Rising Calls For Just Climate Finance to the MENA Region at COP29 #NewsUnitedStates

In this article, Earth.Org explores climate injustice in the Middle East and North Africa region (MENA), particularly in light of the inequality of climate finance flows to the region. This inequality aggravates the debt distress and stymies national efforts to phase out fossil fuel and accelerate low carbon development. The article also touches upon the current climate finance architecture and possible ways to revamp climate finance particularly for developing countries, including MENA countries.

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The notion of climate justice is central to the international climate regime – from advocacy and negotiations to the provision of climate finance. 

Climate justice recognises that those who are least responsible for climate change suffer its gravest consequences. This means that responsibility for human-caused climate change is distributed unevenly – by far the vast majority of historical emissions have been from the richest countries that are equipped with the most resources and capacity to respond to and bounce back from climate disasters. 

Climate (In)justice in the MENA Region

Based on the above-mentioned definition, is the MENA region suffering from the legacy of climate injustice? The answer to this question is most definitely “yes.” 

While the MENA region is accountable for less than 5% of the historic global carbon emissions, the region is considered one of the most vulnerable regions to climate hazards and lacks the resources and capacity needed to mitigate and adapt to the climate change impacts. It is one of the world’s most water-stressed regions, with more than 60% of the population having difficulties in accessing potable water. Over 70% of the region’s gross domestic product (GDP) comes from areas that are characterized by high to very high surface water stress. 

It is estimated that with an average warming of 2C under the business-as-usual scenario, the region would experience a 15-45% decline in freshwater availability. If global temperatures rise by 4C, the region would experience a 75% decline in freshwater availability, putting all its countries at risk of extreme water stress. 

In addition to increased water scarcity, rising temperature and decreased precipitation will result in increased aridity in a region where more than 86% of the land is already covered by desert. This, coupled with other climate stressors, will lead to land degradation and shrinking of arable lands, which translates into reduced agricultural productivity and widespread food insecurity.  

For example, studies show that over the past decades, desertification and land degradation of the Nile Delta have been on the rise, disrupting agriculture patterns and reducing agriculture’s contribution to GDP over time. 

In addition to water scarcity and droughts, floods are one of the most likely and recurrent climate disasters in the MENA region. It is estimated that sea levels may rise by an average of 0.36m in a 1.5C average warming scenario, and 0.6m in a 4C scenario, by 2100. 

7% of the total MENA’s population lives in zones that are less than 5 meters above sea level, a factor that potentially exposes an estimated 100 million people to coastal flooding by 2030. The recent devastation caused by Storm Daniel in Derna in Libya is emblematic of the climate injustice the region is enduring. 

Libya holds Africa’s largest crude oil reserves and the country’s revenue from oil and gas –two fossil fuels that massively contribute to climate change – reached $27 billion in 2022. However, the money was not invested in building infrastructure such as early warning systems and preparedness measures to predict and address disasters like storm Daniel. 

Climate Finance to the MENA: Debt Trap and Compounded Vulnerabilities 

Despite the cascading environmental, economic societal impacts of climate change the region endures, most countries there confront considerable financial hurdles in their climate change mitigation and adaptation efforts. 

According to the African Development Bank, in order to meet their climate change mitigation and adaptation needs, North Africa countries need around $280 billion by 2030, with an annual financing gap of $10 to $30 billion. However, the MENA region receives the lowest share of international climate finance. For example, while East Asia and the Pacific Islands received an estimated $293 billion in climate finance in 2019 and 2020, the MENA region’s share was only $16 billion.In terms of climate finance distribution in the region, the 2024 Climate Fund Update showed that 17 of 21 countries in the region benefit from international climate finance flows. Furthermore, climate finance is not equally distributed among all of the region’s countries. While Morocco and Egypt respectively received 48% and 28% of total approved climate finance to the region between 2003 and 2023, countries in fragile securitarian conditions or conflict-affected such as Yemen, Libya and Syria got a much lower share.

What’s more, the majority of these funding was in the form of loans or concessional loans. This over-reliance on debt instruments aggravates the region’s debt distress. 

The debt crisis is endemic, particularly in oil-importing economies with debt-to-GDP ratio approaching 90% in 2023, almost three times higher than that of oil-exporting countries in the region and 50% higher than the global average of emerging market and developing economies. 

For instance, in Tunisia, public debt rose from 40% of GDP in 2010 to 80% in 2023; from 70% to 85% in Jordan; and from 130% to 150% in Lebanon. Given long-standing structural economic weaknesses and limited government revenues, this level of debt represents a real risk of debt payments crowding out social expenditure on basic services such as education and health. 

