The COP has begun! Well, the other one, to be preicse: the UN Conference on Biodiversity in Cali. The world’s attention is focused on the dangerous loss of global biodiversity. Today, however, we turn our gaze to the host of the meeting: Colombia is an important ally for Germany in climate policy. Alexandra Endres describes the challenges faced by the country’s ambitious energy transition.
In Washington, reformers at the World Bank and IMF also have reason to fear headwinds. The restructuring of these financial institutions toward more climate protection, sustainability, and aid for the poorest has begun, as Nico Beckert reports. But right now, the reforms threaten to fizzle out. This is partly due to tight budgets in industrialized countries – a topic BMZ State Secretary Jochen Flasbarth speaks about candidly in an interview with Horand Knaup: Germany is investing too little in its international commitments.
We also look at many other topics: the footprint of the climate crisis in the drought of 2022, Germany’s funding policies for heat pumps compared to other EU countries, and the question of how climate-damaging certain flights are now. We hope to pique your interest with this and wish you insightful reading.
Colombia, the host of the COP16 biodiversity summit currently taking place, is an important ally for the German government in international climate policy. This is why Germany is supporting the South American country in its planned phase-out of fossil fuels with many millions of euros. The aim is to phase out fossil fuels completely, but the success of this ambitious project is not guaranteed. Implementation, financing and acceptance raise questions. What’s more, time is of the essence.
The Colombian government has two years left in office – the next presidential election is due in 2026. In Germany, the Bundestag will be elected a year earlier. This may leave little time to further develop the climate partnership between the two countries. The ambition is high. However, practical implementation is proving difficult in some areas.
Martin Dirr, responsible for projects in urban development, energy, mobility and the circular economy at the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in Colombia, sees three key factors for the concrete implementation of climate action projects in the country:
Capacities: Managing, planning and implementing the coal phase-out across different levels of government is very complex, says Dirr. The departments involved are “rural and in some cases also very affected by civil war“. GIZ is supporting the local actors in building structures and expertise “to shape the transformation”.
Capital: Colombia’s government is working hard to attract foreign investment. The country has high debts – and if revenues from fossil fuels collapse, it will need private and international capital all the more. Internationally, the Colombian government is campaigning for debt-for-nature swaps, i.e. debt relief in exchange for investments in climate and nature conservation.
Acceptance: “The realization that we have to do something about the climate crisis is deeply rooted in the population”, says Dirr. But at the same time, there is “the fear of losing your job. The fear of the economic transformation, which we don’t know where it will lead. And a sense of global justice that asks: We are only at the beginning of industrialization. Why should we, of all people, reduce our emissions now?”
In some regions, several challenges come together. For example, in the department of La Guajira, where GIZ is working with local stakeholders on plans for the climate transition. There is a lot of wind in the region, the Colombian government wants to develop wind power there and foreign investors are interested.
However, paramilitary groups are still active in the area and there is great mistrust of the government. An important infrastructure project for the energy transition was approved in June: The La Colectora line is to feed renewable energy from the Guajira into the national grid in the future. However, the approval process does not always run smoothly. A wind power project developer in the Guajira may have to negotiate with dozens of communities individually before it can implement its project – and not all of them are successful: Italian energy company Enel, for example, has abandoned its planned Windpeshi wind farm, and all other wind projects due to strong resistance from Indigenous communities.
The difficulties apply even more to hydrogen projects. It will take time before Colombia can secure its domestic supply of renewable electricity. In order to produce and export green hydrogen, the country would have to produce surpluses.
The 2026 presidential elections are also likely to decide the future of Colombia’s energy transition. According to Colombia’s Environment Minister Susana Muhamad, large sections of the population support the strategic direction of the government’s policy, but are dissatisfied with the concrete results. “We will have to show tangible results in the coming years to convince people that we are going in the right direction.” If this does not succeed, the plans for a complete fossil fuel phase-out could soon be history.
The reform of the World Bank and International Monetary Fund (IMF) towards more climate protection has made some progress in recent months and years. However, at the annual meeting of the two financial institutions (Oct. 21-26), critics are complaining that the reform is progressing too slowly and neglecting important solutions. Observers also fear that the ambition to reform the institutions could wane among the key member states. In addition, a possible election victory of Donald Trump as US President would weaken the two financial institutions. And the German Federal Ministry of Finance continues to reject the use of special drawing rights for climate financing.
