Aligning Development Co-operation and Climate Action

1. Why is it a priority to align development co‑operation with the objectives of the Paris Agreement?

Abstract

Climate change and development are fundamentally interconnected. Hard won development gains will be lost without rapid, coherent action to address the climate crisis and transition to low-emissions, climate‑resilient pathways.

This chapter first explores how and why the climate crisis is closely interconnected with development, and looks at potential scenarios for development as the world heats up. It then looks at how aligning development co‑operation with the objectives of the Paris Agreement will bring opportunities to advance development while supporting the transition to low-emissions, climate-resilient pathways.

In brief

• The climate crisis touches every sector and community. It multiplies threats, creating new obstacles for development and poverty reduction.

• To limit the devastating impacts of climate change, countries should act within the decade to massively cut global greenhouse gas emissions and place climate at the centre of their policies and investments across sectors.

• The climate crisis threatens to derail the agendas of the many institutions that facilitate and provide development co-operation. They cannot deliver on their mandate to support developing countries’ economic, social and environmental transformation without anticipating and accounting for climate change.

• The window of opportunity is closing, and development co-operation providers have two urgent tasks. First, they need to support developing countries to accelerate the shift to low‑emissions pathways and strengthen adaptation and resilience to climate change. Second, they need to help to protect the people and places most at risk – both from the direct impacts of climate change and from the social and economic disruptions that the transition to new development pathways entails.

• Aligning with the objectives of the Paris Agreement constitutes an opportunity for development. Sound climate policy is sound development policy, and ambitious climate action reinforces developing countries’ economic growth and development.

1.1. Sustainable development and climate change are inseparable

All development is occurring in the context of the world’s changing climate. Climate change is rapidly altering the ecological and social systems that underpin human well-being and economic activity, and will continue to influence how countries develop beyond the end of this century (IPCC, 2018[1]). Moreover, climate change is a threat multiplier that directly challenges societies’ ability to satisfy basic human needs; promote justice, peace and security; and pursue sustainable and equitable economic growth and development (OECD, 2018[2]; Hoegh-Guldberg et al., 2018[3]; Rüttinger et al., 2015[4]).

The impacts of climate change are occurring now. In the absence of more effective climate action, they are projected to dramatically worsen. Impacts include not only increasingly frequent and severe extreme weather events such as floods and hurricanes, but also slower-onset changes such as sea level rise, warming and acidifying seas, and long-term droughts. These impacts are geographically varied, unpredictable and exponential rather than linear or gradual (IPCC, 2018[1]). Their implications for development are far-reaching. The way in which communities, cities and countries develop – spatially, economically and socially – is a key determinant of their vulnerability to climate change and their exposure to impacts that compound on one another, especially in places where poverty and disadvantage are widespread (Hallegatte et al., 2016[5]; Zscheischler et al., 2018[6]).

The world’s most vulnerable people face the greatest risks from climate change (IPCC, 2018[1]; Roy et al., 2018[7]). These include people who live in poverty, face entrenched disadvantage, or lack access to fundamental human needs such as water, energy or health services. They are people who live in the most climate-sensitive locations and environments around the world, among them communities dependent on coastal and agricultural livelihoods, particularly in the least developed countries (LDCs) and small island developing states (SIDS) (IPCC, 2018[1]). Dimensions of disadvantage exacerbate people’s vulnerability to climate change impacts in many ways. The combination of low socio-economic status and geographic location can increase certain groups’ exposure to climate hazards – for instance, if they depend on agriculture, live on islands or coastlines prone to extreme weather, or live in informal settlements in flood-prone areas. The 2030 Agenda will not be achieved if societies’ most vulnerable people continue to face exclusion and disadvantage. It is vital that they are supported to reduce their exposure to the impacts of climate change.

Sustainable development is possible only when countries own and lead their development and local populations are active agents in decision making (UN, 2015[8]), and when there is a strong link between the development and climate priorities expressed by developing countries and communities. Leaders in low-income countries prioritise zero hunger and affordable and clean energy, Sustainable Development Goals (SDGs) 2 and 7, respectively; these two goals are also among the top three SDGs mentioned in the nationally determined contributions (NDCs) of low-income countries (Brandi et al., 2017[9]; Custer et al., 2018[10]). This reflects developing countries’ growing recognition of the imperatives and benefits of shifting to low-emissions, climate-resilient development pathways. By fostering such synergies, development actors can help to ensure that development interventions are oriented to countries’ own development priorities and support the integration of strong climate action into efforts to achieve the SDGs.

The climate crisis is a major obstacle to reducing poverty, and immediate action is needed to ensure these two challenges are also addressed together (Hallegatte et al., 2018[11]; IPCC, 2018[1]). The combination of climate change and socio-economic vulnerability can increase the risk of food and water shortages, conflict, and natural disaster exposure and at the same time, induce the forced migration of populations in some of the world’s least developed regions (OECD, 2018[2]). Natural disasters alone are already pushing 26 million people a year into poverty, and climate change is expected to increase the frequency and severity of such events (Hallegatte et al., 2018[11]; IPCC, 2018[1]). Without sound, climate‑informed development, climate change could force more than 100 million additional people into extreme poverty by as soon as 2030 (Hallegatte et al., 2015[12]). Climate change also adds to the development challenges of rapid population growth and urbanisation in many developing countries. These place further pressure on already scarce resources, especially land, food and water. For example, as much as two-thirds of the world’s population already experience severe water scarcity today; that number is projected to rise as a result of climate change and population growth (Hallegatte et al., 2018[11]; Mekonnen and Hoekstra, 2016[13]).