This is demonstrated vividly in countries such as Lebanon, whose debt service reached 221.8% of total revenue in 2020; Yemen, whose debt service represents over half of total government revenues; and Tunisia, where debt service represents over one-third of the government revenues in 2021. These countries also spend more on debt service than on health and education. For example, Yemen and Lebanon spend over five times as much on debt service than on health expenditure. 

This precarious debt crisis, compounded by climate vulnerabilities, pushes MENA countries into a vicious cycle in which increased climate vulnerabilities raises the costs of international debts and limits the fiscal and monetary space for investment in climate adaptation and resilience. All this also ensures the failure of developed countries to honor their climate pledges.

State of Climate Finance

Developing and least developed countries – including MENA countries – have unequivocally pointed to tighter global financing conditions and rising debt distress that impede their ability to invest in low-carbon transition. They have also underscored the need to rethink the climate finance architecture in a way that facilitates providing timely access to affordable development and climate finance. 

This long-standing demand has been endorsed by the international community through the release of the three stages of the Bridgetown Initiative (BI) for the Reform of the International Financial Architecture (IFA). The initiative calls for the establishment of a Global Climate Mitigation Trust with $500 billion seeded with International Monetary Fund (IMF) Special Drawing Rights. In addition, the BI advocates that all lending instruments should include a natural disasters clause that allows countries that are hit by climate disasters to temporarily pause their debt servicing obligations. BI also calls for the expansive role of multilateral development banks (MDBs) in providing concessionary finance to governments to help fund climate adaptation. 

The above-mentioned package of measures is expected to achieve a more responsive, fairer and more inclusive global financial system. However, implementation remains a key challenge. This is particularly true given the fact that the chapeau of the latest BI indicates that too little has materialized since the package’s launch in 2022, which must be implemented by 2025. These conclusions are in alignment with the outcomes of the first Global Stocktake Report – the most extensive review of climate action to date – which indicates that public finance must be rapidly scaled up to support climate action in developing countries.

In 2022, the International Development Finance Club (IDFC) members pledged a total fund of US$288 billion for green finance, a record increase of 29% from 2021. However, a closer look at where and how this funding was distributed shows the current gaps and inequality of climate finance flows. For example, while East Asia and the Pacific region’s share reached $195 billion, only $2.1 billion was mobilized for the MENA region, around 1% of the funds. 

Moreover, while adaptation finance increased 52% to a record of $31.6 billion, mitigation finance continued to dominate, representing 87% of the total climate finance in 2022. The MENA region is no exception as 71% of foreign climate finance to the region from 2003 to 2021 went to mitigation projects, mainly in the energy, transportation and infrastructure sectors.

At the 2022 COP27 in Egypt, countries reached a historic agreement to set up a Loss and Damage Fund, following decades of advocacy and pressure from the Global South. The fund was operationalized at COP28 the following year. However, pledges from wealthy nations reached a total of US$700 million, less than 0.2% of what developing nations need to tackle climate-related challenges – estimated at least $400 billion per year and expected to grow as the crisis intensifies.

More on the topic: Explainer: What Is Loss and Damage Compensation?

Therefore, it is crucial for developed countries, in line with their historical responsibility for carbon emissions, to take the lead in exploring innovative funding mechanisms to fill the fund, based on the UNFCCC principles of common but differentiated responsibilities and respective capacities principles. Further, finance for loss and damage should not be taken away from existing humanitarian and development funding, ensuring that every dollar is accounted for and not subject to double counting. This is particularly relevant given the fact that 93% of the climate finance pledged by developed countries between 2011 and 2020 was “taken directly from development aid” rather than being a “new and additional finance” for the purpose of climate mitigation and adaptation.

Climate Justice Is Unattainable Without Fiscal Justice

Many observers are calling COP29 the “finance COP”, seeing it as an opportunity to set climate finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. However, this finance lens should reflect the ethos of climate justice, ensuring that climate finance is adequate and balanced between adaptation and mitigation, prioritizing adaptation for vulnerable recipients – including the MENA. 

More importantly, the international community needs to rethink climate finance mechanisms, which are currently dominated by loans and debt-creating modalities, unfairly placing the financial burden of the climate crisis onto the shoulders of the Global South. As innovative tools like debt-for-climate and debt-for-adaptation swaps grow in popularity – providing an incentive for creditors to participate in debt relief in exchange for environmental investments – parties should place them front and center at COP29, to whatever extent possible.

Proposals for a more efficient and equitable climate fiscal landscape are not lacking. What really lacks is a common understanding of their crucial role in addressing the climate crisis, asserting that climate justice is unattainable without fiscal justice. Only then can the international community take a leap in reconfiguring the climate finance system, ensuring its alignment with a zero-carbon future that increases resilience and boosts support for the countries and communities that need it most – including, of course, MENA countries.