World Bank CEO Ajay Banga has initiated many reforms and “largely delivered”, as Danny Scull, Senior Policy Advisor at E3G, says. However, in order to meet the high demand for climate financing, the World Bank must initiate a “second reform phase” and, above all, receive larger budgets from the member states. The IMF, on the other hand, is lagging behind in its reforms and needs to speed up, analysts criticize.
However, observers such as Laurence Tubiana, Chair of the European Climate Foundation, fear that “the momentum for reform” is waning. According to her, many countries are not showing much ambition in replenishing the funds of the International Development Association (IDA) – an arm of the World Bank that grants particularly favorable loans to the currently 75 lowest-income countries. Tubiana also sees little ambition for important reforms among the IMF member states. Important decisions must be made before a new Donald Trump presidency, warns Tubiana. Although the US Treasury Department is very active, time seems to be running out.
In order to mobilize large sums of money for climate protection in poorer countries, the World Bank and the IMF would have to push for the following reforms, according to observers:
Tubiana believes that the European Central Bank and Germany in particular have a duty to pass on Special Drawing Rights (SDRs). The ECB points out that the on-lending of SDRs to development banks is not compatible with the ECB Treaty, as it constitutes “monetary financing”. In Germany, the Constitutional Court would block the transfer, says Tubiana. She therefore proposes that Germany should raise green bonds on the capital market based on its good rating from its own SDRs and pass them on to poorer countries in the form of discounted loans.
The German Ministry of Finance remains opposed to the use of SDRs for climate financing. SDRs “are generally not suitable for use in climate financing”, writes a spokesperson for the Federal Ministry of Finance at the request of Table.Briefings. “The original function of SDRs is to create new currency reserves. Efforts to expand these beyond their actual function should be viewed with skepticism” – which is something Finance Minister Lindner also says. Climate financing must be “tackled from budgetary funds”, according to the Ministry of Finance.
However, there are also voices that consider the on-lending of SDRs to be compatible with the ECB treaties in some cases: On-lending SDRs to IMF funds or development banks would not necessarily contradict the ECB Treaty and would not necessarily be “monetary financing”. Spain has already forwarded SDRs to the IMF Resilience and Sustainability Trust. And France is also one of the European pioneers, praises Tubiana. Although the country has not forwarded any SDRs, it has used its SDRs to secure guarantees for climate financing.
Observers have praised the World Bank’s reform results to date:
The IMF has only stepped up the reform process this year. “Little has happened at the IMF so far”, is Germanwatch’s assessment. A recently adopted reform of penalty interest rates does create scope for climate investments. However, these penalty interest rates have not yet been completely abolished, criticizes Christian Groeber, expert on the reform of the international financial architecture at Germanwatch. The IMF needs to build a “safety net that provides better protection against global systemic crises” such as climate change, demands David Ryfisch from Germanwatch.
Mr. Flasbarth, your ministry’s budget is facing significant cuts. What does that mean for 2025?
That we have less of everything than we need. Of course, this increases the competition for funds. In the health sector, for example, large funds such as the GAVI vaccination fund or the fund against tuberculosis, malaria and AIDS are soon to be replenished. Germany has always been at the forefront. This will continue to be the case, even if we are now slightly below plan and probably also below expectations. But it is also true that we need to rethink many things that are not just to do with money.
First of all, the fact is that we are not keeping our promises.
No, you can still say that now. We are giving €5.7 billion for climate instead of €6 billion, the difference is not much. And we’re talking about 2023, whereas the €6 billion was announced for 2025.
The overall budget is shrinking – this is unlikely to be manageable.
We are doing everything we can to align our programs in such a way that we can still increase our contribution. But yes, that’s damn difficult when it comes to climate and biodiversity. The target is still achievable and all departments have to make a real effort, not just us. But you’re right: the overall direction of funding is not good.
What do you expect from COP29, which begins in Baku in mid-November?
This is a financing COP. In Copenhagen in 2009, the industrialized countries promised to pay $100 billion a year to developing countries for climate action and adaptation from 2020. We didn’t quite manage that. We were at around $80 billion in 2020: Not little, but it was not what we had promised and what the countries in the Global South had relied on. And the most important currency in the international context is not the dollar or the euro, but trust.
