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Status of Climate Finance in 2020 – Why 2020 is declared as Year of Green Wave

Status of Climate Finance in 2020 – Why 2020 is declared as Year of Green Wave


  • GS 3 || Environment || Climate Change || India & Climate Change

What is the issue?

  • The world has overlooked an undeniable silver lining: the arrival of the green future

The year of Green wave-2020

  • In 2020, the world spent half a trillion dollars on renewable power, electric vehicles, and other clean


  • This was the highest funding for clean energy in one single year, especially on electric vehicles.

The Possible Green Future

  • The cost of renewable energy price is declining steadily.
  • Once they become competitive & cheap enough then it will transmit over wires to our homes, businesses, etc.
  • Once this happens, power-intensive industries will be disrupted.
  • As electricity prices fall, industries will make a switch to electrical furnaces, the cost of the required equipment and industrial plants should fall, and production will become environmentally far cleaner.

Climate Finance

  • Climate finance refers to the financial resources mobilized to fund actions that mitigate and adapt to the impacts of climate change, including public climate finance commitments by developed countries under the UNFCCC, Private sector Funding, and local finances.
  • It aims to promote actions for mitigation and adaptation that resolve climate change.
  • The UNFCCC, the Kyoto Protocol, and the Paris Agreement calls for financial aid to those who are less endowed and needier, from countries with more financial capital.


  • At 2010 Cancun Agreements, developed countries have committed themselves to the objective of collectively mobilizing USD 100 billion per year to meet the needs of developing countries by 2020.
  • The Cancun Agreement created the Green Climate Fund (GCF) and named it as the operating body of the Financial System.
  • Under the Paris Agreement, developing countries confirmed this objective in 2015 and agreed to set a new joint quantified goal of USD 100 billion per year from floor to floor before 2025.

Need for Climate Finance

  • Climate change is one of the most pressing concerns of the modern 21st-century era. Its effects as impacted and even altered the planet to a significant extent. Long-term climatic changes on the Earth are of utmost significance.
  • They can have economic, human, and geographic consequences if the changes are not reversed or not mitigated at the earliest. There are solutions to mitigate climate change but they are not financially viable for many developing nations. Hence the GCF will help bridge this gap by economic means.

Globally the scale of needed investment

  • The World Economic Forum estimates that about $5.7 trillion would need to be invested in green infrastructure annually by 2020.
  • Just a tiny piece of the $5.7 trillion puzzles is the current pledge of $100 billion annually.
  • The ill-effects of climate change are already visible in erratic rainfall, rising number of cyclones and their destructive capabilities, increase in extreme weather events, glacier melting events.
  • The global south is the main sufferer of the climate change ill effects. But their mitigation and adaptation capabilities are very meager. They depend heavily on climate finance.
  • The target of limiting global warming below 1.5 ˚C is possible only with fast-paced mitigation activities. It needs heavy investments in green technology.
  • Mitigation – Large-scale investments are required to significantly reduce emissions.
  • Adaptation – Significant financial resources are needed to adapt to the adverse effects and reduce the impacts of a changing climate.
  • The investment required to achieve the low-carbon transition is to the level of USD 3.8 trillion annually between 2016 and 2050, for mitigation investments alone (IPCC 2018).
  • Estimations of adaptation costs are up to USD 180 billion annually between 2020 and 2030 (The Global Commission on Adaptation, GCA 2019)

India and climate change

  • IPCC (2014) Fifth Assessment Report argued that climate change will have widespread impacts on Indian society and its interaction with the natural environment.
  • It has been argued that climate change will slow India’s economic growth, impact health and development, make poverty reduction more difficult, and erode food security.
  • India aims to reduce its carbon emission intensity-emission per unit of GDP-by 33-35 percent under the Paris Accord. India needs climate finance to accomplish these goals and develop its renewable capacity.
  • The Indian green bond market is in a growing phase, with the first green bonds issued in 2015 – suggesting the need to explore more climate finance options.
  • In India, because of asset-liability mismatches, banks and non-banking financial firms have a small appetite for long-term debt.
  • India also faces traditional problems such as poverty, pollution, education and skill gaps, etc., along with problems arising from climate change. There is therefore a greater need for climate finance.

India and the GFC

  • From India’s point of view, the establishment of the GCF is noteworthy. The reason being that it was India that led the call with other developing nations in insisting on a set up of a multilateral mechanism under the auspices of the UNFCCC through the aid provided by developing nations.
  • The Ministry of Environment, Forests and Climate Change (MoEFCC) has been selected as India’s Nationally Designated Authority (NDA) for the GCF. The MOEFCC will make suggestions on funding proposals for national climate strategies to the controlling board of the GCF.
  • NABARD has been accredited by GCF as the first Entity for sourcing financial resources from GCF for India.
  • As of now, the Groundwater Recharge System Installation project in Odisha is the only one in progress with funds collected from the GCF.

Global Climate Financing

  • To restrict or reduce greenhouse gas (GHG) emissions in developing countries and to help vulnerable communities adjust to the inevitable impacts of climate change, the Green Climate Fund (GCF) has been established.
  • Green Climate Fund(GCF)
    • It was set up in 2010 under the UNFCCC’s financial mechanism to channel funding from developed countries to developing countries to allow them to mitigate climate change and also adapt to disruptions arising from a changing climate.
    • It is intended to be the centerpiece of efforts to raise Climate Finance of $100 billion a year by 2020.
    • On 22nd July 2020, GreenClimate Fund (GCF) and Asian Development Bank (ADB) have agreed to partner toward a “green recovery” for members confronting the harsh economic impact of the coronavirus disease (COVID-19) pandemic.
    • The decision was taken after a meeting between Asian Development Bank President (Masatsugu Asakawa) and Green Climate Fund Executive Director (Yannick Glemarec). The decision will help in creating the necessary institutions, assets, and systems. Green Climate Fund has approved total funding of $ 473 million for 10 Asian Development Bank projects. 
  • Fund for the Global Environment (GEF)
    • Since the Convention came into force in 1994, the GEF has acted as the financial mechanism’s operating body.
  • In addition to guiding the GEF and the GCF, two special funds were formed by the parties:
    • The Fund for Special Climate Change (SCCF) and the Fund for the Least Developed Countries (LDCF).
    • The GEF controls both funds.

Mains model question

  • Discuss India’s gains and losses at the Paris climate talks.