From the moment that the summit was announced, civil society and developing countries called for a complete transformation of the current financial system that unfairly benefits polluters and industrialised countries and a rebalancing towards people, especially those people on the front line of the climate crisis. But this Summit has fallen far short of that outcome.
In her opening address Barbados Prime Minister Mia Mottley dubbed this the “how dare you” Summit - acknowledging that by organising the Summit French President Macron had “stepped out of his crease, and summoned us all to an inflection moment that will determine whether we will have the capacity and the will to bring pace and scope to the problem”. Mottley called for a “complete transformation” of the current financial system, to question the foundations and address root causes of the financial inequality and power imbalance embedded within the current financial system. Mottley called for a shift from a system “in the shadow of the old imperial order” to one where burdens are shared equally, that recognises the common humanity that we share and the moral imperative to save our planet and to make it liveable.
Kenya Prime Minister William Ruto joined in a call for a complete transformation. He noted that the journey to net zero is not going forward, it is going in reverse, largely because climate finance promises from rich countries have not been met. And he decried that the costs of finance were eight times higher in Global South countries, as well as being much harder to access. He called for a new financing mechanism, and a new global financial institution, to be established to address these challenges. In particular he called for global taxes to create new sources of fair income, generated outside of national political control, to be urgently established. A global financial transaction tax (FTT), a tax on fossil fuels, and aviation and maritime fuel taxes were the global taxes he mentioned.
The reason this deep transformation, and these global taxes, are so necessary is that the current system is run to benefit the rich and the polluters. Just five fossil fuel companies - Total Energies, ExxonMobil, Chevron, BP and Shell – had combined profits of $153.5 billion last year (2022). The international aviation and maritime industries pay no tax on the fuel that they use and as a result their emissions are growing dramatically.
The prime minister of Kenya, William Ruto, highlighted the win-win of taxing fossil fuels to generate climate finance: “Why do we need to tax fossil fuels? Because they are causing 73% of the emissions responsible for climate change.”
Whilst the big polluters and polluting industries are undertaxed, developing countries are forced to take loans to pay for their own reconstruction from worsening climate impacts. The Paris Summit heard from the Pakistan Prime Minister, Mohammed Sharif, that Pakistan was forced to take loans to recover from the extreme floods of 2022 that affected one third of the country and 33 million people. Pakistan is not alone, small island states who can face storms that wipe off more than 200% of their GDP in a few hours, have to take loans to recover and rebuild from these disasters. This system has led to a debt crisis, with 93% of countries at the forefront of climate disasters in, at risk of, debt distress.
In an emotional intervention, the Prime Minister of Pakistan, Muhammad Shehbaz Sharif, explained how Pakistan was forced to take loans to recover from the devastating Pakistan Floods of 2022 that affected on third of the country and 33 million people, leading to the loss of over 1700 lives.
The Chair of the Alliance of Small Island Developing States (AOSIS), H.E. Fatumanava-o-Upolu III Dr Pa’olelei Luteru of Samoa, explains how many small island states have to take loans to recover and rebuild having faced storms that lead —in a just a few hours— to loss and damage totalling as much as 200% of their GDP.
Given these clarion calls for action, for transformational change, and to do things differently, what did the Paris Summit achieve in the end?
Tangible outcomes from the Summit were small. They amounted to little more than tinkering around the edges. Largely because rich countries are not willing to share power and make the structural adjustments required to give developing countries a fair go. As Prime Minister Ruto said in one of the side events - “you’re not listening to us” as President Macron parroted his already determined outcomes from the Summit, which fell far short of transformational change.
The modest, and mixed, outcomes included:
• the announcement that the World Bank will pause debt repayments for countries struggling to address loss and damage caused by climate disaster, but disappointingly, this will only be for new loans. Whilst the UK announced that it will do the same for its existing loans, but only for 12 countries in Africa and the Caribbean.
• re-commitment to providing $100bn (USD) to developing countries via International Monetary Fund special drawing rights (SDRs), a commitment first made in 2019 in relation to the covid crisis. France, Japan and the UK have pledged varying proportions of their SDRs —amounting to about $80bn. Macron committed to increase France’s share, whilst a further $21bn could come from the US if Congress agrees. The SDRs are most likely to be used as loans.
