Economy

Study: rich nations could affordably give $2tn to tackle climate change in developing countries

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Rich nations could pledge up to $2 trillion (£1.35tn) each year by mid-century to developing countries to help mitigate and adapt to climate change without exceeding more than 2% of GDP or the finance provided being prohibitive.

The research, from the London School of Economic’s Grantham Research Institute on Climate Change and the Environment, used economic models to calculate the finance. Authors of the paper calculated how much money would need to be transferred between countries if the costs of cutting emissions to avoid dangerous levels of climate change were based on GDP.

The research concludes that developing countries should receive between $400 billion (£270bn) and £2 trillion (£1.35tn) per year from rich countries by 2050 to help them cut greenhouse gas emissions and keep global temperature increase below 2C. Even at the highest suggestion, costs to developed nations would not exceed 2% GDP per year.

In 2010 rich nations agreed to provide an additional $100 billion (£67bn) each year to developing countries by 2020 from public and private sources. However, the latest paper states that this commitment is “rather unambitious”, with pledges representing only a very small portion of the 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.

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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.”

While the paper acknowledges the potential of private investors to incentivise climate change mitigation and adaption finance, it argues that governments still need to step up their support or risk a “considerable shortfall” each year.

The paper adds, “Relying on investors motivated purely by financial returns may underpin international climate finance more effectively than the fluctuating goodwill of policymakers.”

Photo: Ken Tegardin

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Further reading:

Climate finance of $150bn needed to limit climate change

COP19: China urges progress on 2020 climate finance targets

UK set to offer climate expertise to developing countries

World Bank lowers growth projections for developing countries

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