Unlocking climate funds …Malik Amin Aslam Khan
WHILE the need for urgent climate finance remains an inescapable priority for Pakistan the key to unlocking it remains a mystery. Our policymakers often bemoan climate vulnerability and the absence of such climate finance as the main bottleneck impeding climate action. This approach is flawed. Claiming climate victimhood in a global arena where everyone is a victim does not attract climate finance and the demands for justice in an unjust world continue to remain mere demands.
It is now established that climate finance flows follow climate action rather than the other way around. Country policies and strategies are required facilitators but can never be a substitute for demonstrated action. Pakistan’s NDCs, submitted to the UN, chart out the required climate action pathway. It is premised on the two pillars of building up the country’s green infrastructure through forestry and protected areas, and a shift towards low-carbon development by deploying renewable energy and electric mobility.
Pakistan needs to follow up this stated intent with action if it is to become a stakeholder in attracting a slice of the global $1.3 trillion climate finance flows. More importantly, it must learn some important lessons derived from the global financial architecture.
Firstly, if backed by political commitment, a major part of the requisite climate finance can be generated internally through efficient reprioritisation of public investment funds. Almost 85 per cent of the total climate finance globally is raised and spent domestically while almost half is through private sector mobilisation.
The formula is simple. Government budgetary space needs to be allocated towards climate action and this needs to catalyse private sector flows. This, interestingly, is also the prescription being now driven by the IMF in its latest C-PIMA (Climate Public Investment Management Assessment) for Pakistan whereby green responsive budgeting has been advised to drive the country’s own resources towards building climate resilience and low-carbon growth.
Meanwhile, inconsistency in policymaking, like the recent flip-flop on solar tariffs does not help the cause. Promoting zero-carbon home solar should have been a no-brainer for Pakistan instead of penalising it to support the capacity payments of carbon-polluting IPPs.
Secondly, acting with domestic funds enhances a country’s green credentials which then creates traction to attract not only global appreciation but also innovative climate financing. China is a prime example; it alone accounts for 51pc of global domestic spending on climate finance and, in turn, remains the top country for attracting this finance, accounting for almost 25pc of all green bond funds. For us, any future thrust towards attracting cutting-edge nature financing, such as through green, blue or nature bonds, must be driven by this philosophy.
In tandem with the lessons above, the past two years have seen a rapid transformation of the global financial architecture, which now views all mainstream development financing through the lens of climate change. The issue is no longer considered just an ecological challenge but, increasingly, as an unprecedented economic challenge, with impacts on macroeconomic and fiscal policy, debt trajectories, trade positions and asset valuations. It is no surprise that large multilateral institutions are rapidly realigning their lending strategies, with the World Bank committing 45pc of its yearly financing to climate change by 2025 and the IMF committing to enhancing concessional funding for climate resilience, through the Resilience and Sustainability Facility (RSF).
While all this opens up new financing opportunities for Pakistan, it also ratchets up the challenge of putting our own house in order. The recent enactment of a green taxonomy is the correct step and needs to be supported by enhancing the credibility of our climate data and disclosures while adhering to a home-grown climate compatible development pathway as outlined in the NDC. Against this backdrop, it is welcome that the IMF has not only announced $1.3 billion in climate funding, through the RSF, but has also been reportedly pushing Pakistan to commit at least 1pc of its “own” budget towards enhancing climate resilience.
This is logical, as Pakistan’s losses due to climate change are predicted to rise dangerously, devouring up to 9pc of our GDP by 2050 unless resilience is built into our physical and financial infrastructure. More importantly, by investing domestic budgetary funds, Pakistan will again reinforce what has been discussed above — that access to climate finance follows demonstrated climate action, prioritised by the country itself. This remains the simple key to unlocking climate finance.
Courtesy Dawn