In 2022, however, the figure was $100 billion.
Yes, but even in Copenhagen in 2009, the Global South expected that it would not remain at $100 billion, but would continue to grow. And it was also clear from the 2015 Paris Agreement that the global target for 2025 would be reformulated. There is no avoiding it now. This discussion is now taking place at a time when geopolitics is characterized by wars and crises and budgets are under pressure everywhere. That is why this will be an exhausting discussion.
The Chancellor has promised €6 billion for international climate financing, but the BMZ is supposed to make savings. Where will we end up in 2025?
All departments must make an effort and the BMZ in particular.
The hoped-for leverage effect in climate financing is not yet really recognizable. Or have we missed something?
That’s right, the leverage factor – i.e. the ratio of federal funds used to the additional private capital generated – was estimated to be significantly higher years ago. That is why we must now pay even more attention to how we can mobilize additional private funds. Much more is possible. The financial industry can do a lot. Next year, we will set up a platform that we have just agreed with many partners at the first Hamburg Sustainability Conference.
What does that mean?
Large investors such as insurance companies and sovereign wealth funds are still investing in fossil fuels. That is bad. We need investments in a climate-friendly economy. To this end, we want to standardize many things in the area of sustainability financing, a topic that I underestimated for a long time and whose importance I have honestly only now understood. The financial industry needs such standards. The insurance industry in particular is much more interested in stable and long-term earnings than in maximizing returns.
Has the topic of development lost support in politics and society?
In any case, we are on the defensive. We therefore need to justify and legitimize our work more strongly. And there’s nothing to be said against that. Because we can prove a lot of things. We have our own institute for this, DEVAL. There is no other department that has its expenditure evaluated so thoroughly.
Only largely on camera.
That’s not true. Everything has been published. But the really toxic aspect of the debate is that the idea of “America first” is spreading to Germany. Driven by the extreme right.
Your coalition partner is also questioning your work.
Yes, the national navel-gazing has also started among some in the political center. I’m less worried about the traffic light coalition – there were a few individual votes with relatively little substance. In the CDU/CSU, this also flared up in the spring, but has died down again, partly because some there recalled the Union’s tradition of international development policy. Incidentally, it is absolutely legitimate for us in Germany to formulate our own interests. But we are a country with few raw materials and we are dependent on functioning supply chains. And these interests are not only reflected in the foreign trade activities of the Ministry of Economic Affairs, but are also part of our development policy.
In the next 80 years or so, our planet will warm by two and a half to three degrees Celsius – with unforeseeable consequences for life. This is shown by the latest calculations from the World Bank. Nevertheless, many countries and companies continue to insist on fossil fuels. In some regions, coal consumption has even increased.
While ten countries, including Germany, are responsible for two-thirds of global CO2 emissions, the least developed countries, for example in East Africa and the Sahel region, but also the small island states in the Pacific and the Caribbean, are suffering the most from the effects of climate change. Yet they themselves have contributed practically nothing to the climate crisis. They have hardly any means to prepare themselves.
So how do we finance the long overdue transition to a climate-neutral society? How do we pay for the damage and for the necessary adaptations to climate change?
We need a paradigm shift in climate financing: Stronger partnerships, more private investment and banks that systematically incorporate climate risks and predicted damage into their decisions. Governments have a central steering function. It is essential that they align their finances in an environmentally and climate-friendly way. This means that they must reduce environmentally harmful subsidies – currently €2.6 trillion annually worldwide – and promote climate-friendly economic activity and behavior, for example with CO2 prices or environmental taxes. Freed-up funds can be used to create good framework conditions for a sustainable green economy. Such reforms must be socially responsible and, for example, relieve the burden on low-income households. Only then will people accept them.
Multilateral development banks such as the World Bank can encourage governments in these efforts, for example by granting loans not only on the basis of economic criteria, but also taking social and environmental aspects into account. Without their financial strength, we will not be able to tackle climate change.
However, they often reach their limits when it comes to responding to local needs, involving those affected in planning and implementation and reaching all the necessary stakeholders. As GIZ, we can fill precisely this gap. We work with all public levels worldwide – from state governments to municipalities – as well as with the local population.
Let’s take cities as an example. They produce almost three-quarters of global CO2 emissions. 800 million people living in cities are threatened by rising sea levels, and twice as many will regularly suffer from extreme heat. Yet city administrations lack the time, money and technical expertise to develop suitable and cost-effective business and financing models.
