Treasury Secretary Janet Yellen said on Wednesday that the United States would support a financing mechanism that aims to direct $500 million a year to move developing countries away from coal-based energy and toward wind, solar and other low- and zero-carbon energy sources.
Speaking at the United Nations climate talks in Glasgow, Ms. Yellen acknowledged that while wealthy countries have promised billions of dollars to tackle climate change, the real cost is in the trillions.
“I agree we all must do more, and the United States is stepping up,” Ms. Yellen said. But, she added, “the gap between what governments have and what the world needs is large, and the private sector needs to play a bigger role.”
Financing for climate change initiatives remains an enormous point of tension at the U.N. talks. Wealthy countries have not met a promise they made more than a decade ago to raise $100 billion annually by 2020 to help poor countries — which have contributed the least to climate change but are suffering some of the worst consequences — make the transition to cleaner energy and build resilience to fiercer storms, droughts and rising seas.
The Biden administration has promised $11.4 billion annually by 2024, but that is subject to congressional approval. Ms. Yellen said on Wednesday that the private sector also needed to provide more financing.
Mark Carney, the former Bank of England governor, said that private funds to developing countries must “dramatically scale up.” This week, Mr. Carney led an initiative by financial groups to commit to using their $130 trillion in assets to help countries hit their targets of reaching net-zero emissions by 2050.
The separate financing program that Ms. Yellen described is designed to issue bonds and use the proceeds to support clean energy and sustainable infrastructure in developing economies. The bonds will be issued by the Climate Investment Funds, a World Bank initiative founded in 2008, that invests money contributed by countries including the United States, Britain and Japan.
Many environmental groups and organizations that represent developing countries are skeptical of private finance. That is in part because most of that money tends to go toward energy projects that can turn quicker profits, rather than the less lucrative but critical work of building sea walls, planting mangroves and other efforts to help communities adapt to the effects of climate change.
Jörn Kalinski, a senior adviser at Oxfam, said in a statement that without time frames and specific dollar targets for adaptation, “poorer nations will continue to lack the resources they need to protect lives, homes and businesses from weather disasters.”