Aftermath of the Covid-19 crisis, war in Ukraine and increasingly marked climate change… How to succeed in bringing out the difficult subject of the global ecological transition while States are struggling in a maelstrom of crises with dramatic implications ? COP27, which opened on 6 November in Sharm el-Sheikh, Egypt, is being held in an increasingly pressing context of disasters. This year, historic floods have ravaged Pakistan, a drought threatens famine in the Horn of Africa and heat records have continued to be broken in Europe since this summer.
“The moment is particularly critical” for the countries of the South, the most exposed to climate change, explains Sébastien Treyer, director general of the Institute for Sustainable Development and International Relations. These countries are waiting for the promises of solidarity to translate into financial commitments at the COP. According to a report commissioned by the COP presidency and published on Tuesday 8 November, the countries of the South will need more than 2,000 billion dollars per year by 2030 to finance their climate action, of which nearly half will come from outside investors.
L’Express: What can we expect from this new COP?
Sebastien Treyer: This COP is important because in a way, on several aspects, we could say “make or break”. It is a COP that should make it possible to rebuild trust between the countries of the North and the countries of the South, especially on questions of financing the ecological transition in the countries of the South. The moment is particularly critical for developing countries. They suffered the economic consequences of the Covid crisis, the war in Ukraine, but also the dramatic economic and social consequences of the climatic disasters that affected them. From this point of view, it is a “perfect storm”, a multifactorial crisis. There is therefore a major challenge for these countries to be able to invest for the well-being of their populations, to remedy the catastrophic damage of the climate, to respond to the problem of population growth.
There is a particular political balance of power this year between the countries of the South and the countries of the North…
The countries of the South, and in particular the African countries, today have two levers to support their demands: they are courted for their gas resources, and also because the Western countries want to prevent them from lining up behind Russia in the context of the war in Ukraine. This is why they can monetize their support for Western countries and this gives them weight in these negotiations. We are in a COP which is politicized in spite of itself, and it is subject to current geopolitics. But we must not forget that the subject of the transition is eminently political, what we are discussing at the COP is also the organization of the world of tomorrow once we get out of fossil fuels.
Northern countries have pledged $100 billion a year in public and private funding from 2020, but since 2018 funding has not exceeded $80 billion. Is there also a risk that the countries of the South will be fed up with the unfulfilled commitments of the countries of the North?
I think it is time that we take seriously the demands of the countries of the South. We are at a breaking point, we heard it very loudly already in Glasgow. During the COP26, some African representatives felt, despite the big announcements, that we weren’t there. In 2015 at COP21 in Paris, African countries agreed not to be demanding on issues of climate justice and finance because the idea was that the most massive injustice they could suffer would be to fail to contain climate change. But since then, the climatic and global situation has changed a lot. Seven years after the Paris Agreement, their situation has become so critical, and the damage linked to climatic events is so extreme, that this time they want to insist on the need for urgent funding.
Developed countries are criticized for not doing enough, is that true?
Admittedly, the current investments do not live up to their promises, but on the whole the countries of the North continue to increase their contributions for the adaptation of the countries of the South. It must also be understood that the ability to spend more does not depend solely on the goodwill of Westerners. There are also the conditions under which this money must be implemented, and the faucet is not so easy to turn on. I think that given the extent of the needs of the countries of the South, we should at least keep the promises symbolically, but in any case the requests for funding sent by the countries of the South are always an order of magnitude higher.
At the Glasgow conference, Indian Prime Minister Narendra Modi said “you can’t even keep the promise of 100 billion, when we have to spend 1,000 billion a year in India alone to make the adaptation a success”. These figures are indicative, but they show the gap in the investment needs of the countries of the South compared to the promises of the countries of the North.
What are the different funding channels?
