A new study shows developed nations could give up to $2 trillion (£1.35 trillion) each year until 2050 to help developing countries mitigate and adapt to climate change without exceeding more than 2% of the GDP or the finance provided being prohibitive.
The research conducted by the London School of Economic’s Grantham Research Institute on Climate Change and the Environment used economic models to calculate the finance.
The authors calculated how much money developed countries would need to transfer if the costs of cutting emissions to avoid dangerous climate change were based on GDP.
The research concluded that developing countries should receive between $400 billion (£270 billion) and $2 trillion (£1.35 trillion) per year from rich countries by 2050 to help tackle climate change, as well as to meet the target of keeping global temperature increase below 2 degrees Celsius.
Even if the maximum amount was pledged, costs to developed nations would not exceed 2% GDP per year according to the calculations.
The 2010 agreement from rich nations to provide $100 billion (£67 billion) per year until 2020 from public and private sources was rated by the researchers as “rather unambitious”, since it represents only a small portion of the total finance needed.
Supporters of giving finance to developing countries argue that rich nations have typically contributed the most to climate change, while developing nations will be the most impacted.
The paper states,
The definition of equal effort means that the reforming economies and the current oil exporting regions would receive relatively large amounts as a share of GDP. However, transfers never exceed 1-2% of GDP for high-income country regions in any of the model projections. Hence the cost to high-income countries, while substantial, is not likely to be prohibitive.
The paper acknowledges the potential of private investors to incentivise climate change mitigation and adaption finance as follows:
Relying on investors motivated purely by financial returns may underpin international climate finance more effectively than the fluctuating goodwill of policymakers.
However, it argues that governments still need to increase support significantly or risk a “considerable shortfall” each year.
Examples of the discrepancies between domestic and international climate funding have been highlighted in the report “Fair share: climate finance to vulnerable countries” released in September 2014 by thinktank the Overseas Development Institute (ODI).
Neil Bird, research fellow at ODI, said:
In the whole of Sub-Saharan Africa, international support to assist countries [adapting] to climate change has averaged only $130 million (£79m) annually, far less than the $1.1 billion (£670m) the UK alone spent on flood defences.