Together with the C40 city network, GIZ is helping to remedy this situation: With the Cities Finance Facility (CFF), we are preparing urban development projects so that financiers – whether public, multilateral or private – can get involved. Germany, France, the UK and the USA have provided €45 million to advise 30 major cities. This means that CFF has mobilized investments totaling one billion euros for greenhouse gas reduction and adaptation to climate change. This corresponds to 23 times the original public funding.
The key to this success is that we use governments and national development banks as bridges to international climate money and cooperate with companies and operating companies. The work begins with needs analyses and feasibility studies and continues with locally adapted and concretely developed solutions through to funding applications. In Jakarta, for example, the idea of an e-bus system was turned into a funded trial operation with 100 e-buses, stops, charging stations and optimized tariffs. Building on this, four out of five buses in the entire fleet are now to be electric by 2030.
In a similar way, the European initiative GET.invest advises energy companies in developing countries so that they can attract private investors and thus meet the requirements for financing and bank loans. This has already been successful in more than 200 cases: In total, investors have pledged around €3.1 billion for measures that will give almost 20 million people access to clean energy and save more than five and a half million tons of CO2 every year.
The two examples show: If invested wisely, public funds can be leveraged many times over in investments that will bring about sustainable social and environmental progress. However, investments in established technologies are not enough to limit the climate crisis. We also need to channel national and international financial flows into innovation. After all, we need solutions that do not yet exist or are in the early stages of development for around half of the greenhouse gas emissions that we need to reduce by 2050.
With the CATAL1.5°T initiative, we are therefore supporting start-ups and their innovative approaches. With funding from the Federal Ministry for Economic Cooperation and Development and the Green Climate Fund, viable business models and market-ready prototypes are being created that are of interest to private venture capital investors. Development banks are also a necessary component of these new financing lines, but they are often still reluctant to take risks. Ultimately, everyone’s efforts must work together. Governments, development banks and the private sector therefore need to put a green future even more firmly on the agenda!
Ingrid-Gabriela Hoven is Deputy Chair of the Management Board of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.
The COP has begun! Well, the other one, to be preicse: the UN Conference on Biodiversity in Cali. The world’s attention is focused on the dangerous loss of global biodiversity. Today, however, we turn our gaze to the host of the meeting: Colombia is an important ally for Germany in climate policy. Alexandra Endres describes the challenges faced by the country’s ambitious energy transition.
In Washington, reformers at the World Bank and IMF also have reason to fear headwinds. The restructuring of these financial institutions toward more climate protection, sustainability, and aid for the poorest has begun, as Nico Beckert reports. But right now, the reforms threaten to fizzle out. This is partly due to tight budgets in industrialized countries – a topic BMZ State Secretary Jochen Flasbarth speaks about candidly in an interview with Horand Knaup: Germany is investing too little in its international commitments.
We also look at many other topics: the footprint of the climate crisis in the drought of 2022, Germany’s funding policies for heat pumps compared to other EU countries, and the question of how climate-damaging certain flights are now. We hope to pique your interest with this and wish you insightful reading.
Colombia, the host of the COP16 biodiversity summit currently taking place, is an important ally for the German government in international climate policy. This is why Germany is supporting the South American country in its planned phase-out of fossil fuels with many millions of euros. The aim is to phase out fossil fuels completely, but the success of this ambitious project is not guaranteed. Implementation, financing and acceptance raise questions. What’s more, time is of the essence.
The Colombian government has two years left in office – the next presidential election is due in 2026. In Germany, the Bundestag will be elected a year earlier. This may leave little time to further develop the climate partnership between the two countries. The ambition is high. However, practical implementation is proving difficult in some areas.
Martin Dirr, responsible for projects in urban development, energy, mobility and the circular economy at the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in Colombia, sees three key factors for the concrete implementation of climate action projects in the country:
Capacities: Managing, planning and implementing the coal phase-out across different levels of government is very complex, says Dirr. The departments involved are “rural and in some cases also very affected by civil war“. GIZ is supporting the local actors in building structures and expertise “to shape the transformation”.
