The $1 trillion dilemma of climate justice for the LDCs

Whether it's $1.3 trillion, $5 trillion or the $100 billion annual climate finance target, these are just numbers unless they are grant-based and delivered on time to address the vulnerabilities of Least Developed Countries (LDCs), said M Zakir Hossain Khan, chief executive of Change Initiative, a Dhaka-based think tank focusing on equity and justice. 

Speaking to The Business Standard from Baku, Azerbaijan, where he is attending COP29, Hossain emphasised the need for actionable solutions.

An expert on climate finance and governance, Zakir Hossain shares insights from COP29, highlighting critical gaps in climate justice for Least Developed Countries (LDCs). He critiques the lack of time-bound commitments to the 1.5°C target and meaningful climate finance for LDCs, emphasising Bangladesh's rising climate debt, which now stands at $79.6 per capita. 

Change Initiative's recent study found that, on average, for every $1 grant received, $0.53 was received as a loan by LDCs. Hossain also warns of developed countries evading responsibility through loans and potential insurance schemes instead of grants. 

How has the LDCs group, including Bangladesh, approached negotiations at COP29, and what outcomes are they advocating for?

In the early 2010s, climate-vulnerable forums (CVFs) and the LDC group were notably active, with joint efforts. However, this year, despite being labelled as a "climate finance COP," I don't see a cohesive or strong stance from these groups to assert their rights while loss and damages jeopardise the sustainability of the planet. 

Earlier, the G20 proposed a target of one trillion dollars, and discussions largely revolve around this figure. Yet, two critical concerns remain unresolved at this COP.

Firstly, there's a lack of concrete, time-bound commitments from developed countries, including India and China, to meet the 1.5°C target by 2030. Despite discussions, no united position or binding document has emerged to hold these nations accountable. 

Secondly, on climate finance, while LDCs highlight the debt burden and call for country-specific grant-based funding, no substantive roadmap supports country-specific debt risk assessments, apart from the Change Initiative's climate debt risk index (CDRI) 2024 disseminated at COP29. 

Without clear evidence of debt vulnerability, countries struggle to secure climate finance effectively. So, what do we want? 

LDCs need timely, country-specific grant-based funding based on their vulnerability indices aligning with the NDCs [Nationally Determined Contributions are countries' climate action plans that are a key part of the Paris Agreement]. Delayed fund delivery can severely undermine projects, for instance, if a fund allocated for a 2024 adaptation project arrives in 2030  with the same budget, the project's impact diminishes and ultimately ends up as maladaptation. 

Similarly, delays in mitigation financing can lead to increased emissions due to a lack of timely intervention. Ultimately, the critical issues of finance quality – such as grants versus loans, timely disbursement and prioritised, vulnerability-based allocations tied to NDC targets – remain unresolved at this COP. 

However, one positive development is the COP29 presidency's declaration of a Climate Finance Action Fund (CFAF), a reflection of the Call to Action of Change Initiative. This fund is designed to receive annual contributions from fossil fuel-producing countries and companies, and 50% of the funds will be used for adaptation. mitigation, and research and development in developing countries. 

Yet, there's no clarity on how this fund will be sourced or utilised. Instead, varying numbers – ranging from $1.3 trillion to $5 trillion annually in place of $100 billion – are circulating. But these are all just numbers until and unless you don't address them in the vulnerabilities of the LDC countries. 

One week into COP, the situation remains uncertain, with the official document already revised twice. A looming concern is a potential declaration from the US President-elect's withdrawal from the Paris Agreement — or even the UNFCCC — which could deliver a severe blow to global climate efforts. 

Such a move would echo the factors that led to the failure of the Kyoto Protocol, casting doubt on the future of global climate governance and the credibility of existing frameworks.

Another major development from this COP is the lack of high-level engagement from key nations. India has refrained from sending a high-level delegation, while China's presence has been minimal. Argentina's full delegation has withdrawn, with reports suggesting the country is considering exiting the Paris Agreement altogether. 

Meanwhile, neither the United States nor Canada has sent senior representatives, further fueling concerns about the commitment of major players to global climate discussions.

This is a pivotal moment for decisive action, but the reality is grim. With only 20% of the carbon emissions quota left to meet the 1.5°C target, it is virtually impossible to achieve this within the next six years, given the projected rise in emissions. 

Despite the urgency, developed countries have shown no commitment to delivering climate finance on time. Instead, they hint at withdrawing from agreements, further exacerbating the crisis.

There has also been little progress on establishing loss and damage funding grounded in equity and justice for LDCs. These nations, which face annual losses estimated at $1.5 trillion, have received less than $1 billion in funding. The stark contrast highlights the growing disparity between the promises of global climate action and the reality faced by vulnerable nations.

Do you consider the Trump administration a significant obstacle to global climate action?