Global accords recognise that climate and development objectives are interconnected

In adopting the 2030 Agenda for Sustainable Development in 2015, countries acknowledged that the adverse impacts of climate change threaten the prospects of achieving sustainable development by limiting future progress and potentially reversing the hard-earned development gains of previous decades (UN, 2015[8]). That same year, world leaders signed the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC), The Agreement is a basis for urgent, measurable and country-led action to mitigate and adapt to climate change, and it sets out a vision for a global shift to low greenhouse gas (GHG) emissions and climate-resilient development. Failure to drastically reduce GHG emissions over the coming decade until 2030 will result in a much warmer world – with dire consequences for sustainable development (Box 1.1). Indeed, if countries do not urgently increase their ambition and meet the objectives of the Paris Agreement, the 2030 Agenda and its SDGs will not be met and the world will not fulfil its overarching pledge to leave no one behind (IPCC, 2018[1]). Additional global agreements – in particular the Addis Ababa Action Agenda on financing for development, the Sendai Framework for Disaster Risk Reduction, and the other two United Nations (UN) Rio conventions on biodiversity and desertification – are also vital to the achievement of the objectives set out in the 2030 Agenda and the Paris Agreement.

While nearly all countries have formally committed to implementing the Paris Agreement, many government and non-government actors remain uncertain or face major barriers to planning, financing, delivering and sustaining the transformative changes that are needed. Tackling these interconnected challenges demands the involvement of a range of actors to mobilise increased finance, support policy reforms and build capacity. The 2030 Agenda and the Paris Agreement call for ambitious action by both developed and developing countries to deliver transformative change. They note as well that developing countries will continue to need dedicated support (see Chapter 2). Such support is the essence of development co-operation. Development co-operation providers’ support to developing countries to mitigate and adapt to climate change should thus rise to the ambitions of the Paris Agreement, as a prerequisite for sustainable development.

Meeting the objectives of the Paris Agreement is essential to bring the Sustainable Development Goals within reach

Countries’ policy and investment decisions over the next ten years will shape development pathways far into the future and determine the effectiveness of efforts to meet these interlinked and mutually reinforcing global goals (New Climate Economy, 2018[14]). For instance, the Intergovernmental Panel on Climate Change (IPCC) warns in a 2018 report that countries need to make massive cuts to collective global emissions by 2030 – approximately halving them from 2010 levels – if they are to successfully limit global warming to 1.5°C this century (IPCC, 2018[1]). Box 1.1 presents the report’s findings on what is needed to mitigate and adapt to climate change.

Box 1.1. The potential implications of global warming of 1.5°C

The IPCC report, Global Warming of 1.5°C (IPCC, 2018[1]; Rogelj et al., 2018[15]), starkly sets out what is needed to effectively mitigate and adapt to climate change over the coming years and decades. It analyses pathways to the two temperature goals outlined in the Paris Agreement – limiting global warming to well below 2°C or to 1.5°C above pre-industrial levels. The report finds that:

• limiting global warming to 1.5°C (with limited or no overshoot of this temperature goal) requires global net anthropogenic carbon dioxide (CO₂) emissions to fall by about 45% compared to 2010 levels by 2030, and to reach net zero emissions around 2050

• pathways that target greater global warming of well below 2°C involve a decline in CO₂ emissions by 2030 of around 25% compared to 2010 levels and net zero emissions by about 2070.

While the necessary pace of change varies, all pathways to 1.5°C or well below 2°C rely on both of the following:

• improving energy efficiency, rapidly decarbonising energy supply and rapidly electrifying energy end use

• increasing the use of negative emissions technologies including land and soil restoration and carbon dioxide capture and storage with bioenergy or natural gas technologies.

Measures for removing carbon dioxide from the atmosphere differ widely in their maturity, potential, costs, risks, co-benefits and trade-offs, and the deployment of current and potential carbon dioxide removal measures could have major impacts on land, energy, water or nutrients at a large scale. The pathways to 1.5°C reflect the need for especially urgent action in the energy sector, notably that:

• investments in unabated coal are essentially phased out by 2030 (with the early retirement of some fossil investments before their capital investment is fully recovered or before the end of their operational lifetimes)

• by 2050, the electricity sector is fully decarbonised and 70-85% of all power is supplied by renewable energy.

Achieving either of the temperature goals also demands transformative adaptation strategies to manage the inevitable risks from climate change. Importantly, there will be limits to adaptation and adaptive capacity with warming of 1.5°C, and these will become more acute at 2°C and above. For example, the risks to SIDS and many LDCs remain high even at low levels of climate change. Even if global warming is limited to 1.5°C, the populations of some SIDS will be displaced due to rising sea levels and other climate change impacts. In natural systems, coral reefs are already severely degraded, and many species are facing extinction.

Ambitious and early mitigation efforts will not only limit further global warming but will also help both human and natural systems to adapt to adverse climate change impacts. Such efforts could also help to reduce the chance that the world will experience disastrous large-scale, singular events1 from climate change, such as the disintegration of the Greenland and Antarctic ice sheets.

