Jun 26, 2023 - Energy & Environment

Paris climate finance summit unlocks billions, but hard work is ahead

Illustration of the earth as an unlocked padlock

Illustration: Sarah Grillo/Axios

Last week's climate finance summit in Paris went a considerable way — but perhaps not far enough — to quell demands from developing nations for more funding to help offset the costs of climate change, and the transition to clean energy.

Why it matters: Global climate talks are riven by persistent issues of fairness and trust, with industrialized countries so far failing to deliver on promised climate funds.

  • Progress could help lay the groundwork for a smoother productive U.N. climate summit in Dubai later this year.

Driving the news: The summit was organized by France and hosted jointly by the government of Barbados, whose prime minister has championed the cause of reforming the world’s multilateral banks. It was a precursor to more difficult, high-stakes meetings that will lead up to COP28.

Between the lines: One key demand from developing countries — access to $100 billion in so-called “Special Drawing Rights” from the world’s biggest economies — was met, at least in principle.

  • This money comes from an International Monetary Fund program, instituted during the height of the COVID-19 pandemic. It allowed the world’s largest economies to tap into a low-cost source of cash to help stabilize their economies, but not all of it has been used.
  • Under the terms agreed to in Paris, countries will agree to redistribute portions of their special drawing rates to nations that are in greater need of assistance. France, for example, committed to fork over 40% of its funds via this program.
  • It’s not yet clear if the financial target will be met in the end, but the summit puts it within striking distance.
  • The summit also saw the World Bank’s new leader, Ajay Banga, get on board with adding “resilient debt clauses” in new loans. That would allow countries to pause their loan repayments, and divert loan money already disbursed in order to help them rebuild in the event of a climate-related disaster.

The intrigue: The idea of a tax, with revenues devoted to clean energy transition and climate challenges developing countries face, gained traction among governments represented at the summit.

  • In particular, a proposal for a tax on marine shipping emissions, currently exempted from the Paris climate agreement, earned particularly widespread support
  • It will then go to the International Maritime Organization for consideration.

Quick take: When it comes to global climate talks, never underestimate the power of a small island developing country, which are on the front lines of warming impacts sweeping the globe.

  • At the Paris climate talks in 2015, the Marshall Islands’ top climate official, the late Tony deBrum, proved to be a powerful moral voice urging industrialized countries to push for an ambitious agreement that included the 1.5-degree climate change target.
  • On climate finance, the leader to watch is Barbados’ Mia Mottley, who has now taken a detailed set of proposed reforms (known as the Bridgetown Initiative), and brought it to the forefront of some of the world’s richest nations.

What they’re saying: "Paris has shown that there is no shortage of creative ideas to make the financial system work better for people and the planet. But, as ever, it is about implementation. That requires broader leadership than that on display in Paris,” Rachel Kyte, dean of The Fletcher School of Law and Diplomacy at Tufts University, said in a statement.

  • “What is required of us know is absolute transformation, and not reform of our institutions,” Mottley told leaders at the summit.
  • "My plea simply now is to step up the pace, and let's get going," Mottley added.
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