Capital: Colombia’s government is working hard to attract foreign investment. The country has high debts – and if revenues from fossil fuels collapse, it will need private and international capital all the more. Internationally, the Colombian government is campaigning for debt-for-nature swaps, i.e. debt relief in exchange for investments in climate and nature conservation.
Acceptance: “The realization that we have to do something about the climate crisis is deeply rooted in the population”, says Dirr. But at the same time, there is “the fear of losing your job. The fear of the economic transformation, which we don’t know where it will lead. And a sense of global justice that asks: We are only at the beginning of industrialization. Why should we, of all people, reduce our emissions now?”
In some regions, several challenges come together. For example, in the department of La Guajira, where GIZ is working with local stakeholders on plans for the climate transition. There is a lot of wind in the region, the Colombian government wants to develop wind power there and foreign investors are interested.
However, paramilitary groups are still active in the area and there is great mistrust of the government. An important infrastructure project for the energy transition was approved in June: The La Colectora line is to feed renewable energy from the Guajira into the national grid in the future. However, the approval process does not always run smoothly. A wind power project developer in the Guajira may have to negotiate with dozens of communities individually before it can implement its project – and not all of them are successful: Italian energy company Enel, for example, has abandoned its planned Windpeshi wind farm, and all other wind projects due to strong resistance from Indigenous communities.
The difficulties apply even more to hydrogen projects. It will take time before Colombia can secure its domestic supply of renewable electricity. In order to produce and export green hydrogen, the country would have to produce surpluses.
The 2026 presidential elections are also likely to decide the future of Colombia’s energy transition. According to Colombia’s Environment Minister Susana Muhamad, large sections of the population support the strategic direction of the government’s policy, but are dissatisfied with the concrete results. “We will have to show tangible results in the coming years to convince people that we are going in the right direction.” If this does not succeed, the plans for a complete fossil fuel phase-out could soon be history.
The reform of the World Bank and International Monetary Fund (IMF) towards more climate protection has made some progress in recent months and years. However, at the annual meeting of the two financial institutions (Oct. 21-26), critics are complaining that the reform is progressing too slowly and neglecting important solutions. Observers also fear that the ambition to reform the institutions could wane among the key member states. In addition, a possible election victory of Donald Trump as US President would weaken the two financial institutions. And the German Federal Ministry of Finance continues to reject the use of special drawing rights for climate financing.
World Bank CEO Ajay Banga has initiated many reforms and “largely delivered”, as Danny Scull, Senior Policy Advisor at E3G, says. However, in order to meet the high demand for climate financing, the World Bank must initiate a “second reform phase” and, above all, receive larger budgets from the member states. The IMF, on the other hand, is lagging behind in its reforms and needs to speed up, analysts criticize.
However, observers such as Laurence Tubiana, Chair of the European Climate Foundation, fear that “the momentum for reform” is waning. According to her, many countries are not showing much ambition in replenishing the funds of the International Development Association (IDA) – an arm of the World Bank that grants particularly favorable loans to the currently 75 lowest-income countries. Tubiana also sees little ambition for important reforms among the IMF member states. Important decisions must be made before a new Donald Trump presidency, warns Tubiana. Although the US Treasury Department is very active, time seems to be running out.
In order to mobilize large sums of money for climate protection in poorer countries, the World Bank and the IMF would have to push for the following reforms, according to observers:
Tubiana believes that the European Central Bank and Germany in particular have a duty to pass on Special Drawing Rights (SDRs). The ECB points out that the on-lending of SDRs to development banks is not compatible with the ECB Treaty, as it constitutes “monetary financing”. In Germany, the Constitutional Court would block the transfer, says Tubiana. She therefore proposes that Germany should raise green bonds on the capital market based on its good rating from its own SDRs and pass them on to poorer countries in the form of discounted loans.
The German Ministry of Finance remains opposed to the use of SDRs for climate financing. SDRs “are generally not suitable for use in climate financing”, writes a spokesperson for the Federal Ministry of Finance at the request of Table.Briefings. “The original function of SDRs is to create new currency reserves. Efforts to expand these beyond their actual function should be viewed with skepticism” – which is something Finance Minister Lindner also says. Climate financing must be “tackled from budgetary funds”, according to the Ministry of Finance.
