Analysis and News

The Global Climate Fund

BY ARMCORE VPI's Analyst: Govindra Raghubansi

The United Nations Framework Convention on Climate Change (UNFCCC) created the Green Climate Fund (GCF) in 2010 as an operating body of the Convention's Financial Mechanism. In the context of sustainable development, the Fund facilitates the burgeoning of climate-resilient pathways by assisting developing countries in limiting or reducing greenhouse gas emissions and adapting to climate change impacts.

150 years of economic activity has resulted in high levels of GHG emissions in the atmosphere. In 2015, 197 nations adopted the Paris Climate Agreement to avoid catastrophic climate change. It seeks to keep global average temperature increases to 2°C since pre-industrial levels while pursuing attempts to stay under 1.5°C. Financing a rapid transition to net-zero is estimated to be 23 Trillion USD by the year 2030 for a climate-resilient economy in accordance with the Paris Climate Agreement's goals.

To achieve rapid decarbonisation and benefit from sustainability there will be trade-offs in the short run. Climate change creates a triple burden on financial decision-makers, financial system regulators, and governments. To begin, they must ensure that the financial system is capable of supporting economic activity, encouraging entrepreneurship, and safeguarding the assets of millions of people. Second, they must direct a significantly higher portion of global private savings into sustainable projects and low-carbon alternatives. Third, they must maximise climate policy development co-benefits. The Global Climate Fund plays an important role in managing these 3 responsibilities. Current decision-making on how to revive economies will either cement our dependency on fossil fuels or put us on pace to meet the goals of the Paris Climate Agreement.

The Nationally Determined Contributions (NDCs) that each country has set does not yet show a path to net-zero CO2 emissions. By the end of the century, their full implementation is expected to result in warming of between 2.9°C and 3.4°C. The gap between 1.5°C and 2°C in expected impacts is large, but the difference between 2°C and 2.5°C is significantly higher; anticipated impacts are expected to cause substantial, sudden and permanent changes in the climate system, with detrimental effects on wildlife and humanity.

By investing across key transition areas – built environment, energy and industry, human security, livelihoods and wellbeing, and land-use, forests and ecosystems – and employing a four-pronged approach, GCF aims to drive the shift to low emission, climate-resilient development pathways.

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