Private Capital and Fight against the Climate Change

Private Capital and Fight against the Climate Change

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Tackling climate change is one of the most daunting tasks in the modern world. To be successful in the fight against climate change, we need private capital. Without private capital, fighting against climate change might be harder than playing the free spin game. So, we need to identify the hotspots of climate change. And should allocate those hotspots with necessary reinforcements. Therefore, having strong climate finance is necessary.

What is Climate Finance?

In simple terms, climate finance refers to the finance that helps enhance greenhouse gas use and reduce emissions. Proper use of climate finance will reduce the vulnerabilities of negative climate change. It will create a strong ecological system that can save the planet.

Why Do We Need Private Capital?

Even though during UN COP26, the rich countries agreed to provide a capital of $100 billion per year, they failed to keep up the agreement. Having said that, here are some shortcomings of public climate finance.

  • Failing to provide the agreed amount of $100 billion to the developing countries. This amount is used for mitigating climate change in those developing countries.
  • Failing to attract needed private investment in the fight against climate change.
  • Multilateral Development Banks are in an excellent position to mobilize the private climate capital. This matter will be a problem soon.

Current Use of the Public Capital

In the 2019/2020 period, the average total climate finance was $632 billion per year. Developing nations heavily depend on this public capital. Here is the allocation of climate finance by region.

  • China – $237 billion
  • Western Europe – $105 billion
  • North America – $84 billion
  • Other East Asia and Pac. – $55 billion
  • Latin America – $35 billion
  • Central Asia and Eastern Europe – $32 billion
  • Sub-Saharan Africa – $19 billion
  • The Middle East and North Africa – $15 billion
  • Other – $11 billion

On the other hand, for global decarburization, an amount of $4-5 trillion per year is needed. This amount is too big to handle by the public funds. So, to reach these goals, the world needs the help of the private sector.

What Kind of Impact Does the Private Sector Have on Climate Change?

In the current situation, the private sector has an excellent opportunity to transform its business model. For instance, every year, we release a huge amount of CO2 to the environment. And we cannot continue this path much longer.

So, the private sector should step up now. If they can transform their companies into more climate-friendly and energy-efficient companies, they will benefit greatly. Otherwise, we will not be able to release new renewables to the system. Besides, all the innovations will not be useless compared to this CO2 quantity.

Wrap Up

Reducing carbon footprint is vital for the survival of humanity and the earth. However, we cannot reach the intended goal by using public capital. The private sector should be more engaged with this matter. So, we all should look for a more climate-friendly and energy-efficient solution.