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(THE CONVERSATION) Something big is happening in the desert in Egypt as countries come together for COP27, the UN climate change summit.

Despite a frustrating sclerosis in the negotiating rooms, the way forward for increasing climate finance to help low-income countries adapt to climate change and transition to clean energy is becoming clearer.

I have spent much of my career working on international finance at the World Bank and the United Nations and now I advise public development and private funds and teach finance-focused climate diplomacy. Climate finance has been one of the thorniest issues in global climate negotiations for decades, but I see four promising signs of progress at COP27.

Achieve net zero – without greenwashing

First, the goal – to bring the world to net zero greenhouse gas emissions by 2050 to stop global warming – is clearer.

The last climate conference, COP26 in Glasgow, Scotland, nearly collapsed due to frustration that international finance was not flowing to developing countries and that corporations and financial institutions were making money. greenwashing – making claims they couldn’t substantiate. A year later, something is moving.

In 2021, the financial sector arrived at COP26 in force for the first time. Private banks, insurers and institutional investors representing US$130 trillion said they would align their investments with the goal of keeping global warming to 1.5 degrees Celsius – a net zero pledge. This would increase funding for green growth and clean energy transitions, and reduce investment in fossil fuels. It was an apparent breakthrough. But many observers cried foul and accused financial institutions of greenwashing.

In the year since, a United Nations commission has drawn a red line around greenwashing, delineating what a company or institution must do to make a credible statement about its net zero goals. Its checklist isn’t mandatory, but it sets the bar high based on science and will help hold companies and investors accountable.

Reforming international financial institutions

Second, the functioning of international financial institutions such as the International Monetary Fund and the World Bank is receiving much-needed attention.

Over the past 12 months, frustration has grown with the international financial system, particularly with the leadership of the World Bank Group. Low-income countries have long complained about having to borrow to finance resilience to climate impacts they did not cause, and they have called on development banks to take more risk and mobilize more investment private sector for much-needed projects, including the expansion of renewable energy.

This frustration culminated in pressure for World Bank President David Malpass to resign. Malpass, appointed by the Trump administration in 2019, has held on for now, but is under pressure from the United States, Europe and others to present a new roadmap for the response of the World Bank to climate change this year.

Barbados Prime Minister Mia Mottley, a leading voice for reform, and others have called for $1 trillion already in the international financial system to be redirected to climate resilience projects to help vulnerable countries to protect themselves from future climatic disasters.

At COP27, French President Emmanuel Macron backed Mottley’s call for an overhaul of the way international finance works, and together they agreed to create a group to propose changes at the next meeting of IMF governors. and the World Bank in spring 2023.

Meanwhile, regional development banks are reinventing themselves to better meet the needs of their countries. The Inter-American Development Bank, focused on Latin America and the Caribbean, is considering changing its business model to take on more risk and attract more private sector investment. The Asian Development Bank has launched an entirely new operating model designed to deliver better climate outcomes and mobilize private finance more effectively.

Circulate private funding

Third, more public-private partnerships are being developed to accelerate decarbonization and fuel the transition to clean energy.

The first of these “Just Energy Transition Partnerships”, announced in 2021, was designed to support South Africa’s transition away from coal power. It relies on a combination of grants, loans and investments, as well as risk sharing to help attract more private sector funding. Indonesia plans to announce a similar partnership when it hosts the G-20 summit in late November. Vietnam is working on another and Egypt announced a major new partnership at COP27.

However, public funding has been difficult to lock in. Developed country coffers are dwindling as governments, including the United States, are unable or unwilling to meet their commitments. Today, the pressure of war in Ukraine and economic crises are compounding their problems.

The lack of public funds was behind the proposal of the American special envoy for the climate, John Kerry, to use a new form of carbon offset to pay for investments in green energy in countries in transition from the coal. The idea, loosely outlined, is that coal-dependent countries could sell carbon credits to companies, with the proceeds used to finance clean energy projects. The country would accelerate its exit from coal and reduce its emissions, and the private company could then claim this reduction in its own accounting towards net zero emissions.

Globally, voluntary carbon markets for such offsets have grown from $300 million to $2 billion since 2019, but they are still relatively small and fragile and require stricter rules.

Kerry’s proposal has drawn criticism, pending the fine print, for fear of flooding the market with industrial credits, crashing prices and potentially allowing companies in the developed world to green their own claims by withdrawing the coal in the developing world.

New rules to strengthen carbon markets

Fourth, new rules are emerging to strengthen these voluntary carbon markets.

A new set of “High Integrity Carbon Credit Principles” is due in 2023. A code of conduct on how companies can use voluntary carbon markets to meet their net zero claims has already been published, and standards to ensure that a company’s plans meet the goals of the Paris Agreement are evolving.

Incredibly, all of this progress is outside of the Paris Agreement, which simply calls on governments to make “financial flows consistent with a path to low greenhouse gas emissions and climate-resilient development.”

Negotiators seem reluctant to mention this widespread reform movement in the formal text being negotiated at COP27, but walking the halls here, they cannot ignore it. It has been too slow in coming, but change in the financial system is on the way.

This article is republished from The Conversation under a Creative Commons license. Read the original article here: https://theconversation.com/4-signs-of-progress-at-the-un-climate-change-summit-194345.