1. The IPCC defines large-scale singular events as “relatively large, abrupt and sometimes irreversible changes in systems that are caused by global warming”. See http://report.ipcc.ch/sr15/pdf/sr15_spm_final.pdf

Source: (IPCC, 2018[1]), Global Warming of 1.5°C: Summary for Policymakers, http://report.ipcc.ch/sr15/pdf/sr15_spm_final.pdf; (Rogelj et al., 2018[15]), “Mitigation pathways compatible with 1.5°C in the context of sustainable development”, http://report.ipcc.ch/sr15/pdf/sr15_spm_final.pdf; https://www.ipcc.ch/site/assets/uploads/sites/2/2019/05/SR15_Chapter2_Low_Res.pdf.

The IPCC report examines the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways. It compares the potential pathways to and implications of global average temperature rise of 1.5°C and 2°C (IPCC, 2018[1]). The global average temperature is already 1.1°C above pre-industrial levels and, strikingly, it is 0.2°C warmer than in 2011-2015 (World Meteorological Organization, 2019[16]). If warming continues at the current rate and countries do not strengthen their existing commitments under the Paris Agreement (i.e. the unconditional pledges outlined in their NDCs), the world will likely reach the threshold of a 1.5°C temperature rise sometime between 2030 and 2052; by 2100, the global average temperature increase will likely reach between 2.9°C and 3.4°C relative to pre-industrial levels and warming will likely continue beyond that point (IPCC, 2018[1]; World Meteorological Organization, 2019[16]). Significantly, in the absence of major changes to reverse these temperature rise trends, by 2030, the world will also pass the point at which global warming can be kept to well below 2°C (UNEP, 2017[17]).

Both 2°C and 1.5°C of global warming would have major consequences. However, there are differences in terms of bringing the SDGs into reach. For example, limiting global warming to the lower target of 1.5°C rather than 2°C could reduce the number of people exposed to climate-related risk and poverty by up to several hundred million by 2050 (IPCC, 2018[1]), although further analysis is still needed of how different mitigation approaches might affect poverty levels. Limiting warming to 1.5°C also would help to reach the SDGs on water and energy access, food security, health and well-being, and safe cities, and would contribute as well to inclusive economic growth, poverty eradication, and the protection of terrestrial ecosystems and biodiversity (Roy et al., 2018[7]). In particular, efforts to adapt to climate change that are ecosystem-based and community-based, and that incorporate indigenous and local knowledge, advance synergies with SDGs 5 (gender equality), 10 (reducing inequalities) and 16 (inclusive societies) (Roy et al., 2018[7]).

On the other hand, the anticipated trajectory of global warming of between 2.9°C and 3.4°C will result in abrupt, catastrophic or irreversible changes that signal disaster for development, among them runaway climate change, major losses of habitat and large-scale species extinction (IPCC, 2018[1]; World Meteorological Organization, 2019[16]). Overshoot on the 2°C temperature goal would result in potentially severe impacts ranging from declining food and water supplies to the catastrophic loss of lives and livelihoods from extreme weather events. These would in turn threaten the human development of current and future generations across SDGs 2 (zero hunger), 3 (health and well-being), 6 (water and sanitation), 8 (work and economic growth), 9 (industry, innovation and infrastructure), 11 (sustainable cities and communities), and 15 (life on land) (UNDP, 2018[18]). Climate impacts are increasing the risk of surpassing critical tipping points, and are now recognised to be occurring earlier and with graver consequences than assessments suggested in 2009 (World Meteorological Organization, 2019[16]). Box 1.2 describes the transformative visions of the interlinked climate and sustainable development agendas.

Box 1.2. Transformation in the context of the Paris Agreement and sustainable development

Both the 2030 Agenda and the Paris Agreement establish a vision for fundamentally transforming countries’ development pathways to create inclusive, low-emissions and climate-resilient pathways. Various actors have explored what this transformation might entail in practice (Few et al., 2017[19]; OECD/World Bank/UNEP, 2018[20]; New Climate Economy, 2018[14]). While there is no universally agreed definition, transformation can be understood as a process of systemic change that encompasses all sectors and actors and constitutes a decisive shift away from the status quo.

The very title of the 2030 Agenda – Transforming Our World – signals the importance of this vision. The Agenda explicitly notes that “bold and transformative steps … are urgently needed to shift the world on to a sustainable and resilient path” (UN, 2015[8]). As this statement suggests, sustainable development is itself a process of transformation. For instance, a country with low economic and human development indicators undergoes a fundamental transformation in its economic, social and environmental systems, practices and norms over the course of its development. Some of this transformation takes the form of progressive shifts. Other changes are more sudden and disruptive. Development co-operation has a long-standing role in supporting countries through the change process, including and in particular when it is necessary to disrupt systems and past approaches to ensure continued progress towards development objectives.

In the context of climate change, the IPCC refers to “transformation pathways” that describe possible emissions futures, defining them as trajectories that are “associated with a set of broad and irreversible economic, technological, societal and behavioural changes [which] can encompass .changes in the way energy and infrastructure are used and produced, natural resources are managed and institutions are set up and in the pace and direction of technological change” (Matthews, 2018[21]). This reflects an understanding of transformation as far-ranging and permanent. The IPCC also defines adaptation as either incremental (adaptation that “maintains the essence and integrity of a system or process at a given scale”) or transformational (adaptation that “changes the fundamental attributes of a socio-ecological system in anticipation of climate change and its impacts”), while noting that incremental adaptation can accrue to achieve transformational adaptation. In noting this, the IPCC makes an important distinction between actions that preserve existing approaches and those that anticipate future changes and bring about fundamental shifts as a result. This distinction supports the view that individual development interventions can be designed and delivered in a way that supports wider systemic goals (OECD/World Bank/UNEP, 2018[20]).

