Why climate finance needs a relook

As the world negotiates the ways to finance climate actions at Baku, DH’s
Kalyan Ray caught up with one of India’s past negotiators,
Ajay Mathur, who is currently the director general of the International Solar Alliance. Excerpts:

What’s your expectation from COP29?

I look forward to an infrastructure that would allow private sector finance from developed countries to flow into developing countries. In the past, a vast amount of investment in the solar sector came to OECD countries, China, and a few large developing countries like Brazil, India, and Indonesia. They account for 80–85% of the investment. For other developing nations, there is almost no money. All African countries together get about 3% of the investment. What is important at Baku is to get a mechanism through which money can flow to all countries, leaving no one behind.

Why is money not available? Is there a dearth of resources?

Worldwide, more than a trillion dollars a year are available for investment, but only around $500-$600 billion is spent. The biggest challenge is to give confidence to the investors that there is a market in developing countries. Earlier, the developed countries promised $100 billion per year. If that money can be used as a guarantee to help the private sector money flow to the developing countries, it would help in project preparations. Those are the kinds of things I hope will happen at Baku.

Considering that the Paris pledge of $100 billion per year by 2020 hasn’t materialised, how hopeful are you of the NCQG (new collective quantified goal)?

The biggest challenge has been the definitional one. What does this $100 billion include? If it includes all finances, including commercial financing, we have certainly crossed $100 billion a year. But if it relates to the money made available to the developing countries as assistance or aid, which brings down the cost of capital, then the $100 billion has not been achieved. It’s a matter of counting. According to the OECD, the $100 billion has been achieved. According to the Government of India, it has not been achieved.

India says that the external funds should be in addition to the development assistance.

India and the developing countries’ negotiating positions always were that this has to be additional to the commercial money that is flowing.

Are such demands realistic?

I believe you will start seeing public sector resources being invested to bring down the cost of capital that flows to the developing countries. It started in a small way, like the global solar facility at the International Solar Alliance to provide payment guarantees. Countries, including India, have invested to create the guarantee fund. But we need to see it at scale so that it makes the money flow.

Do you think the US presidential election results will change things at Baku?

The US has had certain consistent positions, irrespective of whether there is a Republican or Democratic administration. Among these consistent positions is the fact that they would not like to formally agree to making the resources available as pre-resources. This is not to say that the US does not support, but it will not give a multilateral commitment in that regard. On a one-to-one basis, it supports.

Will Donald Trump’s return to the White House adversely affect climate action?

That will start happening January 20 onwards when he takes office. At Baku, we will probably see the US largely continuing to act on the basis that it would not be held responsible for any reparations to the world for climate damage.

The frequency of extreme weather events is increasing.

The window is closing on the 1.5 degrees Celsius. Though the amount of renewable energy being used is increasing globally, it’s a battle for time. On one hand, we would like renewable energy, particularly solar energy, to be adopted quickly. And on the other hand, we are seeing climate impact increasing as time goes by. It is a battle between these two competing areas.

But solar energy, compared to fossil, is still not so efficient.

Efficiency is not the issue. Electricity produced by solar is the best form of electricity in several countries, including India. When the sun is shining, we get electricity at approximately Rs 2–2.4 per kilowatt hour. Electricity from a new coal-fired power station costs in excess of Rs 5 per kilowatt hour. The challenge is how to make the solar electricity last when the sun is not shining. In 2024, there had been four auctions for round-the-clock renewable electricity. We found that the prices are between Rs 4-5 per kwh. This to me is the straw that broke the camel’s back.