However, there are also voices that consider the on-lending of SDRs to be compatible with the ECB treaties in some cases: On-lending SDRs to IMF funds or development banks would not necessarily contradict the ECB Treaty and would not necessarily be “monetary financing”. Spain has already forwarded SDRs to the IMF Resilience and Sustainability Trust. And France is also one of the European pioneers, praises Tubiana. Although the country has not forwarded any SDRs, it has used its SDRs to secure guarantees for climate financing.
Observers have praised the World Bank’s reform results to date:
The IMF has only stepped up the reform process this year. “Little has happened at the IMF so far”, is Germanwatch’s assessment. A recently adopted reform of penalty interest rates does create scope for climate investments. However, these penalty interest rates have not yet been completely abolished, criticizes Christian Groeber, expert on the reform of the international financial architecture at Germanwatch. The IMF needs to build a “safety net that provides better protection against global systemic crises” such as climate change, demands David Ryfisch from Germanwatch.
Mr. Flasbarth, your ministry’s budget is facing significant cuts. What does that mean for 2025?
That we have less of everything than we need. Of course, this increases the competition for funds. In the health sector, for example, large funds such as the GAVI vaccination fund or the fund against tuberculosis, malaria and AIDS are soon to be replenished. Germany has always been at the forefront. This will continue to be the case, even if we are now slightly below plan and probably also below expectations. But it is also true that we need to rethink many things that are not just to do with money.
First of all, the fact is that we are not keeping our promises.
No, you can still say that now. We are giving €5.7 billion for climate instead of €6 billion, the difference is not much. And we’re talking about 2023, whereas the €6 billion was announced for 2025.
The overall budget is shrinking – this is unlikely to be manageable.
We are doing everything we can to align our programs in such a way that we can still increase our contribution. But yes, that’s damn difficult when it comes to climate and biodiversity. The target is still achievable and all departments have to make a real effort, not just us. But you’re right: the overall direction of funding is not good.
What do you expect from COP29, which begins in Baku in mid-November?
This is a financing COP. In Copenhagen in 2009, the industrialized countries promised to pay $100 billion a year to developing countries for climate action and adaptation from 2020. We didn’t quite manage that. We were at around $80 billion in 2020: Not little, but it was not what we had promised and what the countries in the Global South had relied on. And the most important currency in the international context is not the dollar or the euro, but trust.
In 2022, however, the figure was $100 billion.
Yes, but even in Copenhagen in 2009, the Global South expected that it would not remain at $100 billion, but would continue to grow. And it was also clear from the 2015 Paris Agreement that the global target for 2025 would be reformulated. There is no avoiding it now. This discussion is now taking place at a time when geopolitics is characterized by wars and crises and budgets are under pressure everywhere. That is why this will be an exhausting discussion.
The Chancellor has promised €6 billion for international climate financing, but the BMZ is supposed to make savings. Where will we end up in 2025?
All departments must make an effort and the BMZ in particular.
The hoped-for leverage effect in climate financing is not yet really recognizable. Or have we missed something?
That’s right, the leverage factor – i.e. the ratio of federal funds used to the additional private capital generated – was estimated to be significantly higher years ago. That is why we must now pay even more attention to how we can mobilize additional private funds. Much more is possible. The financial industry can do a lot. Next year, we will set up a platform that we have just agreed with many partners at the first Hamburg Sustainability Conference.
What does that mean?
Large investors such as insurance companies and sovereign wealth funds are still investing in fossil fuels. That is bad. We need investments in a climate-friendly economy. To this end, we want to standardize many things in the area of sustainability financing, a topic that I underestimated for a long time and whose importance I have honestly only now understood. The financial industry needs such standards. The insurance industry in particular is much more interested in stable and long-term earnings than in maximizing returns.
Has the topic of development lost support in politics and society?
In any case, we are on the defensive. We therefore need to justify and legitimize our work more strongly. And there’s nothing to be said against that. Because we can prove a lot of things. We have our own institute for this, DEVAL. There is no other department that has its expenditure evaluated so thoroughly.
Only largely on camera.
That’s not true. Everything has been published. But the really toxic aspect of the debate is that the idea of “America first” is spreading to Germany. Driven by the extreme right.
Your coalition partner is also questioning your work.
Yes, the national navel-gazing has also started among some in the political center. I’m less worried about the traffic light coalition – there were a few individual votes with relatively little substance. In the CDU/CSU, this also flared up in the spring, but has died down again, partly because some there recalled the Union’s tradition of international development policy. Incidentally, it is absolutely legitimate for us in Germany to formulate our own interests. But we are a country with few raw materials and we are dependent on functioning supply chains. And these interests are not only reflected in the foreign trade activities of the Ministry of Economic Affairs, but are also part of our development policy.
