After months of preparations and weeks of talks, COP28 is over – but the hard work is just beginning. Now we need to translate the agreements reached into changes on the ground through local action.
Mixed results
As ever, we left COP with some positive developments and some areas where we need to see a lot more progress. First, the positives. State parties finally agreed we must transition away from fossil fuels and to triple renewable energy supply and a raft of new commitments re-emphasised the priority of keeping global temperature rises below 1.5 degrees. We also saw a new wave of financial pledges at the start of COP28, notably the news of USD 700 million pledged to combat loss and damage resulting from climate change.
On the other hand, some may say that December’s commitments did not go far enough in terms of phasing out fossil fuels and financial pledges. While new pledges are a move in the right direction, the amounts fall far short of the trillions needed to address the crisis in front of us. An Independent High-Level Expert Group report from November 2022 suggested that costs to address loss and damage “could be as high as USD 150-300 billion by 2030 to cope with immediate impacts and for subsequent reconstruction”. Against this, USD 700 million really is a drop in the ocean.
Climate finance where its most needed – locally
Yet what was most striking though was the absence of meaningful negotiations on climate finance, particularly at the subnational level. COP focused mainly on financing action at a national level, but we know from our experience at Climate Group that this is not where most of the implementation takes place. In fact, a considerable proportion of climate activities are planned and carried out on the ground by local level government – states, regions and cities.
The OECD found that in 2019, subnational governments accounted for 63% of climate-significant public expenditure and 69% of climate-significant public investment across more than 30 OECD and EU countries. As the level of government closest to the people it makes sense that initiatives to cut emissions or to deal with the fall out of extreme weather events will land at their door.
Working with states and regions in the Under2 Coalition, Climate Group carried out research into subnational climate finance last year. We found that subnational governments often have devolved regulatory, legislative and budgetary autonomy, and control key policy levers to boost efforts against climate change. Although not universal, many of them have the legal and purchasing power to instigate real change and spur others on to do the same. In the absence of international climate funds specific to subnational governments, many governments are using creative new ways to raise finance at the local level.
Catalonia, for instance, is one of the few European regions to implement carbon pricing. In the first phase of their initiative in 2021, they taxed CO2 emissions from vehicles through the form of an annual fee based on a vehicle’s emissions efficiency. The income from the tax, estimated at around EUR 140 million a year, is shared equally between the Natural Heritage Fund and the Climate Fund. Another example of creative financing is the German state of North Rhine-Westphalia, which issued its ninth “sustainability bond” in 2022, worth €3.5 billion, to finance social and environmental projects. The state has issued at least one green bond every year since its first issue in 2015, with the annual amounts raised gradually increasing over time.
Among the key recommendations of our report was to maximise the opportunities from greening procurement systems, as this is where subnational governments spend proportionately more than national governments. We also highlighted the importance of tailored incentives and regulations for the private sector to align government and business action.
Empowering subnational governments
Yet locally led revenue generation is only possible where such devolved powers exist. Not all states and regions have such powers. There is much more work to be done to ensure international climate finance instruments are available to subnational governments, to ensure more effective multi-level financing at national and subnational levels, and to ensure subnational governments understand and can access the full range of climate finance mechanisms. As the level of government closest to communities, it is essential we empower local governments. At the same time, we must recognize that the financing gap cannot be met solely through bottom-up financing. The scale of investment needed for mitigation, adaptation, and resilience demands international support and approaches.
In 2023 alone we saw devastating heatwaves and wildfires in North America, floods in Europe, rising sea temperatures and powerful storms across Africa. Delivering climate finance to protect vulnerable countries is essential. But effective climate finance relies on channeling finance to the right places at the right time. Achieving this will mean rethinking international climate finance flows to channel that finance through effective subnational networks. It will also mean working with those on the ground who are on the frontlines of the challenges – and are already innovating to deliver tailored solutions to protect those hardest hit by the increasing impacts of climate change.