Yes, if the United States withdraws from the Paris Agreement, and with only two years remaining for the agreement's effectiveness, it raises serious concerns about the future of the planet. The US is the world's largest per capita emitter, and its exit would undermine the agreement's credibility. 

With the US absent, countries like India and China, based on equity, may feel less compelled to reduce global carbon emissions. This would create a significant gap in global efforts to combat climate change and hinder progress on achieving the 1.5°C target. Though some US states and cities may continue with the ambitious plan that would not help LDCs to be resilient as state climate funding would be curtailed. 

If the Paris Agreement fails, I see a significant breaking point in global multilateralism, where two polarities are emerging. This division will have a profound impact on the UNFCCC. The developed world, which recently spent $3.4 trillion on war expenses, has the financial capacity to provide the $1 trillion fund needed to address climate change. 

For comparison, global public fossil fuel subsidies amount to around $1 trillion annually. Even if just 50% of this subsidy is rechanneled, it would provide $600-650 billion per year, which could meet the financial requirements of LDCs and support their climate adaptation and mitigation projects

But they are not doing it. This is a matter of political will. 

While the US administration under Trump may talk about progress, particularly in renewable energy and the electric vehicle (EV) sector, the reality is that they will continue to prioritise profit maximisation within the American economy. 

Moreover, by onboarding China, they may claim significant contributions to global mitigation efforts but these claims will likely serve to enhance their economic interests rather than genuinely address the needs of vulnerable countries or the full scope of the climate crisis.

Could you explain the loan versus grant debate, especially considering your significant research on this topic with the Change Initiative?

On average, for every $1 grant, LDC countries receive $0.53 in loans. However, Bangladesh's situation is much more precarious, as it receives almost $0.80 in loans for every $1 in grants, which amounts to a growing climate debt. 

From an equity point of view, the same study identified that for every 1 tonne of CO2, an average person bears a $4.58 climate loan in LDCs, which is far higher than that of the OECD countries.

The total climate debt per capita in Bangladesh has reached $79.6. We have developed the Climate Debt Risk Index, which is a tool that previously did not exist, to track and understand this increasing burden.

We found that among 20 vulnerable LDC countries with limited access to finance, 18 are at risk. Only the Philippines and the Maldives fall under moderate risk, while the remaining 18 countries are facing high or very high climate debt risks. 

Sri Lanka, Myanmar, Madagascar and Mozambique are in the very high-risk category. If the current trend of increasing loans continues, by 2030, countries like Bangladesh, Sri Lanka, Rwanda and Senegal are expected to fall into the climate debt trap, which will severely hinder their ability to address climate change impacts.

What we observe is a contradiction: while we are told we will receive substantial climate finance, our analysis shows that LDC's climate debt risk is steadily increasing. As this debt burden grows, the ability to fund adaptation and mitigation efforts will decline. 

This situation directly contradicts the four major principles of climate justice, including 'polluters pay,' equity and fairness, intergenerational responsibility, and transparency and accountability. All these principles are violated as the debt burden rises. 

This is particularly concerning, as we are already facing per capita external development debt burdens of $3,000, with an additional $80 in climate debt, totalling approximately $13 billion, which was almost zero in 2009. 

How is the loss and damage fund discussion progressing in this COP?  

The discussion around the loss and damage fund at this COP has seen some new pledges but concerning the requirements, it is peanuts. Change Initiative's analysis identified that Bangladesh spend around $7.7 billion annually to avert the potential loss and damages from increased climate disasters. 

Moreover, there's a major concern: there is still no clarity on how and when the funding will actually be delivered. The promises made remain vague, with no specifics on whether the funds will arrive on time or whether they will truly benefit the most vulnerable countries. 

The 'polluters pay' principle, which is central to climate justice, seems to have faded from the conversation. My fear is that, as the discussions drag on, LDCs will be left with no options, and an insurance regime may be imposed upon vulnerable people. Such a system would benefit the economies of the polluting countries rather than offering real solutions to the loss and damage experienced by vulnerable nations

The first week of COP is over. Are you optimistic that we will achieve anything substantial this year?

I want to be optimistic but the reality is that we might once again get stuck in political rhetoric and wordplay. I believe the LDC leaders should jointly provide a clear message to the developed countries in reflection of the science-based growing loss of lives and irreversible damage to nature. If developed nations fail to make meaningful progress on deliverables or the 1.5-degree target, we may need to adopt a carbon tax regime in 2026. 

Under this system, we would impose taxes on all carbon-emitting and environmental-degradation products from developed nations. Around 53 fossil-fuel companies are responsible for about 80% of global carbon emissions, yet they often operate outside any state boundaries. 

Where is their accountability? For example, a Japanese, Chinese or Indian company setting up a coal project in Bangladesh. These companies profit from LDCs including Bangladesh but do not take responsibility for the emissions they cause. With the greed-based economy that they built around the world, there should be a proper plan for transitioning to nature-centric prosperity from here guided by natural rights protection as a core priority.