‘G20 is the biggest part of the world economy, emissions and climate finance — India’s leadership of it is remarkable’

Lord Nicholas Stern is chair of the Grantham Research Institute at the London School of Economics. Speaking to Srijana Mitra Das at Times Evoke, Lord Stern outlined why the G20 is central to climate action:
How pivotal is climate finance from developed economies to developing ones today?
First, climate change is already having an enormous impact on the development possibilities of emerging markets and developing economies (EMDEs) — and indeed, on all countries. We must recognise the magnitude of the threat now. We are already past the temperatures of the comparatively quiet Holocene period which followed the last Ice Age and we’re moving to global temperatures which are impacting all countries — the poorest nations are being hit hardest. There is a great injustice to that as they contributed the least to greenhouse gas concentrations. So, this issue is immensely important for the entire world and particularly the developing world.
Secondly, it is key to understand that the investments needed for sustainable new technologies and infrastructure, preserving biodiversity and making adaptations for greater resilience are actually real drivers of growth. This is because in large measure, they are lower-cost, focused on resource efficiency which adds to productivity and they will see heavily concentrated future innovation. Alongside, a bad climate will only undermine our biodiversity, growth and development prospects while its health effects are enormously detrimental — in the UK, twenty times more lives are lost to air pollution than road accidents. It is likely that millions of lives in India are lost to air pollution and many are severely damaged by it. Raising investment for clean technologies will deepen growth and sustainability. We face great dangers from not doing so — and we can achieve a real growth story by going forward. Climate finance is thus fundamental.

The investments are big — across the world, we are looking at 2% to 3% of GDP and more in EMDEs. A great deal can be financed internally through governments’ resource mobilisation, private capital markets, etc. But a lot will have to be external — those numbers are around one trillion dollars a year by 2030 into EMDEs outside China. This is covered in the Bhattacharya, Songwe and Stern Report for COP-27. The same numbers underpin the excellent work of the G20 Multilateral Development Bank (MDB) Taskforce Expert Group, which has been superbly chaired by NK Singh and Lawrence Summers.
Climate finance means making climate investments — without doing that, the world will be in deep trouble. But doing so will lead us to a much more attractive economic story.

TO GROW RESILIENT: India is pushing for hardy millets to appear on world menus. Photos: iStock
The developing world says the developed world owes it climate finance while developed nations point to high emissions from India and China. What is your perspective on these debates?
First, there is a collective responsibility — we all cause emissions and we all need to act to get to net zero by midcentury. We have a shared responsibility — but some countries do have bigger responsibilities than others. Rich countries have a larger responsibility owing to the history of their emissions and their wealth which appeared mostly on the back of dirty growth. The majority of emissions is now in Asia. The future of rich countries also depends on lowering these — for all these reasons, rich nations have a bigger responsibility, particularly in the area of finance.

The trillion dollars a year needed in external climate finance could see about half coming from the private sector but a very large sum, upto $500 billion, would need to come from the public sector. Within that, MDBs will play a large role — these will be a very important route for the public part of those flows while helping the private sector manage risks. The climate for private investments also must be strong — people won’t invest unless they can see the revenue possibilities and cost management with confidence. That depends on the host country creating a positive environment. The private sector, MDBs, concessional or zero-cost overseas development assistance (ODA), voluntary carbon markets, philanthropy, etc., will be key. ODAs will play a very important part as many countries will require concessional resources. These three markets will be critical to the world’s future.

BEE-ING A CLIMATE CHAMPION: Biodiversity is crucial to maintaining planetary health. Photo courtesy: iStock
What are your recommendations to the G20 now to hasten agreeing on and delivering climate finance in time?
This next decade is absolutely decisive — a very large amount of the world’s infrastructure will be constructed. That has got to be clean. So, there is an urgency involved. On the G20, I think India’s leadership has been remarkable. I’ve seen many G20s and India’s G20 is very purposive, well-organised and comprehensive. The leadership of External Affairs Minister S. Jaishankar, Finance Minister Nirmala Sitharaman, Amitabh Kant and the PMO has been outstanding. The G20 flows onto Brazil and South Africa now and India, the biggest democratic emerging market, has set a very good direction of travel. This has also been a difficult time — the Russia-Ukraine war has caused divisions. China and the US are having fractious relations.
India can be a great convenor, getting people together, despite these fissures. I think the one area where the world will come together with shared enthusiasm is climate — India making climate action and finance central is right. The G20 MDB group has come a long way and FM Nirmala Sitharaman should get credit for initiating that. I think it will play a critical part in the Summit. The Triple Agenda Paper outlines key recommendations — these include ensuring MDBs have these global challenges as part of their mandate in addition to poverty and shared prosperity goals. The second aspect is a tripling of the overall flows I described. The third involves looking at different ways, like the global challenge funding mechanisms, which could play a part in the necessary expansion.

WHY IT'S NOT COOL: Around 20% of the Amazon rainforest has been cut for logging and ranching — this loss corresponds to a time of rising global temperatures. Photo courtesy: iStock
Would you be pleased if climate finance commitments were made binding in some manner?
That could be good but as of now, there is no enforcement mechanism. The G20 are the major shareholders in MDBs, leading investors in this growth story and hopefully will be charting the new model of clean, sustainable, resilient and inclusive growth. The group is by far the biggest part of the world economy, emissions and finance — so, it is critical. We must look to them to make the necessary commitments and take these seriously.
Enforcement mechanisms can’t come from an external police force — what should give us confidence is the backing in domestic politics for these issues and the shared recognition amongst countries that our mutual dependence on climate and biodiversity is immense. There is a shared interest as well as a massive opportunity for a new pathway of growth benefitting all nations. India is already showing how productive renewable sources of energy at low cost are. PM Modi’s Lifestyle for Environment (LiFE) initiative shows how people can make changes in everyday life to prioritise both efficiency and ecosystems — we can all contribute and benefit from such steps.
Enforcement should come from a mutual recognition of responsibilities, particularly of the richer nations but also all countries. Climate action is to the benefit of all countries through generating a clean new model of growth and inclusive sustainable development.