The Failure to Adapt

Wealthy nations and financiers spent COP26 focusing on a future transition to clean energy. They ignored the immediate and dire need for funding to ameliorate the current impacts of climate change.

Historian Michael Franczak returns with his third and final dispatch from the COP26 climate summit in Glasgow. If you haven’t already, please read his first and second dispatches as well! And please sign up today for a free or paid subscription to Foreign Exchanges and support more news and analysis of international affairs and US foreign policy:

by Michael Franczak

As I write this on Friday, climate activist Greta Thunberg is leading a massive rally outside the Blue Zone, which you can read about here. The atmosphere is also tense inside the Blue Zone, despite Al Gore’s impressive but flawed presentation (more on that soon).

Today I’ll focus on what was (on the surface) an optimistic day for COP-26: Wednesday, or finance day. As FX readers already know, that morning, UN Climate Envoy and former UK central banker Mark Carney announced a massive new private sector climate financing initiative. The NYT reported that:

A coalition of the world’s biggest investors, banks and insurers that collectively control $130 trillion in assets said on Wednesday that they were committing to use that capital to hit net zero emissions targets in their investments by 2050, in a push that would make limiting climate change a central focus of most major financial decisions for decades to come. The group, called the United Nations Glasgow Financial Alliance for Net Zero, is made up of 450 banks, insurers and asset managers in 45 countries. It said the pledge amounted to a transformation of the global financial system and would help businesses, financial firms and entire industries undergo fundamental restructuring for a carbon-neutral future.

GFANZ will no doubt be cited by COP-26 president Alok Sharma and others as a crowning achievement for the conference, regardless of progress on other issues. The financial press has already done so, e.g., Bloomberg’s simply irresponsible headline (“Carney Unveils $130 Trillion in Climate Finance Commitments”). Like every other “commitment” made by wealthy countries and banks, there is no enforcement mechanism or transparency—we must take the bankers at their word. As I saw in a discussion panel that same morning, Carney and the bankers were, of course, positively giddy: Problem solved, cheers mates and let’s grab a pint.

But there are even more serious issues than follow-up and number-fudging. Let’s go for a minute to Gore’s speech. In the first half, Gore ran through harrowing footage and figures on the enormous suffering climate change is already causing, in every corner of the world but particularly for the already-worst off. Gore quoted Pope Francis’ encyclical Laudato si’ on climate change: “[T]he gravest effects of all attacks on the environment are suffered by the poorest.”

The second half of the speech, however, was supposed to be a jolt of optimism. Gore listed statistic after statistic (as he is wont to do) on the growth and scaling of renewable energy technologies. Ninety percent of newly installed electric capacity last year globally came from solar and wind, Gore told us, which are now cheaper than coal and gas in two-thirds of the world. He’s right: the cost of renewables is indeed plummeting, which is great news for mitigating climate change and meeting net zero commitments. Last year in China, 63% of new electric capacity came from solar and wind; in India, 70%, and in the US, 81% (more Gore figures). Even the famous coal museum in Kentucky just put solar panels on its roof to save money. “The markets are moving forward,” he insisted in his final remarks, citing GFANZ as a prime example. “This is not greenwashing.”

There may be some truth to that, but mitigating emissions is only half of the problem. Take the small island developing states (SIDS), which a) barely emit anyway and b) need immediate aid to literally stay afloat. Gore stated that if every party at COP-26 kept their current net-zero pledges, then by 2050 we will be able to hold global temperature rise to 1.8 degrees Celsius—still higher than the 1.5 target declared at Paris, but enough to avoid the extremely dramatic consequences of 2.5 or 3 degrees in most rich and middle-income countries. Sea level rises have already harmed coastal communities in emerging economies by salinating drinking water and spoiling fertile land, e.g., in the Mekong Delta. But for the SIDS, sea level rises and extreme weather events mean not just economic loss and displacement, but outright extinction.

What these countries need most—and now—is money for adaptation and resilience. And here is the problem with the GFANZ/Gore consensus. Naturally, capital seeks the highest rate of return, and yes, there is plenty of money to be made in wind, solar, nuclear, and other renewables. This is a good thing. But investment for these will go mostly to developed countries, who possess the necessary infrastructure that many developing countries (and especially the Least Developed Countries), who would benefit greatly from such technologies, don’t. Barring support for public finances from rich countries (or cancelling debt principals rather than printing SDRs for endless interest payments), the money for these improvements comes from the public purse—leaving less for other vital social services.

Jamaican Finance Minister Nigel Clarke made exactly this point on a panel directly before the bankers spoke. As a middle-income developing country, Jamaica no longer qualifies for concessional aid from, say, the World Bank. Yet climate-induced risks like more and stronger tropical storms both discourage FDI and increase borrowing costs. Thus, countries like Jamaica must fund their own adaptation and development. “We do not have luxury of waiting for adaptation finance to become accessible,” Clarke explained, “because we have to act now.” Most climate finance is bilateral and marked for specific projects selected by donors, which may not be responsive to local needs. “The $100 billion promise is critical, but so is its composition,” added Yannick Glemarec, Executive Director of the Green Climate Fund. “What kind of form? What kind of instruments?” Obviously, this is only a fraction of what developing countries need, so the $100 billion must be as flexible as possible. “If you have grants, you can convert them to anything—guarantees, equities, stabilizers. When you’re limited to one instrument, your capacity is diminished.”

I mentioned in my last piece that on Tuesday the US delegation announced $3 billion for a new adaptation fund—its own, bilateral fund. For the multilateral GCF, well, Kerry promised to ask Congress for $1.25 billion. Since 2010, when it was founded, the UNFCCC’s Adaptation Fund has delivered just $850 million. Balancing adaptation and mitigation finance is a key objective of the conference. It is what SIDS and the Least Developed Countries insist on most, and for which they receive the least. Only one-fifth of OECD climate financing from 2019-20 went toward adaptation; the number for G-7 climate finance is 8%, most of which went to middle-income countries (instead of the Least Developed Countries).

The UK COP-26 presidency declared in the “Glasgow Imperative”: “The Paris Agreement sets out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C above pre-industrial levels. However many climate impacts are already locked in. These impacts will disproportionately affect those who are most vulnerable. Some will be able to adapt but many will not.” But for most donors, the multilateral adaptation fund simply isn’t a priority; for investors, adaptation financing simply isn’t profitable. The $130 trillion signal from GFANZ and $100 billion from donor countries (which will be “met” with last-minute pledges and creative accounting) will change none of this.

According to Gore, if the collective promises, pledges, and commitments made at COP-26 are met, we will be able to limit warming to 1.8 degrees by 2050. There is no formal voting in the UNFCCC process; it is a consensus-based organization, based on trust between negotiators in the short-term, and trust between countries and their records of commitment in the long-term. As Kofi Annan once said, “The only promises of mine that matter are the ones I’ve kept.”

Michael Franczak is a Postdoctoral Fellow in Global Order at the University of Pennsylvania’s Perry World House. Before that, Michael was a Postdoctoral Fellow in International Security Studies at Yale, where he also taught in the History department.

Michael’s first book, Global Inequality and American Foreign Policy in the 1970s, is forthcoming in June 2022 from Cornell University Press. He is now at work on a history of US foreign policy and global climate change negotiations.

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