• Colombia, Kenya and France proposed to establish by COP28 a Global Expert Review on Debt, Nature and Climate to assess the impact of debt on low- and medium-income countries capacity to preserve nature, adapt to climate change and decarbonise their economies
• Côte d’Ivoire and France agreed a debt reduction and development contract in which 1.14 Bn€ of Ivorian bilateral debt will be converted into grants to finance various development projects
• UK, France, US, Spain, Barbados, the World Bank Group and Inter-American Development Bank launched a call to action to bilateral, multilateral and private sector creditors to offer climate-resilient debt clauses by the end of 2025, with a group of early movers offering the clauses by COP28
• The World Bank Group announced the strengthening of its capacity to assist countries in preparing and responding to crises, through additional assistance to develop crisis preparedness, development of new types of insurance FOR development projects and additional flexibility to allow countries to reallocate financing to emergency response during crises.
• The launch of a process to define vulnerability and lead to a common definition of the multidimensional effects of vulnerability among multilateral development banks (MDBs) and its possible impacts in determining the eligibility to concessional resources.
• The World Bank announced the publication of new Country Climate and Development reports by COP28.
• A Just Energy Transition Partnership (JETP) was announced to facilitate Senegal to meet 40% renewable energy by 2030
• The launch of a taskforce to examine possible new financial resources through taxation was proposed, which could present its first conclusions by the Summit organised by Kenya in September 2023 on climate finance.
• In principle support was expressed for an IMO levy to contribute to a ‘just and equitable transition’ of the shipping sector.
Whilst the Paris Summit fell short of hoped for and needed outcomes - which Ministers and Heads of State and Government made clear in the closing plenary - it is not cause for despair. The clarion call from Global South countries at the Summit is that the scale of the challenge has unified developing countries in their call for transformational change. It is clear they are determined to have their need for a fairer financial system met. If not it is likely that greater and far more disruptive change is on the horizon.
The Summit made clear the opportunities to fundamentally change the system, and make polluters pay for loss and damage from the climate impacts their activities have resulted in. The upcoming International Maritime Organization (IMO) meeting offers the first opportunity to take forward one of these ideas - with a tax on international maritime fuel raised to help the laggard shipping industry meet net zero and also to fund efforts to address loss and damage from climate change.
A further opportunity for progress in the near future is the Africa Climate Summit, to be hosted in Nairobi Kenya in September by Prime Minister Ruto. It offers a promising moment to make real progress on the way to an ambitious and comprehensive outcome on all fronts - mitigation, adaptation and Loss and Damage to avert, minimise and address loss and damage and move towards a world in which all humans have the resources they need to thrive in the midst of climate change.
We must also see real progress towards debt cancellation to enable vulnerable developing countries to free up fiscal space for sustainable development and efforts to address climate change.
Within the UNFCCC process there is much happening in the lead up to COP28 to make the Loss and Damage Fund more than an empty shell. It will also be crucial for the Transitional Committee of the UNFCCC, meeting across this year, to make recommendations to COP28 at the end of the year for how to operationalize the Loss and Damage fund as a standalone fund under the UNFCCC. The fund needs a floor of 400 billion USD a year of new, additional, adequate, sustainable and predictable finance. This scale was supported by the new paper from Amar Bhattacharya, Vera Songwe and Nicholas Stern, released during the Summit. This money must come from developed country contributions and from sources discussed at the Summit, such as taxing polluting industries, including the fossil fuel industry, the international maritime industry and a frequent flyer levy, to provide support to communities on the front line of climate impacts. Eventually we will need to mobilise trillions of USD a year to address loss and damage.
We also need to see the new collective quantified goal on climate finance, being negotiated within the UNFCCC, include a sub-goal on Loss and Damage finance that is aligned with the needs on the ground in developing countries. We expect that the Santiago Network for Loss and Damage will be operationalised in early 2024 to provide urgently needed technical assistance in vulnerable developing countries once a host is selected at COP 28.
Finally, we must ensure that the Global Stocktake, being undertaken within the UNFCCC, which culminates at COP 28, provides the political signals and momentum needed to scale up mitigation ambition to avert loss and damage, ensure adaptation finance to minimise loss and damage and mobilise action and support to address loss and damage.
Julie-Anne Richards is the Loss and Damage Collaboration’s Strategy Lead. She has two decades of experience working on the climate crisis, has written extensively on loss and damage, and campaigned with civil society and in collaboration with vulnerable countries on the need for loss and damage finance.
This article has been Funded by the Rosa-Luxemburg-Stiftung New York Office with support from the German Ministry for Economic Cooperation and Development (BMZ). The publishers are solely responsible for the content of this publication; the opinions presented here do not reflect the position of the BMZ. We also note that views and any errors, are the authors alone and that the content of this brief does not necessarily represent the views of all the members of the Loss and Damage Collaboration (L&DC).