in the run-up 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), media reports claim that developed countries are getting closer to the target of providing $100 billion annually in climate finance to developing countries by 2025 (the original target was 2020). This view has been reinforced by the Organization for Economic Co-operation and Development (OECD), which claimed that climate finance provided by developed countries reached $78.9 billion in 2018.
erroneous claims
These claims are wrong. First, the OECD figure includes personal finance and export credit. Developing countries have emphasized that developed country climate finance should be from public sources and provided in the form of grants or concessional loans. However, the OECD report makes it clear that the public finance component was only $62.2 billion in 2018, with about $32.7 billion through multilateral institutions and $29.2 billion in bilateral funding. Significantly, the final figure comes after adding loans and grants. In the public finance component, loans comprise 74%, while grants account for only 20%. The report did not specify how much of the total debt of $46.3 billion is subsidized. From 2016 to 2018, 20% of bilateral loans, 76% of loans provided by multilateral development banks and 46% of loans provided by the Multilateral Climate Fund were non-concessional. Between 2013 and 2018, the share of loans continued to increase, while the share of grants decreased. Heavy provision of climate finance through credit risks exacerbates the debt woes of many low-income countries.
The OECD report on climate finance has long been criticized for inflating data on climate finance, including funding for development projects such as health and education that only target climate action. The Oxfam Report on Climate Finance Waivers for Climate Relevance of Reported Funds to estimate how much climate finance is actually targeting climate action and also exemptions for grant equivalence. In contrast to the OECD report, Oxfam estimates that in 2017-18, out of an average of $59.5 billion in public climate finance reported by developed countries, climate-specific net aid was only between $19 and $22.5 billion per year.
The hollowness of the OECD’s claims is also exposed by the accounts themselves provided by developed countries in their biennial reports submitted to the UNFCCC. The 2018 biennial assessment of the UNFCCC Standing Committee on Finance reports that on average, developed countries provided only $26 billion per year in climate-specific finance between 2011-2016, even though these numbers are still open to challenge . This increased to an average of $36.2 billion in 2017-18.
broken promises
US President Joe Biden recently said that the US will double its climate finance to $11.4 billion annually by 2024. But any claim that such a pledge would make the US a “leader in international climate finance” is misleading. It is the Congress that will ultimately decide on the quantum. The US also has a history of broken commitments, having promised $3 billion to the Green Climate Fund (GCF) under President Barack Obama, but only $1 billion before President Donald Trump withdrew US support from the GCF. distributed. Mr Biden initially promised only $1.2 billion to GCF, far less than what was already owed.
In any case, the future focus of US climate finance is to mobilize private sector investment, as John Kerry, Special Presidential Envoy for Climate Change made clear during his recent visit to India. Along with claims of some trillion dollars of private investment, he was clear that public finance would only contribute to the “de-risking” of investment. At the end of the day, the bulk of the money coming in will be through private funds, directed to projects that are considered “bankable” and not chosen based on the priorities and needs of developing countries. Sadly, behind the rhetoric of raising climate finance lies the grim reality of putting a new burden of “green” debt on the G77 and its people.
Despite repeated calls to strike a balance between adaptation and mitigation, climate finance is also leaning towards mitigation. The United Nations Environment Program’s 2016 Adaptation Gap Report noted that the annual cost of adaptation in developing countries could range from $140 to $300 billion annually by 2030 and rise to $500 billion by 2050. The adaptation finance available at present is much less than the expressed needs. In the nationally determined contribution presented by developing countries.
Providing climate finance is fundamental to confidence in the multilateral process. Sadly, developing countries will continue to pressure developed countries to deliver on their promises, but the history of climate negotiations is not on their side.
T. Jayaraman is Senior Fellow, Climate Change, MS Swaminathan Research Foundation (MSSRF) and Sreeja Jaiswal is Senior Scientist, MSSRF.
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