Climate and development actors also describe the type of change envisioned in the Paris Agreement as a paradigm shift. For example, the Green Climate Fund (GCF) uses investment criteria to identify the “paradigm shift potential” of programmes and projects (UNFCCC, 2012[22]; Green Climate Fund, 2014[23]). The GCF defines this potential in two parts: the “degree to which the Fund can achieve sustainable development impact beyond a one-off project or programme investment through replicability and scalability” and “systemic change towards low-carbon and climate-resilient development pathways” (emphasis added) (Green Climate Fund, 2014[23]). The framework therefore encourages activities that are not isolated or one-off actions, but are instead designed to be replicated and scaled to contribute to system-level change.

These concepts are instructive for development actors grappling with how they might design their interventions to go beyond doing no harm and focusing on singular or confined objectives to instead contribute positively to the broader transformation envisioned in the Paris Agreement.

1.2. The objectives of the Paris Agreement are central to the mandate of development co-operation

The mandate of development co-operation is to facilitate developing countries’ economic, social and environmental transformation in the face of varied and often complex challenges. The climate crisis directly threatens to undermine the agendas of institutions that facilitate and provide development co‑operation. They will fail to deliver on their sustainable development mandates if they fail to adequately anticipate and account for climate change. Unless development co-operation providers step up and actively help developing countries to take ambitious climate action, they risk supporting unsustainable development.

The Paris Agreement explicitly places climate action in the context of sustainable development and poverty reduction by recognising the development needs and pathways of developing countries, especially those that are most vulnerable to adverse climate impacts (UNFCCC, 2015[24]). The Agreement is a framework that is fundamentally concerned with how countries can reduce devastating global climate impacts and thereby continue to develop and prosper now and into the future. It provides a clear direction for climate action that builds on SDG 13, which calls for countries to take urgent action to combat climate change and its impacts, and supports the broader 2030 Agenda (UN, 2015[8]).

The economic and social case for taking ambitious, accelerated climate action in both developed and developing countries is well established. The low‑emissions, climate-resilient development pathways described in the Paris Agreement will be cost-efficient and will deliver better development results than traditional development trajectories. With the right policies and signals, developing countries can address climate change while increasing growth and productivity and reducing inequality (OECD, 2017[25]; IRENA, 2019[26]). The global economic consequences of failing to take ambitious climate action are stark. Global economic damages in 2100 are projected to be smaller under global warming of 1.5°C than of 2°C. The IPCC estimates that the damages from warming in 2100 could cost USD 54 trillion with 1.5°C of global warming and USD 69 trillion with 2°C of global warming relative to the period 1961-901 (Hoegh-Guldberg et al., 2018[3]).

Emissions-intensive development is not only economically inefficient, but also overlooks the potential for technological and social innovation to reduce emissions and build resilience. Recent modelling demonstrates that limiting global warming to well below 2°C would result in direct, cumulative economic benefits of USD 26 trillion for the period 2018 through 2030, compared with business-as-usual scenarios (New Climate Economy, 2018[14]). A shift to a low-emissions economy would increase global gross domestic product through increased labour participation and female employment, avoid 700 000 premature deaths from air pollution, and generate over 65 million new low-carbon jobs (New Climate Economy, 2018[14]). Current estimates of these future scenarios are often conservative, and they tend to underestimate or fail to factor in the existing economic, social and environmental co-benefits of climate action taken to date, especially in adapting and building resilience to climate impacts (New Climate Economy, 2018[14]).

Urgent climate action that supports countries’ shift to low-emissions, climate-resilient development pathways thus is an opportunity to enable inclusive economic growth that can provide a just transition while ensuring higher wealth and well-being globally (New Climate Economy, 2018[14]).

1.3. Aligning with the Paris Agreement creates opportunities for development

Ambitious climate action constitutes an opportunity for development. It is essential that decision makers recognise the corollary – that sound climate change policy is also sound development policy. Development decisions and interventions that do not reflect the aims of the Paris Agreement are at risk of locking countries into development pathways that exacerbate climate change, increase vulnerability to its impacts and fail to meet Agenda 2030.

Fundamentally, alignment means ensuring that development pathways are low-emissions and climate‑resilient and, as a result, sustainable in the face of the multi-layered challenges that countries now face. Aligning development co-operation approaches with the Paris Agreement involves accounting for the shifting climate reality that is the new normal and clearly aiming to support the core objectives of the Agreement on mitigation, adaptation and the consistency of finance flows (as outlined in Article 2.1; see Chapter 2). Alignment also means supporting a just and inclusive transition in developing countries and shoring up the health of critical ecosystems to realise combined economic, social and environmental benefits.

Alignment will accelerate the shift to low-emissions pathways

In their traditional form, some development co-operation activities have contributed to the current unsustainable pathways, in particular through financing major infrastructure and economic activities that are the main sources of emissions. Economic growth and development have historically been closely associated with the ability to generate energy, predominantly from fossil fuel sources, for various end uses ranging from increased productivity in industrial and agricultural production to transportation, construction, and operation of social and economic infrastructure. In the absence of alternative models, development co-operation played a strong role in promoting development approaches over the past decades that are today known to be unsustainable.

