How much money is needed to fight climate change?
NO ONE SAID that combating climate change would be cheap. Still, a report released during the COP27 climate talks made for a sobering reminder. The report, commissioned by Britain and Egypt as the past and current hosts of the UN summit, said that developing countries alone need a combined $1trn a year in external funding to meet the goals set out in their Nationally Determined Contributions, or NDCs (the climate action plan set out in the Paris Agreement). This funding, in addition to the countries own expenditure, is needed for things like cutting emissions, dealing with deadly disasters and restoring nature. In one encouraging development, it was reported on November 11th that America and Japan would provide Indonesia with at least $15bn to help retire some coal-fired power stations early. Though rich industrialised countries produce far more of the emissions that have caused warming to date, poorer ones tend to suffer far more from its ill effects. Africa is responsible for just 3% of the emissions that humans have ever put into the atmosphere. Yet the continents arid east is suffering from multi-year droughts that blight harvests and wildlife; its central and western regions face catastrophic floods as the rise in temperatures increases the amount of moisture in the air. This has become a flashpoint at COP27, where developing countries are urging wealthier ones to pay for the consequences of their emissions, and help them follow a greener path to economic development. Combined, countries in Africa reckon they need $277bn annually to meet their NDCs. In 2019 and 2020 they received less than $30bn annually (see chart). Where will the funds come from? Every region of Africa is ill-equipped, but some are worse off than others. Just ten countries receive 60% of the current climate financing; 40% is split among 45 countries and territories. Southern Africa faces the biggest funding gap, of more than $100bn between what the region says it needs annually and what it is receiving. Most of the current funding comes from development banks. But financial aid often arrives in the form of loans, not grants. In the long term that only adds to the burden on vulnerable economies. The additional funds instead need to come from the private sector. A report by the Climate Policy Initiative, a think-tank, found that just 14% of known climate financing in Africa comes from private investorsthe lowest share of any region. In North America the figure is 96%. The private sector, understandably, favours rich countries; political instability and debt-riddled economies in parts of Africa may not seem sound investments. Investors also complain of a lack of guaranteed returns on their money. But this only explains part of the gap. Private investments in fossil fuels, for example, amount to $29bn in Africa every year. Clean energy systems receive just $9.4bn. The World Bank estimates that, globally, every dollar spent on climate-change adaptation brings an average of $4 in benefits. On November 9th the UN presented a list of projects worth around $90bn to both public and private actors, in a bid to make it easier for them to invest20% of the projects were in Africa. That is a good start. But even if investors commit themselves to all of the projects, Africas funding gap will still be vast. For more coverage of climate change, sign up for the Climate Issue, our fortnightly subscriber-only newsletter, or visit our climate-change hub.