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New Global Financing Pact

GS Paper 3

 Syllabus: Environment Conservation: Climate Finance

 

Source: TH, DTE

 Context: The New Global Financing Pact is an international agreement or framework set to take place in Paris, France.

  • India, the president of the G20 this year, is co-chairing the steering committee of the summit with France

 

Aim of the proposed Pact:

  • It is aimed at addressing the financing needs of sustainable development and climate action.
  • It focuses on mobilizing funds from various sources, including public and private sectors, to support initiatives that promote economic growth, poverty eradication, and environmental sustainability.

 

Need of the Pact:

  • According to One Planet Lab’s white papers released for the Summit, the scale of investment needed to meet the United Nation’s Sustainable Development Goals, climate COP21 and Biodiversity COP15 objectives set at the global and national levels is to the tune of an additional $4 trillion every year.
  • Only 25% of global climate investment goes to South Asia, Latin America, and Africa, which house some of the most vulnerable regions.
  • Global funds clamp down on the fiscal independence of less developed countries by posing several conditions before the money comes in.

 

Proposals for increasing Climate financing:

  • Rich Tax: A group of over 140 economists has written an open letter urging world leaders to impose a special tax on the wealth of the super-rich to raise funds for the Global South to address climate change impacts. They propose a 2% tax on extreme wealth, which could generate over $2 trillion annually.
  • The summit should include three components:
    • A pact for global finance flows at the domestic and international levels
    • A platform to de-risk finance and attract private investment in sustainable infrastructure
    • A political pathway with time-bound deliverables on climate finance.
  • Other suggestions include:
    • Cancelling illegitimate debts
    • Withdrawing support for fossil fuel projects
    • Making polluting industries pay for damages

 

Conclusion:

The pact aims to bridge the gap between the funding required to achieve global goals, such as the United Nations’ Sustainable Development Goals and the Paris Agreement on climate change, and the actual funding available. It may involve innovative financial mechanisms, tax reforms, and international cooperation to ensure adequate and predictable financing for development priorities.

 

Insta Links

 Editorial: Behind the smokescreen around private climate finance

 

Mains Links: 

Discuss the significance of climate finance for developing countries and the key challenges they face in accessing climate finance. (15M)