While such historical activities may have reflected a lack of climate change awareness and the absence of affordable alternatives for emitting technologies, these factors are no longer valid impediments to climate action. While the Paris Agreement includes provisions for emissions to peak later in developing countries, recent analysis points to superior development outcomes from a rapid and ambitious shift. Moreover, the knowledge, technological solutions, capacities and financial resources exist globally to pursue alternative development models and use them to achieve better development outcomes. It is clear that development co-operation activities that support low-emissions, climate-resilient development help countries to take advantage of these newer solutions, processes and technologies to shift them onto new growth trajectories (New Climate Economy, 2018[14]). Continued investment in emissions-intensive activities such as fossil fuels, on the other hand, has the potential to not only raise emissions but also to increase the risk that countries will have to manage stranded assets, communities and workers as the impacts of climate change grow (OECD, 2017[25]) (New Climate Economy, 2018[14]).

The Paris Agreement encompasses a far greater range of actors and embodies much higher ambition for climate change mitigation than past global climate agreements. It demands major changes to achieve necessary emission reductions across all emitting sectors – among them energy, transport, industry and land use systems – and across regions and urban and rural economic systems. As Box 1.1 illustrates, meeting the Paris Agreement objectives to limit global warming to 1.5°C or well below 2°C requires rapid changes to current global development practices and investments to support major emission reductions between now and 2030 (IPCC, 2018[1]). To meet either of these global warming objectives, it is essential to strengthen countries’ current mitigation ambitions as they are outlined in NDCs, which contain near-term and mid-term national policies, measures and targets for climate action. All pathways for limiting warming to 1.5°C and well below 2°C involve a shift in key sectors. As described by de Coninck et al. (2018[27]), examples of such shifts by area include the following:

• in energy systems, faster uptake of energy-efficient technologies and practices (e.g. in industrial processes and buildings), electrification, raising the share of renewables to decarbonise energy supply with greater reliance on smart grids, new energy storage, and information communications technologies to manage and match supply and demand.

• in land use, extensive afforestation and reforestation as well as agricultural practices that retain and raise soil carbon; these will require careful efforts to address trade-offs with food production and security, bio-energy land requirements, and livelihoods for people dependent on agriculture as many of them are poor.

• in heavy industry, technological innovations such as greater electrification and increased use of hydrogen, bio-based feed stocks, and carbon capture and storage (noting that these options are limited by institutional, economic and technical constraints that increase financial risks to many incumbent firms).

• in urban areas, de-motorisation; electrification of transport; and compact, connected development to manage the carbon footprint and generate human health co-benefits (New Climate Economy, 2018[14]).

In view of the cross-sectoral changes that are needed to achieve the temperature goals of the Paris Agreement, development co-operation should help developing countries to extricate themselves from dependence on fossil fuels by focusing on overcoming financing, policy and capacity gaps that constrain developing countries from making use of existing solutions to achieve better development. For example, SIDS are typically net importers of fossil fuels. Development co-operation also needs to facilitate climate change mitigation within sectors such as health and other social services sectors where climate change considerations have generally been less integrated (OECD/World Bank/UNEP, 2018[20]; OECD, 2017[25]). This can help to build capacity in these sectors and set in motion necessary policy reforms to manage transition costs, while at the same time creating and exploiting economic opportunities in low-emissions, climate-resilient economies.

To guide the right types of investments and long-term policy reforms, development co-operation should support developing countries to progressively raise the ambition of their NDCs (see Chapters 2 and 3). As noted, vital objectives for such co-operation will be decarbonisation and electrification of the energy system, increased sustainable land use including climate-smart agriculture, greater innovation and process changes in heavy industry, and more sustainable urban systems. Supporting developing countries to start making these changes today will help them to avoid becoming locked into dangerous structural dependencies that lead to high emissions and higher vulnerability to climate change in the future.

Alignment will support adaptation to adverse climate impacts and build resilience

The purpose of development interventions is to support communities to adapt to changing contexts and build greater capacity and resilience to emerging risks. Action to adapt to climate change – defined by the IPCC as a “process of adjustment to actual or expected climate and its effects” – shares many characteristics with sound development in that it focuses on reducing the vulnerability and exposure to climate hazards of people and natural and built assets (Hallegatte et al., 2018[11]; Matthews, 2018[21]). Indeed, adaptation to climate change is now being more broadly interpreted and approached as a process of “rapid, inclusive and climate-informed” development (Hallegatte et al., 2018[11]; Hallegatte et al., 2015[12]).

To ensure that the risks of climate change to development are well understood and that developing countries and communities can respond appropriately, development co-operation providers should recognise the risks of climate change and address these in their interventions (Hammill and Tanner, 2011[28]; OECD, 2009[29]). Development co-operation activities can help to enable transformative adaptation by building resilience and adaptive capacity and by promoting livelihood security for poor and vulnerable people. Development co-operation can also help to identify and alter current modes of development that do not assess or address the impacts of climate change and that lead to maladaptation and jeopardise past development gains.

Development co-operation providers should also recognise and help to address the numerous, existing barriers to adaptation (Hallegatte et al., 2018[11]). Many developing countries still have inadequate access to information, knowledge and capacity to inform and undertake adaptation. Other barriers affect all sectors. One example is out-of-date land zoning or land use planning that allows high-risk investments and development to proceed. Another is poor enforcement of zoning or building regulations that are needed to protect people and assets from climate-related risks. Reducing non-financial barriers such as these increases resilience and reduces climate change impacts without necessarily increasing investment costs. Financial barriers may occur in the form of environmentally perverse subsidies for water, extensive agriculture and built infrastructure, among other things. Reforming such subsidies can yield direct financial gains while delivering resilience benefits (Hallegatte et al., 2018[11]; Global Commission on Adaptation, 2019[30]). Development co-operation can be pivotal in supporting developing countries to identify and exploit these policy reform opportunities to help forge low-emissions, climate-resilient pathways.