In the next 80 years or so, our planet will warm by two and a half to three degrees Celsius – with unforeseeable consequences for life. This is shown by the latest calculations from the World Bank. Nevertheless, many countries and companies continue to insist on fossil fuels. In some regions, coal consumption has even increased.
While ten countries, including Germany, are responsible for two-thirds of global CO2 emissions, the least developed countries, for example in East Africa and the Sahel region, but also the small island states in the Pacific and the Caribbean, are suffering the most from the effects of climate change. Yet they themselves have contributed practically nothing to the climate crisis. They have hardly any means to prepare themselves.
So how do we finance the long overdue transition to a climate-neutral society? How do we pay for the damage and for the necessary adaptations to climate change?
We need a paradigm shift in climate financing: Stronger partnerships, more private investment and banks that systematically incorporate climate risks and predicted damage into their decisions. Governments have a central steering function. It is essential that they align their finances in an environmentally and climate-friendly way. This means that they must reduce environmentally harmful subsidies – currently €2.6 trillion annually worldwide – and promote climate-friendly economic activity and behavior, for example with CO2 prices or environmental taxes. Freed-up funds can be used to create good framework conditions for a sustainable green economy. Such reforms must be socially responsible and, for example, relieve the burden on low-income households. Only then will people accept them.
Multilateral development banks such as the World Bank can encourage governments in these efforts, for example by granting loans not only on the basis of economic criteria, but also taking social and environmental aspects into account. Without their financial strength, we will not be able to tackle climate change.
However, they often reach their limits when it comes to responding to local needs, involving those affected in planning and implementation and reaching all the necessary stakeholders. As GIZ, we can fill precisely this gap. We work with all public levels worldwide – from state governments to municipalities – as well as with the local population.
Let’s take cities as an example. They produce almost three-quarters of global CO2 emissions. 800 million people living in cities are threatened by rising sea levels, and twice as many will regularly suffer from extreme heat. Yet city administrations lack the time, money and technical expertise to develop suitable and cost-effective business and financing models.
Together with the C40 city network, GIZ is helping to remedy this situation: With the Cities Finance Facility (CFF), we are preparing urban development projects so that financiers – whether public, multilateral or private – can get involved. Germany, France, the UK and the USA have provided €45 million to advise 30 major cities. This means that CFF has mobilized investments totaling one billion euros for greenhouse gas reduction and adaptation to climate change. This corresponds to 23 times the original public funding.
The key to this success is that we use governments and national development banks as bridges to international climate money and cooperate with companies and operating companies. The work begins with needs analyses and feasibility studies and continues with locally adapted and concretely developed solutions through to funding applications. In Jakarta, for example, the idea of an e-bus system was turned into a funded trial operation with 100 e-buses, stops, charging stations and optimized tariffs. Building on this, four out of five buses in the entire fleet are now to be electric by 2030.
In a similar way, the European initiative GET.invest advises energy companies in developing countries so that they can attract private investors and thus meet the requirements for financing and bank loans. This has already been successful in more than 200 cases: In total, investors have pledged around €3.1 billion for measures that will give almost 20 million people access to clean energy and save more than five and a half million tons of CO2 every year.
The two examples show: If invested wisely, public funds can be leveraged many times over in investments that will bring about sustainable social and environmental progress. However, investments in established technologies are not enough to limit the climate crisis. We also need to channel national and international financial flows into innovation. After all, we need solutions that do not yet exist or are in the early stages of development for around half of the greenhouse gas emissions that we need to reduce by 2050.
With the CATAL1.5°T initiative, we are therefore supporting start-ups and their innovative approaches. With funding from the Federal Ministry for Economic Cooperation and Development and the Green Climate Fund, viable business models and market-ready prototypes are being created that are of interest to private venture capital investors. Development banks are also a necessary component of these new financing lines, but they are often still reluctant to take risks. Ultimately, everyone’s efforts must work together. Governments, development banks and the private sector therefore need to put a green future even more firmly on the agenda!
Ingrid-Gabriela Hoven is Deputy Chair of the Management Board of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.
