Unlike the United States, Japan pays more than its fair share of climate finance. But at what cost ?

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Climate finance will make or break COP27 and no doubt most countries think that should bear the lion’s share of the bill.

The United States is $32 billion short of paying its ‘fair share’ of the $100 billion that developed countries have pledged to developing countries by 2020, according to a new analysis .

Given that the United States is responsible for more than half of the historical emissions unleashed by the richest countries, it should have given 39.9 billion dollars (38 billion euros), according to data from Carbon Brief.

Far from the 7.6 billion dollars (7.3 billion euros) accumulated in 2020.

At the other end of the spectrum is Japan. The East Asian country gave away $7.9 billion (€7.6 billion) more than its fair share of historical issues. According to this indicator – followed by France and Germany – it is well ahead of the pack as far as industrialized countries are concerned.

So, is Japan doing so well when it comes to climate finance?

Speaking to Euronews Green, Japan’s chief climate change negotiator, Sugio Toru, attributes part of his country’s success to stable leadership – at least when it comes to climate attitudes.

While Biden was to bring the United States back into the Paris Agreement Last year, after Trump took a huge step backwards, Japan tried to “fulfill our maximum possible commitment”, he says.

The government has not thought about achieving exactly an equitable amount of funding, in part because this comparative data was only recently released.

But there is a common thread that pulls Japan, France and Germany to the top of the charts when it comes to paying proportionally more than their responsibility for historic warming.

All three provided much of their funding in the form of loans rather than grants: 86%, 75% and 45% respectively.

Loans come in different shapes and sizes, depending on Japan

More climate finance in the form of grants rather than loans is one of the repeated demands of developing countries. It only became more pressing during COP27.

“Countries in the South are already facing an impossible debt burden due to the pandemic and the global cost of living crisis. Providing climate finance in the form of loans would tighten the chains of this debt trap at the worst possible time,” says Nick Dearden, director of Global Justice Now.

“Industrialized countries are the cause of the climate crisis, they should not ask to be reimbursed for the costs of dealing with it in the countries of the South. All climate finance should be unconditional grants.

But Toru defends Japan’s record on this front, pointing out that the ‘yen loans’ it offers are long-term concessions offered on a favorable basis, with interest rates set at 0.1 or 0.2. %. Countries don’t have to start repaying them until 20 to 30 years later, he says, with a much longer grace period than they would receive from commercial lenders.

“It’s like comparing an apple to a strawberry,” he says of the different types of grants and loans given.

Where is Japan’s climate finance going?

The roughly 14 percent of Japan’s grant funding goes to climate-vulnerable countries, such as hurricane-hit Caribbean islands, Toru adds.

“When we have a common infrastructure project, for example to build a metro line in India or Egypt, we give loans,” he explains, because this can ultimately be paid for by users. This type of project would fall under mitigation financing because it helps the country to reduce CO2 emissions.

But developing countries also desperately and increasingly need more money for adaptation – which has long been lagging behind, as UNEP’s latest emissions gap report shows.

Last year, Japan agreed to double its funding for adaptation, to around $14.8 billion (€14.2 billion) in total by 2025.

What is Japan’s position on loss and damage?

Loss and damage is the third category of funding dedicated to compensating countries for climate disasters. This is the litmus test of that The success of the COP for developing countries.

The issue was first included on the agenda of COP27. And although activists’ hopes are dwindling as the summit enters its second week, expectations from some delegations remain “very high”, according to a top negotiator.

“I understand the frustration of developing countries,” says Toru. “We have so many typhoons that come to Japan every year,” he explains, making the country geographically well placed to show empathy.

It’s also something of a sticking point, though.

“Developing countries cannot claim to be the only ones to suffer from climate change,” he adds.

Given Japan’s relative wealth, it is hardly surprising that the delegation seems to be taking a more measured approach to establishing a new finance ease.

“We first need to understand where the gap is,” says Toru, his country’s foreign minister. Japan already provides significant amounts of humanitarian aid, he says, and shares its expertise through the Sendai Framework for Disaster Reduction, launched in 2015.

“A human life would be saved with this kind of [aid] system, in the event of a natural disaster…but buildings, power plants, etc., that’s where the gap is.

Is the Global Shield a solution?

To fill this void, Japan is aligning itself with the “Global Shield” – a disaster risk insurance scheme initially proposed by Germany and now adopted by the G7 and the V20 (the bloc of countries most at risk from climate change).

He was met with mixed reactions. While civil society groups have welcomed the Global Shield as a sign that wealthier countries recognize their need to act, they have also warned that it cannot distract from the overriding need for a new loss and damage fund.

“A disproportionate focus on a new mechanism that does not cover slow-onset events such as sea level rise or loss of language and culture cannot meet the needs of communities on the ground,” comments Harjeet Singh, head of global policy strategy at Climate Action Network (CAN) International.

Where does the current impasse on loss and damage leave countries?

Japan’s history also makes it receptive to calls from developing countries on climate finance, suggests Toru.

In 1961, the country secured a loan from the World Bank to help build its famous high-speed rail line between Tokyo and Osaka as it recovered from World War II.

“We know how difficult it is to rebuild a country,” he says. And despite having closer ties to Asia, the minister says Japan is keen to extend its funding where it is most needed, including in Africa and the Caribbean.

But with the third highest GDP in the world after the United States and ChinaJapan is much better able to protect itself from escalating climate change – and it shows in its attitude towards loss and damage negotiations.

Turo says Japan and other developed countries want to discuss details now and determine the need for a new facility later, while those in the global South want the facility to be grounded first.

“If we do not find an appropriate measure [within existing climate finance structure] then we have to find a new one. It’s a step-by-step approach,” says Turo.

“The COP is an annual process, so we should put it back in place – but that’s not healthy,” he acknowledged.

This moderate position aligns with that of New Zealand. “To create a fund without certainty about what it means would require a high level of confidence that we have a common understanding of what we are working on and how,” the country said in a statement on Saturday evening.

“Listening to the interventions, it doesn’t seem like we have that.”

New Zealand has previously said a loss and damage fund is urgently needed and added that it committed funding last week.

“But we also think we have to get it right.”

Taking the time to do it right can seem like a luxury on Tuvalu’s submerged coast. The rolling calendar of loss and damage financing is another way in which countries are divided by the demands of climate justice.

New Zealand yesterday won CAN’s ‘Fossil of the Day’ award for its ‘regressive intervention in the loss and damage program’.

Japan was the first recipient to be “the world’s largest public funder of oil, gas and coal projects”. The network claims to have contributed 10.6 billion dollars (10.2 billion euros) per year on average between 2019 and 2021.

“No country’s finances are sinking more than Japan’s, but in the wrong direction,” CAN said.

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