Alignment will help to ensure that no one is left behind in the transition

A fundamental part of the mandate of development co-operation is supporting developing countries to develop in a way that is equitable and inclusive – that is, ensuring that no one is left behind – and consistent with the 2030 Agenda (OECD, 2018[2]). As set out in both the Paris Agreement and the 2030 Agenda, this means taking pro-poor, gender-responsive, transparent and participatory approaches to development (OECD, 2018[2]). The changes needed to fulfil the objectives and ambitions of these two global frameworks will be complex and invariably entail disruptions to traditional activities in many sectors. Development co-operation has a clear opportunity to help countries to plan and implement these major transitions in a way that lays the groundwork for sound climate action and better societies in the long term, underscoring that sustainable development and climate change are inseparable. Just, inclusive climate action can also help to foster greater public acceptance for climate policies and enable more rapid progress.

One such opportunity is to support to investments in infrastructure and deliver social protection policies that build resilience to climate and other large-scale change while also protecting the poor (Hallegatte et al., 2016[5]). The need to support a just transition for workers is a recognised critical element of mitigation strategies, and yet development co-operation actors also have a clear, broader imperative to support just and equitable transitions across all sectors touched by climate change (OECD, 2017[25]). It would be inconceivable to achieve the “just transition” called for in the Paris Agreement without taking account of the interconnected impacts on vulnerable populations and the development challenges already confronting them. The just transition imperative requires an approach that recognises the effects of both mitigation and adaptation action on different groups – workers; other populations, notably the poor, facing intersecting challenges; and among these, particularly exposed and vulnerable groups such as girls and women and indigenous populations (Smith, 2017[31]; OECD, 2018[2]).

Some climate change mitigation policies, implemented on their own, may impose relatively greater costs in the immediate term on the poorest or most vulnerable people, for example by raising the cost of fossil fuel-based energy, transport services or food. As a large share of poor people’s budgets is dedicated to food and essential services, the relative cost of these price changes can be disproportionately high for them (Hallegatte et al., 2018[11]). However, such cost increases can usually be more than offset by accompanying policy or regulatory measures. Evidence to date suggests that the introduction of tailored tax and benefits schemes in parallel with climate change mitigation measures can shield poorer households and communities from the potential adverse impacts of reforms, and also ensure that these groups experience net benefits (OECD, 2015[32]). Development co-operation that is aligned with the objectives of the Paris Agreement can help countries to develop and deliver these types of transitional measures and seize the opportunity that comes with the shift to low-emissions, climate‑resilient pathways.

Ensuring a just transition is essential for a future with green and decent jobs (New Climate Economy, 2018[14]; ILO, 2015[33]). Transitioning to low-emissions, climate-resilient development pathways at the global, regional, national and local levels requires structural changes to economies, with implications for the numbers and types of jobs and skills required across economies and societies. Some of these changes are linked to larger technological and structural trends. Others are necessarily disruptive for certain parts of economies or communities of workers, for example in cases where countries are shifting from an agricultural to an industrial-manufacturing economy and/or increasing automation. Development co-operation can support a just transition of the workforce by ensuring fundamental labour and employment rights, developing dedicated regional strategies addressing specific local circumstances or challenges, and fostering social dialogue and protection (ILO, 2015[33]).

The introduction of mitigation and adaptation policies also requires accompanying measures that target industrial development, employment, migration, and protection and adaptation of livelihoods, and thereby help affected workers and populations to adjust while shielding them from undue disadvantage or increased vulnerability (OECD/World Bank/UNEP, 2018[20]). Transitional measures that are directly led and influenced by the parties most affected are central to meeting the Paris Agreement’s call for “a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities” (UNFCCC, 2015[24]). Institutional reforms are needed to ensure that the people most affected by these transitions are able to participate in the creation of policy decisions that affect their jobs and livelihoods. Investment in training and education as well as social protection measures are also vital to supporting workers and their families during interim periods of training or unemployment (Smith, 2017[31]).

It should also be noted that experience to date suggests that the transition towards green growth will not necessarily result in rates of labour reallocation or changes in demands for skills that are outside of historical experience (OECD, 2015[32]). Moreover, technology changes beyond those immediately related to climate change mitigation, such as the advent of artificial intelligence and self-driving cars in the transportation sector, are likely to have a greater impact on the number and nature of jobs in a given industry (OECD, 2018[2]).

Alignment will strengthen the health of ecosystems that support life on Earth

In addition to opportunities to support transitions that leave no one behind, Paris alignment offers development co-operation opportunities to facilitate climate action that supports the health of ecosystems, addresses overlapping crises and delivers broader environmental co-benefits.