There are above all the famous 100 billion per year. This is public funding but above all private, at nearly 80%. Today, European countries have already made a lot of effort and they are struggling to announce new things, but the country that is furthest behind in terms of the power of its GDP is the United States. And the problem is that it is not certain that Joe Biden will manage to increase this contribution given the difficulties he is encountering in Congress to pass this funding. The other way of financing, which must be discussed during this COP, is the commitment of the countries of the North to double their financing for adaptation, i.e. from 20 billion to 40 billion dollars per year by 2025. France and Germany have done their part, and have doubled their contributions.
Then there are other forms of financing that can be put in place. For example, there is work to set up a partnership with South Africa, to allow access to carbon-free electricity via a project to rescue and transform their electricity operator. It is a project supported by the European Commission, the British, the United States, France and Germany, to the tune of 8.5 billion euros. This amount is quite unprecedented, and this public money from the countries of the North to help with the transition is essential to make this transformation. It’s a very interesting, concrete funding model. But before being replicated, it must already prove itself. So South Africa must put its investment plan on the table, which must be validated. This partnership will be scrutinized very closely to see what it produces. We will have to look at whether the amounts promised are kept, what is the balance between loans and donations, and we will have to see what the nature of this deal is: are we really supporting a project that has been defined by the South Africans, or is it the Europeans who impose their conditions…?
The other big subject of the COP is that of the “reparations” of the countries of the North towards the countries of the South, the most affected by climate change historically largely generated by the developed countries…
Indeed, there is a sticking point there. The Paris Agreement specifies that the “losses and damages” resulting from extreme climatic events do not open the door to “compensations”. From a legal point of view, a number of northern countries use this term and we can understand them, it makes legal sense. This is why a number of small island states are seeking to enforce these compensations in other legal forums. The countries of the South call for the creation of a fund ad hoc dedicated to loss and damage. This fund would come to collect the contributions of a certain number of developed countries and would allow, after an event of natural disaster, to finance the exit of crisis. This could contribute to humanitarian aid, but also contribute to the reinvestment in development after the disaster.
The countries of the North are not at all ready for the creation of an ad hoc fund. The first reason for them is that we should not focus solely on the issue of a financial solution. In particular, they prefer to go through insurance mechanisms. In France, for example, we have the natural disaster regime which allows insurance to take over when the latter can no longer provide insurance. In the southern states, these regimes do not exist because they do not have the necessary resources to implement them. The idea is therefore to set up an international system of insurers and reinsurers funded by the richest states and private investors. This is the German proposal, which goes through an extended insurance mechanism they call the “global shield”.
Why do the States of the North fear the creation of a fund dedicated to loss and damage?
What frightens the industrialized countries – and perhaps also China – is the question of the amounts that could be requested for this fund. If they have to cover all the damage, they would be staggering, and unmanageable for the northern states.
Finally, it is obviously the question of their responsibility that is at stake. They are afraid of having to think about how we share the burden of this responsibility, and in this game the Americans, like the British, would have a lot to lose. As such, a number of large emerging countries could also be fearful of finding themselves in the basket of those responsible for these climatic events. Because China has also emitted a large amount of greenhouse gases. But for the moment, the countries of the South have no interest in clashing with China on this question. The subject is therefore not addressed at COP27.
So the last solution is to go through a change in the global financing system?
For many countries of the North, the question is rather to reform the World Bank system. Because it is this system which, in the least developed countries, constitutes an essential part of the budgetary resources of the States. Many believe that it should be able to take greater risks to help these countries in a much more fundamental way, to address the issue of loss and damage, but also their development needs.
And I think you can’t look at the issue of loss and damage without looking at what’s happening on the issue of reforming the global financial system. That’s what Barbados Prime Minister Mia Motley is pushing for IMF reform, but she’s not the only one, so says US Treasury Secretary Janet Yellen . These are not empty words, there is a whole program, quite realistic.
This means that the issue of the dedicated fund for loss and damage will not be resolved at the COP, because there will be no possible agreement. But in any case, the World Bank’s capacity to intervene in the most vulnerable countries will have to be reformed. This may be a response to the countries of the South: this will moreover be one of the subjects discussed at the G20 in Bali, from 15 to 16 November.