Climate Finance: The great gap in Climate Legal Frameworks 

When we hear about or worse, suffer directly from a heatwave, flood, or a big fire, there’s no place for doubt that what stands behind it is climate change. Some call it global warming, others climate change but an increasing number of people are recognising it as a climate crisis.

With any social, environmental, and economic crisis, we demand our local, regional, and national governments bring new ideas and turn them into action. But we often do not recognize that such ideas are already in place and that governments know what must be done. Legislators have passed several legislations establishing climate legal frameworks and the actions and policies of those frameworks aim to implement and exist in every single sector of the economy.

Climate policy is inherently economy-wide. The range of strategies, measures, and policies is so wide that they even feature prominently in the latest IPCC’s Sixth Assessment Report (AR6) (IPCC, 2022). As IPCC Chair Hoesung Lee said, “We have the tools and know-how required to limit warming. […] There are policies, regulations, and market instruments that are proving effective. If these are scaled up and applied more widely and equitably, they can support deep emissions reductions and stimulate innovation.” (IPCC, 2022) 

But if policies, regulations and market instruments are just at our fingertips, why aren’t we on our way to limit global temperatures below 1.5°C, reach carbon neutrality by at least 2050 and overall honor the Paris Agreement? 

The short and simple answer is long-term, secured, and sustained financing. We can design state-of-the-art policies, we can even turn them into law as many countries have done and are doing, but if those policies and laws do not guarantee financing in the long run, there is no chance to develop climate action that survives external dynamics such as government change, economic instability, inflationary processes, wars, and invasions or global pandemics. 

The greatest place to assure the desired long-term, secured and sustained financing for our climate strategy measures and policies is, without a doubt, legislation and legal frameworks. As stated above, climate legal frameworks have been built up both at the national and at the sub-national levels. According to the global dataset developed by the Grantham Research Institute on Climate Change and the Environment, there are already 121 economy-wide legal instruments, which are enacted by the Legislative branch of the State and which have a scope integrating both mitigation and adaptation. 

Territories as extensive as the European Union, countries so diverse as South Korea, Nigeria, Spain, Fiji or Argentina, and even sub-national parliaments have enacted these sets of laws. Less developed regions such as Latin America and the Caribbean show great improvement in their climate legal frameworks, with the recent Chilean Climate Change Law being now the leading legal instrument in the region. Reflecting this trend it must be highlighted that in a twenty-year period between 1997 and 2017, according to Carbon Brief, “there has been a 20-fold increase in the number of global climate change laws” (Carbon Brief, 2017). 

These laws tend to do the following:

1. Legally recognize climate change as a national concern and priority, signing and aligning to the Paris Agreement;

2. Establish legal definitions for key concepts such as climate change, adaptation, mitigation, climate vulnerability, or greenhouse gas emissions;

3. Set mitigation targets for the short, mid, and long term, those being (the majority of times) 2030, 2040, or 2050;

4. Institutionalize a climate governance scheme with clear responsibilities divided within states in order to organize the design, implementation, and measurement of policies;

5. Commit to implementing strategies, measures, and policies, comprehensively with the Nationally-Determined Contributions and the Long Term Strategies in the context of the Paris Agreement; 

6. Determine the scope of the measures in terms of the economic sectors included in the climate strategies, measures, and policies;

7. Promote citizen and public participation by developing institutional bodies comprising representatives of the scientific sector, representatives of NGOs, trade unions, indigenous communities, universities, academic and business entities, and representatives of political parties with parliamentary representation (In more democratic-liberal states); 

8. Set instruments for climate information to be publicly available, including greenhouse gas inventories or greenhouse gas potential tools; and many others. 

However, many of these laws lack the key dimension that will push us towards limiting global temperatures below 1.5 C and reaching carbon neutrality by at least 2050: long-term, secured and sustained financing. So, we know what to do, we know how to do it but we lack the economic flows to do it. 

In this context, we must highlight the great opportunity we hold for including financing mechanisms into climate legal frameworks, such as carbon price mechanisms -whether carbon taxes or emissions trade systems-, green taxes, or state-led funds. In particular, national and federal legislation.

Here are some examples of state-of-the-art and leading legislations that already do so: 

a) Green taxation – Spain 🇪🇸 , Law 7/2021 on Climate Change and Energy Transition: establishing in the seventh additional provision that “within six months of the approval of the law, the Government shall set up a group of experts to evaluate a tax reform that will assess green taxation […]” (Boletín Oficial del Estado Español, 2021); 

b) Emissions trade system – Chile 🇨🇱 , Climate Change Law enacted on 5 July 2022: setting that the Ministry of Environment will “develop rules establishing the maximum quantity of a greenhouse gas […] that may be emitted by an individual facility, emitting source or grouping of emitting sources […] in order to meet the objectives of the Long-Term Climate Strategy and the Nationally Determined Contribution” (Senado de Chile, 2022);

c) Carbon tax – Singapore 🇸🇬 – Carbon pricing Act 23/2018: implementing a carbon tax entering into force in 2019 […] initially at S$5 per tonne of greenhouse gas emissions […] with plans to increase it to between S$10 and S$15 per tonne of emissions by 2023 and […] at S$25 in 2024 and 2025, and S$45 in 2026 and 2027” (Grantham Research Institute on Climate Change and the Environment, 2022).  

d) Climate fund – Brazil 🇧🇷 – Law no 12.187/2009 on National Climate Change Policy: establishing a National Climate Change Fund as a key climate instrument towards guaranteeing climate policies and measures (Presidência da República, 2009) 

What we should do from now on is to keep pushing governments and parliamentarians but to push them to pass new laws or law amendments that integrate climate finance into climate legal frameworks. It may sound boring and not that appealing, but it surely is the best way to go, when pursuing climate action by guaranteeing the implementation of mitigation and adaptation policies economy-wide. 

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