The mysterious three per cent

Mahmoud Mohieldin
Wednesday 7 Sep 2022

The global architecture for funding development efforts and climate action needs to be reformed in order to bring these artificially separated domains together.


Somehow “three per cent” has appeared repeatedly as a significant statistic in several reports on climate action. 

Africa contributes around three per cent of the world’s total greenhouse-gas emissions. The G20 members’ pledge in 2009 to commit $100 billion a year to address the climate crisis covers only three per cent of the money the developing nations need for investments in projects to reduce harmful emissions, transition to clean and renewable energy sources, and adapt to the effects of climate deterioration, especially in agriculture, food production, protecting rivers and seas from pollution, and maintaining, reinforcing, and developing infrastructure in urban, rural and coastal areas. 

The mysterious three per cent has also surfaced in a recent report from the Rotterdam-based Global Centre on Adaptation about financing adaptation efforts in Africa. Three per cent is the private sector’s share in the total financing of climate adaptation efforts on the continent. It comes to $11.4 billion. According to estimates, seven times that amount will be needed annually until 2030.

Africans make up 17 per cent of the world’s population. More than 40 per cent of the continent’s population of 1.4 billion is below the age of 15. The life expectancy at birth is 52 years, the lowest rate in the world. The fact that Africa’s share of greenhouse-gas emissions comes to only three per cent is not a cause for comfort or to celebrate that Africa has fallen in line with climate action standards. 

Instead, it is an indicator of low production and low economic and consumer rates in the framework of currently existing technologies. The continent is severely deficient in basic services. Six-hundred million of its inhabitants have no access to electricity. Otherwise put, three out of every four people deprived of electricity in the world are African. Africa has the highest concentration of people suffering from extreme poverty, whose numbers now exceed 865 million globally. 

Although Africa contributes the least to climate damage, it is ultimately the worst affected by it and the consequent detrimental effects of global warming, to which testify the observed and documented increases in desertification, violent storms, floods and droughts across the continent, and the rise in population displacements and migrations to escape the impacts climate deterioration has on people’s lives and livelihoods.


CLIMATE FINANCING: There are many flaws in financing investment in climate projects and climate mitigation and adaptation measures. We can sum them up as insufficient, inefficient, and unfair.

The available funding, which amounts to about $385 billion, is barely enough to meet a sixth of what it will take to achieve the climate action targets of 2030 and to keep the Earth’s temperature from surpassing the critical point of 1.5 degrees Celsius above its average temperature before the First Industrial Revolution. 

Regardless of the sums of money available, the financing process is extremely slow. It can take more than three years from the time a needs assessment is conducted until the required funding for the identified programmes and actions comes through. This translates into the continued deprivation of basic services and benefits, such as access to energy sources, and longer exposure to the fallout from environmental and climate degradation.

On inequities one could write volumes. Suffice it to say that the countries that contribute the least to (but suffer the most from) climate deterioration are expected to borrow extensively in order to deal with its adverse effects. Currently, over 60 per cent of financing depends on loans, of which only 12 per cent are low-cost. Grants cover only six per cent of the financing. The rest derives from investments. 

In addition, climate financing appears strongly biased against adaptation. Only around 15 to 25 per cent is invested in adaptation needs, while the bulk of funding favours climate mitigation and renewable energy projects. The effect of this is to crowd out and jeopardise private-sector investors who are better able to invest in mitigation. 


THE PRIVATE SECTOR: According to the above-mentioned report on financing adaptation in Africa, 97 per cent of funding for all climate adaptation activities in Africa has been government financed. Of this, 30 per cent was derived from facilitated loans, 23 per cent from commercial loans, and 45 per cent from grants. The private sector accounted for only three per cent of the financing. 

Evidently, the private sector has yet to appreciate the value of investing in adaptation, perhaps because the prospects for commercial returns appear relatively slim. Some governments have offered various incentives and undertaken other measures to bring the private sector on board with climate adaptation action, but they still encounter reluctance.

Changing how proposed projects are designed could remedy this problem, especially if new and renewable energy projects, which the private sector is enthusiastic about, are fused with water, agricultural, and food production projects. Fortunately, such opportunities have emerged in the framework of the initiative launched by the Egyptian presidency of the UN COP27 Climate Conference with the collaboration of UN regional economic committees and climate champions.

Participants in this initiative’s activities have come up with an exciting array of feasible and bankable projects for private-sector investment in Africa, Asia, and Latin America. Their information and databases will be updated and developed so that they can be presented at the COP27 Conference in Sharm El-Sheikh in November.

The above cited indicators and examples of the state of climate action and climate financing underscore the need to reform the global architecture for funding development efforts and climate action together. The artificial separation between the two domains (development and climate) has harmed both. It has fragmented financing and hampered financial and investment policy-making, especially in the developing countries. 

In the forthcoming COP27 Conference in Sharm El-Sheikh, we can expect to see follow-up reports on international climate action financing, including the $100 billion pledge made at the Copenhagen Summit. These reports should clarify the contours of financing climate and development beyond 2025, propose practical means and mechanisms to minimise dependence on borrowing and increase the role of private investment, and review mechanisms reducing debt burdens by investing returns in climate and environmental conservation action. 

The conference will share proposals and experiences in climate-related financial innovation and developing carbon markets in a manner that conforms with the needs of the developing nations. We can also expect to hear the outputs of studies on investment in environmental fields, the social and governmental dimensions of these investments, and the binding rules to prevent “green washing” and other such practices intended to deceive the public and circumvent proper reporting and auditing. 

It cannot be stressed enough that government budgets and expenditures must conform with the 2030 development visions and priorities and the climate-action goals. National budgets are not just about accounting rules with debits and credits columns. They are practical expressions of a developmental approach and its priorities. They tell societies how their taxes and other government resources are spent and mobilised, and they help the private sector and development partners identify where they can invest and participate.

* An Arabic version of this article appeared on Wednesday in Asharq Al-Awsat.

*A version of this article appears in print in the 8 September, 2022 edition of Al-Ahram Weekly.

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