Treasury Secretary Janet Yellen said Wednesday that the United States will support a funding mechanism that aims to divert $500 million a year to shift developing countries from coal-based energy to wind, solar and other low and zero-carbon energy sources.
Speaking at the United Nations climate talks in Glasgow, Yellen acknowledged that while rich countries have promised billions of dollars to combat climate change, the true cost is in the trillions.
“I agree that we all need to do more, and the US is stepping up,” Ms Yellen said. But he added that the gap between what governments have and what the world needs is huge, and the private sector needs to play a bigger role.
Financing climate change initiatives remains a tremendous point of tension in UN talks. Rich countries build cleaner energy and resilience to more severe storms, droughts and rising seas to poor countries that have contributed the least to climate change but are experiencing some of the worst consequences.
The Biden administration has pledged $11.4 billion annually through 2024, but that is subject to congressional approval. Ms Yellen said on Wednesday that the private sector should also provide more financing.
Mark Carney, the former Governor of the Bank of England, said private funds for developing countries needed to “increase significantly”. This week, led by Mr. Carney financial groups’ commitment to use $130 trillion in assets helping countries meet their goals of achieving net zero emissions by 2050.
The separate financing program that Yellen describes is designed to issue bonds and use the proceeds to support clean energy and sustainable infrastructure in emerging economies. Bonds to be issued by Climate Mutual Fundsis a World Bank initiative founded in 2008 that invests with contributions from countries including the United States, the United Kingdom, and Japan.
Many environmental groups and organizations representing developing countries are skeptical of private finance. This is partly because much of that money tends to go towards energy projects that can turn a profit faster, rather than less lucrative but critical businesses like building seawalls, planting mangroves, and other efforts to help communities adapt to the effects of climate change.
Without timeframes and specific dollar targets for compliance, “poor nations will continue to lack the resources they need to protect lives, homes and businesses from air disasters,” Oxfam senior adviser Jörn Kalinski said in a statement.