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Vehicle for climate harm financing aims at 2025 aid despite shortfall
View(s):By Kapila Bandara
A global funding mechanism to aid poorer countries such as Sri Lanka deal with unavoidable risks of the climate crisis is expected to start financing projects in 2025, although projects have yet to be identified.
United Nations Climate Change Conference of the Parties, (Cop29), delegates gathering in Baku, Azerbaijan, a petro state, announced that pledges to the ‘Loss and Damage Fund’ so far amount to US$720m. This falls far short of what is estimated to be required — more than US$1.7 trillion a year. The funding is expected to be grants and concessional financing. Not all pledges have turned into contributions.
It was tiny Vanuatu that first proposed loss and damage in 1991 as chair of Alliance of the Small Island States.
In Baku this week, the World Bank signed up as the secretariat and the trustee of the fund. Sweden pledged “200m kronor (about US$19m) to the fund, subject to government approval’’. Sweden also announced a contribution of US$730m to the UN Green Climate Fund.
The Cop29 presidency said the loss and damage fund needs to identify projects and that “funding will be able to flow in 2025’’.
Sri Lanka has been lobbying, amid macroeconomic and massive public debt challenges and a junk sovereign rating, for financing from the mechanism, while highlighting national vulnerabilities to the harsh impacts of climate change. In the Global Climate Risk Index, Sri Lanka is in the top 10 nations at risk of extreme weather events.
The UN has been supporting Sri Lanka in policy areas such as the green national tourism policy, National Disaster Management Plan for 2023-2030, updating of Nationally Determined Contributions, and also in climate-related programmes such as upgrading of irrigation and drinking water systems and solar energy water pumps in rural communities.
The UN has also supported Sri Lanka to access the Green Climate Fund and Global Environmental Facility.
In Sri Lanka, the Green Climate Fund is supporting a water management project in the Dry Zone to strengthen the resilience of 770,500 smallholder farmer homes with US$52.1m funding, of which US$38.1m is a grant.
As for the loss and damage fund, to raise US$1.7tn a year, there have been proposals for taxing fossil fuel, levies on shipping or aviation, taxing profit or wealth, or a billionaire tax on 2,500 plus billionaires. Windfall taxes, or excess profit tax, on fossil fuel, could raise US$8b annually as estimated by Climate Action Network, Europe. An airline passenger levy (one-time charge) could raise up to US$150b, while a wealth tax could generate more than US$1tn a year. A private jet flight tax in the European Union could yield US$357.5m a year.
The Council of the European Union agreed in 2022, to impose an EU-wide windfall profits tax on crude oil, natural gas, coal, and refinery businesses.
In Baku, this week, multilateral development banks said that by 2030, their annual collective climate financing for low- and middle-income countries will reach US$120b.
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