 people around the globe don’t have access to electricity. As the frequency and scale of natural disasters increase, the costs of adaptation have also exploded to between $215B to $387B annually. On top of this, climate change is now causing damage that we won’t be able to repair, adding another $200B to $800B per year to the bill. Even the UNFCCC itself, the guardian of the COP process, is only half funded.

Despite a flurry of announcements during the first days of COP, the situation hasn’t significantly changed, moneywise — despite what the COP presidency wants us to believe, with their commitment tracker at $83B. Most of these pledges are difficult to decipher, as no detailed breakdown is provided, some are simple repackaging and many of them are private financing. The impressive $30 billion commitment from UAE for instance is in fact a private investment vehicle from Alterra, chaired by Sultan Al Jaber, who is both the COP president and the CEO of the oil giant Adnoc. The billions are meant to be invested into “positive climate action,” but it is unclear what that actually means. 

In comparison, the loss and damage pledges amount to over $700 million only, 2% of the Alterra announcement.  The announcements for other climate and food security look better, with over $4.2 billion announced, but that figure includes a whopping $3.2 billion from the USA for the Green Climate Fund. This would be a huge win except for one big problem — the US Congress will not approve the funding. In fact, US Republicans called it “dead on arrival.” Obviously, the US pledge isn’t the only one that still has to go through a budget process and may never materialize.  

So despite a good-looking tracker, COP 28 didn’t succeed in moving the needle significantly on financing for climate needs. This is not just disappointing in the face of needs. Eight hundred million people go hungry every day, the equivalent to the US and EU population combined. It is frustrating, since solutions are on the table, solutions that wouldn’t weigh on the budget of wealthy nations and could scale climate finance to a historic scale, with easily an additional hundreds of billions per year.

Special Drawing Rights

In 2021, in a historic move, the IMF issued $650 billion in Special Drawing Rights, a lifeline for countries in crisis. More than $500 billion went to G20 countries because of the IMF quota system dictating the distribution of this emergency currency. Since then, the G20 committed to redirect $100 billion of their SDRs to countries in need, including to fund the just transition. However, only $83 billion have been pledged so far and only little has actually arrived in countries, while many more SDRs sit idly in central banks of wealthy nations. The UAE actually announced to reallocate SDRs for the first time ever at COP - a mere 7% of their total share, when others like Spain committed 50%. Two years after their issuance, the SDRs remain underutilized. Countries should speed up reallocating their SDRs, in particular through multilateral development banks which can maximize their impact using hybrid capital mechanisms, and develop other options for deploying the SDRs to counter the climate crisis.

Fossil Fuel Subsidies

In 2009, the G20 agreed to phase out inefficient fossil fuel subsidies. Since then, subsidies, including for production, have tripled globally. $4.5 billion in public financial support went to subsidizing fossil fuels last year - every day. This is a heresy given the fiscal constraints countries are facing and the imperative of phasing out fossil fuels to keep global warming below 1.5 degrees. Many reasons to make good on the 14 year old commitment and to redirect these funds to climate action. The amount would suffice to  fill the financing gap for a just transition, to cover the costs of adaptation and follow through on loss and damage. 

Taxation 

Another way of massively increasing grant financing are international taxes, especially on sectors that are highly polluting, benefiting from global crises and are barely taxed, if at all. Such taxes or levies shouldn’t be a taboo, but common sense. The oil and gas industry made an estimated $80 billion of net income during COP. Taxing their windfall profits alone could yield $200 billion every year, cash on the table. A tiny tax of .5% on buying shares in all G20 countries could bring in another $200 billion or more per year.

One glimpse of hope comes from the launch of a new task force, launched by Kenya and France, together with Barbados, Spain and Antigua and Barbuda and the support of the AU and EU Commission. The announcement didn’t get the limelight in Dubai but may be game changing. At the Brazilian COP in two years time, a group of vanguard countries could go ahead and jointly implement a tax whose proceeds would be used for global climate action. The start of the end of this climate pledge agony?