Too much climate finance given as loans force poorer nations into debt
A paltry 14 percent of climate finance is going to the least developed nations and just 2 percent to small island developing states, which have done least to cause the climate crisis but are being hit hardest.
Climate finance provided and mobilised by developed countries for developing countries totalled USD 78.9 billion in 2018, up 11% from 71.2 billion in 2017. The increase was driven by a rise in public climate finance, while private climate finance was flat, according to new figures from the OECD.
Climate Finance Provided and Mobilised by Developed Countries in 2013-18 is the OECD’s third assessment of progress towards the UNFCCC goal of mobilising USD 100 billion per year by 2020 to help developing countries tackle and adapt to climate change. This latest report deepens the analysis of aggregate figures by providing more insights on the characteristics and recipients of climate finance over the period studied.
The report finds that public climate finance from developed countries reached USD 62.2 billion in 2018. Bilateral public climate finance accounted for USD 32.7 billion, up by 21% on 2017, and multilateral public climate finance attributed to developed countries accounted for USD 29.6 billion, up by 8% on 2017. The level of private climate finance mobilised was virtually flat, at USD 14.6 billion in 2018, after USD 14.5 billion in 2017. Climate-related export credits remained small at USD 2.1 billion, accounting for less than 3% of total climate finance.
“Climate finance to developing countries continues to grow but in 2018 was still USD 20 billion short of the 2020 goal of mobilising USD 100 billion.
OECD Secretary-General Angel Gurría
Early 2019 data from the European Union and its member states, the largest provider taken collectively, indicate that bilateral public climate finance may have continued to increase last year,” added Angel Gurría. “Donors need to urgently step up their efforts to support developing countries to respond to the immediate effects of the pandemic and to integrate climate actions into each country’s recovery from the COVID-19 crisis to drive sustainable, resilient and inclusive economic growth.”
The report shows that out of the overall climate finance in 2018, 70% went to climate change mitigation activities, 21% went to adaptation and the remainder to crosscutting activities. More than half of total climate finance targeted economic infrastructure – mostly energy and transport – with most of the remainder going to agriculture and social infrastructure, notably water and sanitation.
Over 2016-18, Asia benefited from the largest share of climate finance at 43%, followed by Africa (25%) and the Americas (17%).
In terms of distribution by income group, 69% of climate finance went to middle-income countries, 8% went to low-income countries and 2% went to high-income countries, with the remaining 21% allocated at regional rather than country level.
In terms of public finance instruments, both loans and grants increased in absolute terms. The share of loans, however continued to rise, reaching 74% of the USD 62.2 billion public finance figure in 2018, up from 52% in 2013, while the share of grants decreased from 27% to 20%. The share of grants was higher to low-income countries, at 42%, while the share of loans was higher in middle-income countries, at 88%.
Responding to the report, Tracy Carty, Senior Policy Advisor on Climate Change at Oxfam said “These figures confirm that far too much of the climate finance from governments and development banks is in the form of loans that force poorer nations to fall further into debt as they struggle with the impacts of climate change”.
A paltry 14 percent of climate finance is going to the least developed nations and just 2 percent to small island developing states, which have done least to cause the climate crisis but are being hit hardest.
“Climate finance is a lifeline for communities facing record heatwaves, terrifying storms and devastating floods. Wealthy countries should stop inflating their figures with loans that will be repaid, and start increasing grants, especially for the most vulnerable countries to use for adaptation.”
Climate finance is money provided by developed countries to developing nations as an obligation under the UNFCCC due to their responsibility for carbon emissions and their capacity to pay.
Last month Oxfam published its Climate Finance Shadow Report 2020, which also assessed the latest figures reported by donors for 2017 and 2018.
It estimated that the true value of support for climate action once loan repayments, interest and other forms of over-reporting are accounted for was only a third of that reported by donors ($19-22.5bn per year in 2017 and 2018).
The OECD report does not provide an estimate of total non-concessional finance, but Oxfam estimated it was 40 percent of public climate finance in 2017-18 ($24 billion). The terms of this finance are not disclosed but some of it includes market rate loans.