Some major global environmental challenges that interact directly with climate change include land degradation and desertification (including from land use change such as deforestation), ocean warming and acidification, and the broader declining health of ecosystems and biodiversity. For example, climate change has been found to be triggering feedback loops in the ocean and cryosphere (i.e. the frozen components of the Earth’s system) wherein emissions released from melting permafrost combine with additional heating from the loss of sea ice (IPCC, 2019[34]). Another example is the way in which deforestation and land clearing release GHG emissions and remove natural carbon sinks while driving biodiversity loss and ecosystem degradation. These impacts hit people directly, as communities need natural resources such as oceans and forests to survive and develop. The Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services has found that the current trajectory of biodiversity loss and ecosystem destruction will undermine progress towards 80% of the assessed SDG targets related to poverty, hunger, health, water, cities, climate, oceans and land (IPBES, 2019[35]). A lack of available data on the status of the environmental dimensions of the 2030 Agenda is also a major barrier to progress. The UN Environment Programme, which has identified 93 SDG indicators as being environment-related, found that for 77% of these indicators, there is either insufficient data to assess progress so far or it is unlikely that the target would be met without upscaling action (UNEP, 2019[36]).

An effective response to these crises in the world’s natural systems requires cross-sectoral, integrated approaches (IPBES, 2019[35]). Such solutions explicitly account for the interactions between the natural systems that support biodiversity and ecosystem health on the one hand, and human-built systems on the other. Nature-based solutions are one example of such integrated approaches, as they “protect, sustainably manage, and restore natural or modified ecosystems, that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits” (International Union for Conservation of Nature, 2019[37]). While the Paris Agreement recognises the role of nature-based solutions to climate change, the urgent imperative to protect and restore vital ecosystems presents both synergies and trade-offs with other SDGs, particularly in the near term. For example, watershed and soil conservation may constrain land for agriculture and push up food prices in the short term, as a result of increased demand through population growth or the unsustainability of existing uses of agricultural lands. This is one reason why sustainable development and pro-poor climate action require the use of social safety nets and specific transitional measures to protect vulnerable populations and that are underpinned by an understanding of natural systems.

Nature-based solutions for climate change can provide adaptation and mitigation benefits while also helping to lower or reverse the risk of ecosystem degradation, biodiversity loss and mass species extinction (Griscom et al., 2017[38]; IPBES, 2019[35]). The use of nature-based solutions for adaptation can be particularly cost-effective in delivering co-benefits for mitigation when other sustainability criteria are considered (IPCC, 2018[1]). Natural climate solutions can provide more than one-third of the emission reductions that are required between now and 2030 to keep global warming well below 2°C, and do so in a cost-effective way (Griscom et al., 2017[38]). There are also clear opportunities to address different environmental challenges coherently through climate action, for example pertaining to oceans. Ocean‑based climate solutions, such as ocean-based renewable energy systems and the restoration of coastal and marine ecosystems, have the potential to deliver around one-fifth of the emissions reductions that are needed to limit warming to 1.5°C by 2050, while also delivering major co-benefits for adaptation (Hoegh-Guldberg et al., 2019[39]). By supporting combined solutions such as these, development co-operation can help to shore up the natural systems that have a proven role in sustaining human health and livelihoods, while facilitating the transition that the Paris Agreement requires.

1.4. Development co-operation is critical to unlocking ambitious climate action

Low-emissions, climate-resilient pathways offer opportunities not just for development, but for better development. The question for development co-operation, then, is how to most effectively support developing countries to seize these opportunities and address risks. The challenge of strategic, timely and effective climate action is not confined to developing countries. It also concerns those OECD countries where domestic policy action on climate change remains insufficient. Development finance, which measures development co-operation flows, constitutes the fundamental resource basis of international action in support of sustainable development. The volume of development finance invariably defines the scope of its reach and ambition. At the same time, the development and climate challenges need to be situated and understood within a broader financing landscape.

Development co-operation needs to apply financial resources more strategically

Increased financing for development is essential for achieving both the 2030 Agenda and the objectives of the Paris Agreement. The financing needs for achieving the SDGs and shifting to low-emissions, climate-resilient pathways are much higher than the levels of historical development finance flows. Official development finance (ODF) – concessional and non-concessional international finance from public sources that is deployed with a policy mandate to support development – is an especially important part of the picture (OECD, 2018[2]). The explicit development co-operation mandate, and especially the ability of ODF to provide highly concessional resources, make this finance a core tool for the more difficult and ambitious changes that need to occur in developing countries to shift to low‑emissions, climate-resilient development pathways.

There has been an encouraging, increasing trend in climate-related development finance in recent years. Bilateral and multilateral actors have made ambitious announcements of increased climate-related financing, which points to continued and growing prioritisation of climate-related development finance. However, this prioritisation is occurring alongside a concerning declining trend in ODA provided to LDCs, which are most reliant on international development finance (OECD, 2019[40]). Moreover, development finance, and especially concessional development finance, is a fundamentally scarce resource relative to needs.

It is essential to meet financing targets – including, for those countries that have committed to it, the target of 0.7% of donors’ gross national income to ODA – as well as commitments with regard to climate finance to developing countries. At the same time, even where it can be substantially scaled up, development finance should not be considered a resource capable of directly meeting overall financing gaps. The total annual investment gap in key sustainable development sectors is estimated at USD 2.5 trillion – equivalent to 17 times current ODA volumes (UNCTAD, 2014[41]).

