A Possible Pathway to Help Reach an Agreement on Funding for Developing Countries at COP27
The UN Secretary General António Guterres is strongly advocating for a “historic pact” at COP27 between “rich and poor” countries, which he recommends involve clear new pledges on finance as well as for all countries to strengthen their emissions-cutting targets. One major issue that needs to be resolved before this “historic pact” can be reached is the very large financial gap between what developing countries are asking and what developed countries* are offering to compensate for losses and damages due to climate change. For example, Pakistan is planning to request compensation at the 2022 UN Climate Change Conference (COP27) for the losses they incurred as a result of the recent flooding in their country, which they have estimated to cost about $40 billion.
Along with loss and damage compensation, developing countries are requesting funding for climate change mitigation and adaptation. The total amount of compensation requested is unprecedented. For example, the total amount of funding requested by several countries in Africa is $1,300 billion per year by 2030 for all developing countries, which is about a 13-fold increase over the existing (but not yet delivered) promises of compensation by developed countries. Therefore, there is a massive gap regarding compensation and this gap appears to be becoming the dominant issue for countries to discuss and try to reach an agreement on at COP27.
Fortunately, as a result of rapid innovation in climate solutions, a major opportunity has emerged that can help countries reach an agreement at COP27 regarding climate-related funding for developing countries. There are now several climate solutions that can be implemented in developing countries on a substantial scale that will significantly increase the flow of money to these countries to create valuable products while substantially reducing carbon emissions. This opportunity is creating a possible pathway to reach this agreement. A one-sentence summary of a key component of this pathway is as follows:
“Developed countries fund a substantial scale-up of climate solutions in developing countries that mitigate climate change as well as providing significant co-benefits.”
There are several breakthrough technologies that can be implemented on a global scale that will generate substantial ongoing income for developing countries and produce valuable products while significantly reducing greenhouse gas emissions. For example, an innovative new company is now capturing and sequestering carbon dioxide with algae in seawater in a coastal desert area in Morocco. The company name is Brilliant Planet and it is currently in the process of scaling up its operations. This company expects it can capture and sequester carbon dioxide at scale for less than $50/tonne and has already identified a shortlist of flat coastal areas that could be utilized to capture 2-billion tonnes of this greenhouse gas per year. Shown below is an image of their facility in Morocco, which is the world’s largest algae growth pond:
Another proven climate solution that removes carbon from the atmosphere, generates considerable benefits, and can be implemented on a global scale, is biochar. This product is produced from biomass in an oxygen-limited environment and is already being produced by many different organizations. Since producing biochar from biomass and incorporating it into soil is an internationally recognized way of removing carbon from the atmosphere, substantial money can be earned by creating this biochar.
Even more beneficial than incorporating only biochar in soil is to combine it with nutrients and then place it in soil. For example, one study found that biochar combined with compost increased average crop yield by 40% compared with the control, which was compost without biochar. There has been a wide range of studies completed about biochar that have documented its substantial benefits, especially when combined with other nutrients. One notable discovery from this research is that the increase in crop yield is often even greater in the second and third year after adding this biochar to soil.
A major initiative called Biochar Life by Warm Heart Worldwide is underway to help smallholder farmers to receive payment for producing biochar. Therefore, small-holder farmers that generate and utilize biochar can earn money from this biochar as well as grow more food. To view more information about biochar and the opportunity to implement it on a global scale, visit this webpage we created: Biochar Overview: What it is, its benefits and an opportunity to scale it globally. This webpage includes this photo showing comparison plots of growing food with and without biochar:
Both these carbon removal methods will generate ongoing revenues for developing countries. Most of the money can be provided by private companies purchasing carbon credits to achieve their Net Zero emission goals. Therefore, most of the funding needed for ongoing operations of these carbon removal methods will not need to be provided by the governments of developed countries.
There are many more technologies that can be implemented on a large-scale in many developing countries with funding from developed countries and the private sector that will create substantial benefits for these developing countries. Given below are some examples of these technologies:
a) An innovative algae growing system that produces healthy food-grade oils on a substantial scale by Global Algae Innovations, which received a million-dollar Carbon Removal XPRIZE for this technology. This company calculates that their technology can be scaled up to produce enough healthy food-grade oil so that this oil can replace all the palm tree oil production, which would enable the areas containing these palm trees to be able to be returned to back to ecologically diverse rainforests. If this did occur, billions of tonnes of carbon dioxide would be captured each year as these rainforests grew back.
b) A new power-plant process that produces reliable electrical power from natural gas will capture 100% of the carbon dioxide created. This breakthrough technology is called the Allam Cycle and was developed by NET Power and its partners. This company already demonstrated this technology on a substantial scale by delivering carbon-free electricity to the ERCOT Texas grid using their 50 MW power-plant test facility in 2021. There are now power-plants being developed that will use this technology including a 300 MW power-plant in Teesside, UK.
c) A new fuel cell technology that can upgrade an existing coal plant so it generates 80% more power, captures 90% of CO2 and reduces NOx emissions by 70%. This technology has been developed by FuelCell Energy and can be added to most hydrocarbon-fueled power-plants. For example, it is now being demonstrated in Alberta Canada on an oil and gas facility.
d) A new bio-fertilizer process replaces traditional nitrogen fertilizer for agriculture. When utilized, it eliminates substantial greenhouse gas emissions associated with this traditional nitrogen fertilizer. This bio-fertilizer was developed by Kula Bio, which is planning commercial production by the end of 2023.
