COP27 must deliver on climate finance for Bangladesh

At a time when the 27th Conference of the Parties (COP27) is taking place from 6-18 November 2022 in Sharm El Sheikh, Egypt, the world is reeling from energy and food crises and rising inflation, largely precipitated by the Ukraine-Russia war. 

While the economic and geopolitical contexts are understandably complex, climate finance is expected to be one of the major topics broached at the conference. 

The world needs accelerated investment in both greenhouse gas mitigation and adaptation to seize what the Intergovernmental Panel on Climate Change (IPCC) describes as the "rapidly narrowing window of opportunity to enable climate-resilient development". 

Vulnerable countries like Bangladesh, which are already facing unprecedented and catastrophic weather events, have an urgent need for international climate finance to help build that resilience going forward. 

The current energy landscape in Bangladesh

In June 2021, in the face of declining coal finance availability, Bangladesh cancelled plans for 10 new coal-fired power plants citing a commitment to reduce carbon emissions.

It then submitted its revised Nationally Determined Contributions (NDC) with enhanced greenhouse gas mitigation commitments to the United Nations Framework Convention on Climate Change (UNFCCC) in August. By 2030, the country aims to unconditionally reduce greenhouse gas emissions by 6.73% below business-as-usual in the energy, industrial, agriculture and forestry, and waste sectors and conditionally by 15.12% below business-as-usual levels. 

In November 2021, the Bangladesh government announced the ambitious target of increasing renewable energy's contribution to its electricity grid by up to 40% by 2041. A target to reach 10% renewable energy generation by 2020 was missed. In the same breath, it called for development partners to 'come forward' with technology and financial assistance to help reach its goal.

As Bangladesh waits for the newly constructed Rampal coal-fired plant to come online, now slated for December despite being inaugurated in August, the high cost of LNG imports amid high global prices driven up by Russia's invasion of Ukraine has seen the suspension of purchases and fuel rationing in addition to power price hikes. Bangladesh has been facing frequent power cuts this year and a near national blackout on 4 October, a situation the new Rampal power plant reliant on expensive seaborne thermal coal imports is unlikely to rectify.

Meanwhile, Bangladesh's Power Development Board is laden with debt, facing a deficit of Tk 30,251 crore (approximately USD 3 billion) in revenue in the calendar year 2022.

Cost of financing clean energy is in the billions

Within this context, Bangladesh has obvious challenges in mobilising capital for clean energy development. The Ukraine-Russia war has exacerbated the situation, with rising fiscal burdens for the government attributable to the price volatility of fossil fuels in the international market and the country's over-reliance on imported fuels. 

The pursuit of clean energy technologies significantly hinges on international support like climate finance. 

On a ballpark estimate, attaining the 40% renewable energy target could posit the need for capital investment of more than USD 1.5 billion per annum until 2041. The total cost of greenhouse gas mitigation actions is estimated at USD 176 billion over ten years to 2030. 

Climate change events sorely affecting Bangladesh

Bangladesh is one of many countries being adversely affected by climate change. The increasing frequency, intensity and duration of floods are affecting livelihoods and infrastructure. Additionally, Bangladesh experiences cyclones almost every year and some of them are increasingly severe, resulting in salinity intrusion in coastal areas, which are home to around 20 million people, making the search for clean water to meet daily household requirements a struggle. 

Although Bangladesh has enhanced its capacity in flood management and continues to be positioned as a leading country in promoting locally led adaptation, such measures don't seem to be enough, with the changing climate taking a hefty toll on the economy each year. 

The recently released Stockholm Environment Institute report, "Operationalizing finance for loss and damage: from principles to modalities" concluded that almost USD 2 billion per annum is being spent by rural households in Bangladesh to prevent and repair damage owing to climate change. Notably, the amount being spent is twice that of government spending per annum and twelve times more than contributions received from multilateral agencies. 

Bangladesh needs increasing finance for climate change adaptation now and into the foreseeable future. 

With the intensification of climate change-related adversities, the 2021 United Nations Framework Convention on Climate Change called for ensuring the channelling of USD 100 billion in climate finance per annum to developing and least developed countries, seen as crucial to global efforts to tackle the climate crisis. Combining both the demand for mitigation and adaptation, the financing amount of USD 100 billion committed at the 2010 United Nations Climate Change Conference in Cancun, Mexico, remains insufficient, to say the least. 

Good outcomes needed at COP27

IEEFA would like to see a ramping up of finance commitments from developed countries at COP27 and measures put in place to avoid some of the criticisms on climate finance, like, double counting. A balanced allocation to adaptation and mitigation (50:50 split) must be ensured. Additionally, there must be an official acknowledgement of loss and damage, with funding allocated for such in the developing world. An example has already been set by Denmark in September 2022 with the declaration of an initial USD 13 million to support developing nations that have experienced losses and damage caused by climate disruptions.

International fossil fuel price volatility makes fossil fuels less affordable and energy independence of paramount importance. Developed countries participating in COP27 could commit to mobilising an increasing volume of financing for countries like Bangladesh experiencing conditions favourable for a rapid clean energy transition. Similarly, parties have the opportunity to agree upon the financing needs for transformational adaptation and loss and damage in vulnerable countries. 

As a logical progression, developed countries could agree on the exact timeline for the annual disbursement of the committed USD 100 billion climate finance per annum while creating a clear roadmap illustrating the enhancement of climate finance commitments for both mitigation and adaptation.

COP is the only feasible platform available to put forward and have vetted targeted proposals. With climate change now clearly affecting all of us globally, leaders of all countries must rise to the occasion, garner consensus, and deliver on climate finance for developing economies.

Environmental Economist Shafiqul Alam. TBS Sketch

Shafiqul Alam is an Energy Finance Analyst at the Institute for Energy Economics and Financial Analysis (IEEFA).