The order of magnitude of this gap reflects the scale of the challenge of overcoming the resources gap for financing development. The gap exists irrespective of whether this financing follows outdated modes or sustainable pathways of low-emissions, climate-resilient development. In some instances, approaches that are aligned with the objectives of the Paris Agreement may require more upfront capital investment. For example, compared to fossil fuel-based energy, the capital expenditure constitutes a higher share in the overall cost of power generation, which translates into a higher cost of financing as a share of the total project cost. Conversely, renewables do not require any fuel costs for the subsequent operations, whereas the costs of fossil fuels represent a high share in the overall cost of fossil fuel‑based energy generation. Moreover, the fossil fuels required for operation are subject to price fluctuations that can increase a power plant’s operational expenditure significantly. In other instances, such as where nature-based solutions are used, sustainable development solutions may actually reduce or eliminate financing needs.

Nonetheless, ODF alone will certainly not be able to fill the resource gap, which makes it essential to situate ODF in the broader system of financial flows and sources. Meeting direct funding and financing needs remains an important function of development finance in specific contexts, notably in the poorest countries and those with the least access to other resources. Overall, it is vital that development co‑operation actors focus strategically on ensuring that development finance creates incentives and pathways for more of the total available finance to be invested in sustainable, low-emissions and climate-resilient development (OECD, 2018[42]).

While financing needs in developing countries dwarf ODF flows, there is a much broader landscape of financing for sustainable development, as set out in the Addis Ababa Action Agenda (AAAA) agreed by countries in 2015 (UN, 2015[43]). Similarly, the scope of the Paris Agreement explicitly includes the alignment of all financial flows within its objectives. Beyond the need for internal coherence within development finance, development co-operation should be used strategically to shift broader financial flows in line with low-emissions, climate-resilient pathways.

The resources called for under the AAAA far exceed the investment gap identified for low-emissions, climate-resilient development pathways. Within international systems of financing for development, the largest financial resource for developing countries in all income categories is domestic, government revenue, although with substantial variation. In 2016, ODF corresponded on average to half of domestic tax revenue in LDCs, about 13% in lower middle‑income countries and less than 0.2% in upper middle‑income countries (OECD, 2018[42]). Looking beyond this system, total global financial assets amounted to USD 382 trillion in 2017, reflecting the scale of financial flows that should be aligned with mitigation and adaptation goals set out in the Paris Agreement (Financial Stability Board, 2019[44]).

In addition to providing targeted support to individual, climate-relevant sectors, the public fiscal and budgetary systems and the private financial systems need to be adjusted. These systems are directly associated with the two largest sources within the financing for development system – government revenue and private, market-based finance – and are responsible for the mobilisation, intermediation and allocation of financial resources they comprise. Their systemic function and importance mean that they play a fundamental role, both in shifting and mobilising the increased financial resources at the required scale and in aligning financial flows generated by these systems with low-emissions, climate-resilient pathways in line with the Paris Agreement.

Development co-operation should support countries to use this window of opportunity

The low-emissions, climate-resilient development pathways now represent the only sound option for achieving the ambitions of development co-operation under the 2030 Agenda. As the Global Commission on the Economy and Climate noted in 2018, the world currently has a “use it or lose it” opportunity to take bold climate action while achieving economic gain (New Climate Economy, 2018[14]). Development co-operation providers and developing countries should work together urgently to align their activities with the Paris Agreement.

Given the scale of the challenges and the need to avoid catastrophic impacts that place the world’s poorest people at the greatest risk, the coming decade is crucial for advancing long-term economic prosperity and development. As the findings of the IPCC (2018[1]) underscore, the combined actions of developed and developing countries in the years to 2030 will determine the world’s ability to shift to development pathways that can curb global warming to 1.5°C. The coming year, 2020, will be especially decisive, as countries update their NDCs, outline vital long-term strategies, commit to the required levels of transparency and accountability, and through these actions, set their levels of practical and political ambition on climate change and sustainable development (New Climate Economy, 2018[14]).

The role of development co-operation implies an inherent focus on supporting developing country partners with the resources, capacities and information they need to address gaps and manage the challenging transitions that arise during the process of sustainable development and that they cannot easily or sufficiently address endogenously.

Recognising that sound climate policy is sound development policy is the essential first step. The urgency of development challenges in many developing countries means that short-term responses to needs may be pursued because they are immediately feasible, notwithstanding their long-term cost and unsustainability in the context of the climate crisis. In such cases, and despite awareness of the benefits of an ambitious climate response, the default course of action may often be business as usual.

Providers of development co-operation are key actors, mandated to support developing countries to successfully navigate their development pathways. As such, they cannot shy away from the challenging transformations that are an intrinsic part of the development process.

It may be tempting to continue past practices and approaches in which both sides of the development partnership have decades-long expertise and experience and that both sides may easily execute. But doing so would miss the essential rationale of development co-operation – to support developing countries to acquire the knowledge, resources and capacities to make the shift towards a transition that represents the only long-term option to achieve sustainable development, and to ensure that these are ingrained in providers’ policies and operations.

Time is of the essence, given the short horizon imposed by climate change and the length of policy, planning and implementation cycles. Only concerted, co-ordinated action will be able to achieve the much-needed transformation in finance, policy and capacity that is needed to ensure activities are consistent with the objectives of the Paris Agreement over the long term and across all sectors and systems.

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Note

← 1.  This estimate refers to the mean net present value of the costs of damages from global warming, and includes what Hoegh-Guldberg et al. (2018[3]) describe as “costs associated with climate change-induced market and non-market impacts, impacts due to sea level rise, and impacts associated with large-scale discontinuities”. A further discussion can be found at https://www.ipcc.ch/site/assets/uploads/ sites/2/2019/05/SR15_Chapter3_Low_Res.pdf