For a more comprehensive list of technologies that can create considerable benefits for developing countries while substantially reducing greenhouse gas emissions, visit: Carbon Tech Companies and Related Information.
Many of these technologies can be integrated with renewable energy to produce even more beneficial results. For example, an Allam Cycle power plant by Net Power can be combined with renewable energy farms and direct air capture technology to produce reliable power with negative carbon emissions.
Funding from developed countries to developing countries, which is used to finance substantial (US$50m+) facilities that reduce greenhouse gas emissions, can be refinanced by Green Bonds once these facilities are built and generate income. If a facility is refinanced with Green Bonds, the owner of this facility can use the money it receives from Green Bonds to finance its next facility. Therefore, the initial funding from developing countries to build an initial facility can lead to multiple facilities being built over time.
According to the ClimateBonds Initiative, over $500 billion in Green (Climate) Bonds were issued in 2021. This organization is now leading an initiative to increase this amount to $5 trillion in Green Bonds by 2025. There is a large pool of buyers of Green Bonds in the global financial system. For example, the members of The Glasgow Financial Alliance for Net Zero (GFANZ), which includes firms that collectively have over US$130 trillion under management, are likely buyers of this type of bond.
If some of the country negotiating teams attending COP27 would like to learn more about this opportunity to significantly increase funding to developing countries while substantially reducing carbon emissions, we could organize and host an online meeting that would include presentations by selected companies to outline their technologies and benefits as well as how quickly their technologies can be scaled-up. If these teams are interested to speak to knowledgeable experts who are very familiar with these technologies, we can organize and host a second online meeting that would include presentations by selected investment managers at venture capital funds that have been investing in these types of companies to help them scale-up. For example, Bill Reichert, who is a Partner at Pegasus Tech Ventures, was part of the team that evaluated Brilliant Planet’s technology and scale-up strategy, could be invited to be one of the speakers. Pegasus Tech Ventures is a $2 billion global venture capital firm with headquarters in Silicon Valley and offices around the world.
The funding to implement the opportunity outlined above could be part of the allocation agreed to by developed countries for mitigation and adaptation in developing countries. If implemented on a very large-scale, considerable benefits would be received by both developed and developing countries including substantially reduced global greenhouse gas emissions, increased stability in developing countries, reduced refugee migration, and reduced future loss and damage due to climate change.
If both developed and developing countries became familiar with the benefits of implementing the opportunity outlined above on a large-scale, this can help these countries to reach an agreement at COP27 regarding climate-related funding for developing countries. Therefore, creating awareness of these benefits amongst the Parties at COP27 would be constructive.
Given below is a brief simplified outline of a possible pathway that we feel can help the Parties at COP27 reach an agreement regarding climate-related funding for developing countries:
1) Add up all the funding requested by developing countries to enable them to meet their Nationally Determined Contributions (NDCs) that are contained in the UNFCCC NDC registry. For an overview of all the NDCs, see this report: UNFCCC 2022 NDC Synthesis Report
2) Estimate the financial gap between what developing countries are asking in order to meet their NDCs and what developed countries are offering. In addition, estimate the existing as well as future loss and damage claims over the next decade by these developing countries.
3) Create awareness amongst country negotiating teams about proven climate solutions that can generate ongoing income for developing countries that mitigate or remove greenhouse gas emissions.
4) Discuss how much developed countries are willing to provide for greenhouse gas emissions mitigation and/or carbon removal projects in developing countries on a large scale.
5) Create awareness amongst country negotiating teams about private sector finance such as Green Bonds that can complement public finance in scaling up climate solutions in developing countries.
6) Explore how increasing funding for climate solutions in developing countries can bridge the gap between what developing countries are asking and what developed countries are offering to compensate for loss and damage.
7) Developed countries agree to fund a substantial scale-up of climate solutions in developing countries that mitigate climate change as well as provide significant co-benefits.
8) Developed and developing countries explore options regarding compensation for loss and damage due to climate change and seek to reach an agreement on this issue.
9) If developing countries update their NDCs with increased emission mitigation commitments, as has been recently recommended by the UN, the appropriate steps shown above should be repeated.
If developed countries do agree to fund the opportunity outlined above (implement Carbon Tech and renewable energy in developing countries) on a large scale, it could help these countries find a way to reach an agreement on climate-related funding for developing countries. If this did occur, the result would create a better future for us all.
*For the purposes of this document, “Developed Countries” are the countries that are being asked to help developing countries fund the implementation of their NDCs. To keep the above explanation as simple as possible, this document also indicates “Developed Countries” are being asked to compensate for the losses and damages in developing countries due to climate change but this issue is more complicated. For more information about this issue, see this recent Reuters article, COP27: What is ‘Loss and Damage’ compensation, and who should pay? To view a classification of developed countries published on the UN website, visit: Country Classification.