By Arunbha Ghosh
For two decades, climate finance has been bifurcated between mitigation and adaptation, with the former outweighing the latter two-to-one. They no longer fall into neat categories. Does a solar irrigation pump mitigate emissions from coal-based electricity or diesel, or does it help farmers adapt to water stress? Funding for both is insufficient. During 2013-18, multilateral climate funds approved only $10.4 billion for mitigation; adaptation funding was at $4.4 billion. Even including bilateral funds and private investment, climate financing was $463 billion in 2016. This is woefully small. India, alone, needs $2.5 trillion in climate financing by 2030.
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Should funds be allocated to build resilience for future or pay for loss and damage now? Bridging mitigation and adaptation, resilience is the ability of human and non-human systems to withstand and respond to climatic changes. Investments in resilient infrastructure (improved drainage, nature-based flood protection) are difficult because markets heavily discount the future. Resilience is contingent on land-use policies accounting for future risks rather than just current needs. Modularity in design can shorten the time horizon, allowing smaller investments today that reduce adaptation needs later.
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Loss and damage due to anthropogenic climate change are the flipside of resilience — and even harder to finance. This is very contentious in climate negotiations. Rich countries — the biggest historical polluters — do not want to bear liability or give compensation for damages caused to climate-vulnerable regions. In 2013, countries agreed to the Warsaw International Mechanism of Loss and Damage but there has been no consensus so far on how it should be funded.
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Crude distinctions between mitigation and adaptation are passé. Financing for resilience and coverage for loss and damage are missing. Climate liabilities can unravel insurance companies; climate vulnerability can undo progress in poverty alleviation. Without finance, there is no growth. When it comes to climate risks, however, finance remains conspicuous by its absence.