TRENDS WITH GLOBAL CLIMATE FINANCE: Case Study of $1.3 Trillion Disbursed in Year 21/22
Glory Oguegbu
Obama Scholar at Columbia University | Climate & Energy Leader | Chief Executive Officer of RETTI Group |Recognized by The Economist as a Top 5 Woman Changing the World | Mandela Washington Fellow |Author of 5 ??
Examining the data in the graph below, it is evident that in 2021/2022, nearly $1.3 trillion (USD 1.27 TN) was allocated to climate projects, indicating a surge in climate finance. The data, sourced from the Climate Policy Initiative’s report on the Climate Finance Landscape, reveals that a significant portion, about 71%, was directed towards climate change mitigation.
The average annual climate finance flows experienced a remarkable increase, reaching almost $1.3 trillion in 2021/2022, nearly doubling compared to 2019/2020 levels. This surge is attributed to an acceleration in mitigation finance, which saw an increase of $439 billion from the previous period. Notably, methodological enhancements and new data sources contributed to an additional growth of $173 billion each year in 2021/2022.
The distribution of climate finance across sectors is uneven. Energy and transport, being the largest-emitting sectors, attract the majority of mitigation finance, with energy receiving 44% and transport 29%. In contrast, agriculture and industry, significant emission sources, receive less than 4% of total mitigation and dual benefits finance, despite having a combined mitigation potential higher than that of energy and transport sectors.
I have analyzed my quick thoughts on the data, below:
Global Disparities
Noticeable gap in finance flowing to the global south and developing countries dealing with climate change impacts.
Mitigation Focus:
-70% of funding in 2021 / 2022 is directed towards the mitigation of climate change.
-Average annual climate finance flows reached almost $1.3 trillion in 2021/2022, nearly doubling from 2019/2020.
-Significant acceleration in mitigation finance, up by $439 billion from 2019/2020.
-Growth in 2021/2022 includes $173 billion each year from methodological improvements and new data sources.
Sectoral Imbalances
-Energy and transport, the two largest-emitting sectors, dominate mitigation finance (44% and 29% respectively).
-Agriculture and industry, despite significant emissions, receive less than 4% of total mitigation and dual benefits finance.
-Combined mitigation potential of agriculture and industry is higher than that of energy and transport.
Adaptation Finance Challenges
Adaptation finance reached an all-time high of $63 billion, growing 28% from 2019/2020.
Falls short of estimated needs of $212 billion per year by 2030 for developing countries.
Tracked adaptation finance dominated by public actors (98%).
AFOLU sector (Agriculture, Forestry, and Other Land Use), critical with wide-ranging adaptation needs, received only $7 billion (11% of all adaptation finance).
Geographical Concentration of Funds
-Developed economies, primarily from the private sector, mobilize the most climate finance.
-East Asia and the Pacific, the US, Canada, and Western Europe account for 84% of total climate finance.
-China’s domestic climate finance surpasses all other countries combined, contributing to 51% globally.
-International finance increased by 35%, with developed economies committing 84%, and EMDEs, including China, committing 13%.
-Less than 3% of the global total (USD 30 billion) went to least developed countries (LDCs), while 15% went to or within EMDEs excluding China.
Challenges and Gaps
-Uneven distribution – The growth is concentrated in a few regions (China, US, Europe) and sectors (energy, transport).
-Adaptation deficit: Adaptation finance lags far behind needs, especially in developing countries and vulnerable sectors like AFOLU.
-Private sector gap: Public actors still dominate adaptation finance, and private sector involvement is fragmented.
-North-South divide: Developed economies mobilize most of the climate finance, and flows to developing countries, especially LDCs, fall short of needs.
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Positive trends
-Significant increase in overall climate finance: Global climate finance nearly doubled from 2019/2020 to 2021/2022, reaching USD 1.3 trillion.
-Mitigation progress: Most of the growth comes from increased investment in mitigation, particularly in renewable energy and transport.
-Data improvements: The data landscape is getting better, with better tracking of green bonds and other sources.
-Emerging technologies: Private finance is starting to flow into new areas like battery storage and hydrogen.
Key takeaways
-We are making progress on climate finance, but the current growth is uneven and insufficient.
-We need to bridge the gap in adaptation finance, particularly for developing countries and vulnerable sectors.
-Mobilizing more private sector finance for adaptation is crucial.
-Developed economies need to do more to share the burden and direct finance to the most vulnerable regions and sectors.
In summary, the data illustrates positive trends in global climate finance, but challenges include geographical disparities, sectoral imbalances, and insufficient adaptation funding for developing countries. The need for consistent improvement, inclusivity, and meeting specific sectoral and regional needs is emphasized.
References
ETC (Energy Transitions Commission). 2023. Financing the Transition: How to Make the Money Flow for a Net-Zero Economy. https://www.energy-transitions.org/wp-content/uploads/2023/08/ETC-Financing-the-Transition-MainReport_update.pdf
BNEF (Bloomberg New Energy Finance). 2023. Energy Transition Investment Trends. https://about.bnef.com/energy-transition-investment/
CPI. 2023c (Climate Policy Initiative) How are public and private finance institutions progressing on their Paris Agreement and Net Zero goals? Available at: https://netzerofinancetracker.climatepolicyinitiative.org/
CPI. 2023 (Climate Policy Initiative) Global Landscape of Climate Finance https://www.climatepolicyinitiative.org/wp-content/uploads/2023/11/Global-Landscape-of-Climate-Finance-2023.pdf
ABOUT THE AUTHOR
Glory Oguegbu is a climate specialist, energy transition entrepreneur, accomplished writer, and published author dedicated to advancing a zero-carbon world. Her mission revolves around promoting climate literacy, advocating for a just energy transition, and actively contributing to the development of renewable energy projects. Through her work, she aims to provide Nigerians with access to clean electricity, playing a pivotal role in sustainable and environmentally friendly energy solutions. Oguegbu’s efforts have been recognized with awards in acknowledgment of her significant contributions to the field.
She’s the founder and CEO of the Renewable Energy Technology Training Institute (RETTI) created to support electricity access which will benefit 93 million Nigerians by training and preparing new solar installers. RETTI has since trained 3000+ engineers who provided electricity for 15, 000 homes/businesses and offset 840, 000 tonnes of C02 through installations. Glory pioneered Climate Smart Nigeria, an ambitious environmental program designed to combat low climate literacy in Africa. Through the CSN, she created Africa’s first contextualized climate education learning toolkits and the Climate Leadership Fellowship.
She regularly shares her insights on these subjects through her BLOG and LINKEDIN articles. Through her writing, Glory contributes to the discourse surrounding climate change, energy sustainability, and the broader implications of the evolving energy landscape.
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