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What is Climate Finance?

Climate Finance:

The Finance Minister of India urged the advanced economies to scale up their commitments to climate finance and transfer of technologies – which are important for achieving climate-related commitments and goals.

  • The Minister was addressing the International Conference on Disaster Resilient Infrastructure (ICDRI).

Climate Finance:

  • Climate finance refers to local, national or transnational financing—drawn from public, private and alternative sources of financing.
  • It seeks to support mitigation and adaptation actions that will address climate change.
  • The UNFCCC, the Kyoto Protocol and the Paris Agreement call for financial assistance from countries with more financial resources to those that are less endowed and more vulnerable.
  • It is in accordance with the principle of “common but differentiated responsibility and respective capabilities”.
  • Climate finance is critical to tackle the issues posed by climate change and achieve the goal of limiting the rise in earth’s average temperature to below 2 degree Celsius over pre-industrial levels, something the 2018 IPCC report has predicted.

The commitment of Advanced Economies:

  • Through the Cancun Agreements in 2010 developed countries committed to a goal of mobilizing jointly USD 100 billion per year by 2020 to address the needs of developing countries.
  • The Green Climate Fund (GCF) was established in the Cancun Agreement and in 2011, it was designated as an operating entity of the financial mechanism.
  • Under the Paris Agreement in 2015, developed countries confirmed this goal and agreed that prior to 2025, a new collective quantified goal from a floor of USD 100 billion per year shall be set.
  • The Paris Agreement reaffirms the obligations of developed countries, while for the first time also encourages voluntary contributions by other Parties.