The money that funds climate action charts five

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1. fall short

Let’s start with the composite numbers. Data on climate finance is controversial (more on that later), but according to what does exist, the total global climate finance flow is estimated at $665 billion in 2020. climate policy initiative (CPI). The bright side: That figure has doubled since the beginning of 2010, growing at a compound annual growth rate of 7%. Preliminary data indicates climate finance will rise 28% to an all-time high of at least $850 billion in 2021. But to avoid the worst effects of climate change – such as meeting the goals of the 2015 Paris Conference – this money flow needs to grow to a massive $4.3 trillion by 2030, the CPI said.

So far, this climate finance leads to two goals: adaptation and mitigation. The numbers include both domestic and cross-country funding, through grants or otherwise, by public and private entities. If negotiations go the way of countries most vulnerable to climate change, “loss and damage” could become an additional category.

2. Priority pressing

Countries have felt a greater pressing need for funding as extreme weather events have become more common in the past decade. This year has seen devastating floods, cyclones and heatwaves across the world. Adaptation to such climate risks has been the focus of previous talks, but UNEP Adaptation Gap Report It was released last week that risks may mount faster than global efforts in adaptation planning, financing and implementation.

While 84% of the climate convention’s 198 parties now have adaptation plans and policies, nearly two-thirds still lack quantifiable and time-bound targets. Most who are not motivated by grassroots results, the report suggests. Any success requires funding, but the first projects worth more than $25 million appeared only in 2017, shows data on financing adaptation projects.

Adaptation efforts are increasing in number and scale, but they need to grow more to keep pace with the effects of a changing climate.

3. Debt Trap

New energy transition technologies rely heavily on climate finance. So is the capacity of developing and most vulnerable countries to cope with the economic losses caused by climate change. However, the vast majority of climate aid going to the countries most in need has been released in the form of loans, not grants, experts say.

This means aid funds will have to be repaid, usually at higher interest rates, and their use can have a negative impact on economically weaker countries that are already reeling under heavy debt.

While the flow of aid has increased in recent years, the share of finance remains non-grant. According to a new report by Oxfam InternationalAn analysis of climate aid flows to 18 Asian countries shows that the share of non-grants was about 70% of the total climate finance flows received in 2019 and 60% in 2020. This is counter-productive to the core objective of climate finance. , stated in the report.

4. Fund Flow

Let’s take a look at where and how the funding is going. The CPI report states that money is mainly going to more developed countries, especially Western Europe, the US and Canada. The largest part of East Asia and the Pacific is led by China’s domestic initiatives. These countries mainly get their money from domestic funding. Poorer countries in Africa and South Asia are more dependent on international finance for mitigation and adaptation needs.

High-income countries that have committed to reaching net zero emissions naturally prioritize climate spending within their region. According to the report, around 76% of all climate finance flows were raised and spent domestically during 2011-2020.

In 2020, public and private sources contributed an equal share of the funds raised. Funding from public sources has grown faster than from private sources. Countries would do well to welcome national policies and a strong domestic regulatory framework to encourage green investment.

5. Inflated Data

In the end, the data itself appears sketchy, a potential body blow to bring about transparency in climate funding. There has long been disagreement among climate negotiators and policymakers over the methodologies used to calculate climate financing. While much of the focus has been placed on advanced countries in funding climate action for poor countries at the $100 billion-a-year mark, not enough attention has been paid to ensure it is reached correctly.

Rich countries together contributed $63.4 billion in 2019 and $68.3 billion in 2020, according to a report by the Organization for Economic Co-operation and Development (OECD). But an analysis of climate finance by international charity oxfam shows that the actual funding received by developing countries may be only a third of the OECD’s reported figures. This is because loans and other non-grant instruments are calculated in such a way that more credit is given to the donor nation, and the reported climate finance underestimates the funding’s relevance to climate-related outcomes. Climate finance will need more transparency to make progress.