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Climate Finance Faces $75-Billion Gap as COP 26 Looms

 

With the opening of this year’s United Nations climate change conference, COP 26, less than 1,000 hours away, the world’s poorest, most vulnerable countries are facing down a six-year, US$75-billion shortfall in the international climate finance that rich countries have been promising since 2009, Oxfam estimates in a report released Sunday.

The analysis landed just two days after the Organization for Economic Cooperation and Development (OECD) said international climate pledges only increased 2% between 2018 and 2019, to about $80 billion, after rising by 11% in 2018 and 22% in 2017, Climate Home News reports. Much of the new money was in the form of loans, not outright grants, and the OECD data showed countries and private financiers falling short on their commitments while multilateral development banks began to step up.

“Based on current pledges, Oxfam estimates that wealthy governments will continue to miss the $100-billion goal and reach only $93 to $95 billion per year by 2025, five years after the goal should have been met,” Oxfam Canada writes in a release. “The shortfall means that climate-vulnerable countries will have missed out on between $68 billion and $75 billion in total over the six-year target period.”

That’s at a time when “extreme weather is already killing five million people every year—accounting for more than 9% of global deaths—and this is expected to increase as heat-related deaths rise due to climate change,” Oxfam adds. “Climate change could trigger economic losses double that of the pandemic, but it is not being treated with the same urgency as COVID-19.”

The release says the European Union, the United Kingdom, the United States, Canada, Australia, and Japan spent more than $15 trillion on pandemic recovery packages last year, “equivalent to meeting the climate finance goal 151 times over.” Canada has spent more than C$397 billion on its COVID response since January 2020, three times the annual global commitment to climate finance.

“By comparison, Canada pledged C$5.3 billion over five years in climate finance to help developing countries address climate change and support a green recovery,” Oxfam adds. “While Canada was among the few countries to increase its pledge in recent months, total funding commitments still fall short of closing the gap on climate finance as G7 leaders promised to do” at their summit in June.

(Fun finance fact: The federal election that ended this week cost an estimated $650 million, about 75% of Canada’s average climate finance contribution in 2017 and 2018 after factoring in the exchange rate between U.S. and Canadian dollars.)

The Oxfam and OECD reports coincided with a Major Economies Forum on Energy and Climate, hosted by U.S. President Joe Biden on Friday, and a gathering of world leaders in New York Monday convened by UK Prime Minister Boris Johnson. At the Monday session, Johnson aimed to “shame the rich countries of the world” into hitting the $100-billion climate finance target, “telling them they have a ‘duty’ to step up because their wealth is based on generations of ‘reaping the benefits of untrammelled pollution’,” The Independent writes.

The present day “is the most important period I think now in the history of the planet, because COP simply must succeed,” Johnson added. “Over the next 1,000 hours, between now and everyone coming to COP 26, we must do the work that will allow us to come to Glasgow bearing the ambitious NDCs—Nationally Determined Contributions—and rock-solid commitments on coal, cars, and trees.”

This would be the same British prime minister whose government enabled a new underground coal mine in Cumbria, plans to approve new oil and gas exploration off the Shetland Islands, declined to block construction of a carbon-intensive third runway at London’s Heathrow Airport, only increased its own international climate finance pledges by cutting back on Official Development Assistance (ODA) to poorer countries, and has utterly failed to avert the vaccine apartheid limiting developing countries’ participation in Glasgow.

Curiously, on his way into the Monday meeting, Johnson wasn’t sure he’d be able to persuade other national leaders to take “concrete action” on climate finance, BBC writes.

“I think getting it all done this week is going to be a stretch. But I think getting it all done by COP, six out of 10,” Johnson told media. “It’s going to be tough, but people need to understand that this is crucial for the world.”

Reacting to the OECD data, COP 26 President-designate Alok Sharma said “there is no excuse” for the funding gap, adding that “delivering on the $100-billion goal is a matter of trust,” Climate Home News reports.

And yet, “as the annual data has approached 2020, the chances of the target being met have diminished each year,” the UK-based climate newsletter adds. “This has led to anger from developing countries, who say they can’t afford to reduce emissions and protect themselves from climate change without the support of wealthy countries that have historically emitted far more than them.”

The Climate Home story includes a chart that shows only three of the world’s wealthiest countries—Norway, Sweden, and Germany—meeting or exceeding their shares of the $100-billion annual contribution, based on data [pdf] from the London-based Overseas Development Institute. Canada’s average contribution in 2017 and 2018, at US$697 million, equals 17% of its fair share, placing the country in a tie with New Zealand for fifth-worst on the list.

The Trump-era United States comes in last, at 4%, though Biden announced plans to double his country’s contribution in a speech yesterday to the UN General Assembly. At US$11.4 billion, that pledge still falls far short of a fair share contribution from the U.S., and the new amount could face stiff opposition in a fractious U.S. Congress, Axios warns.

Biden maintained the doubled commitment would make the U.S. “the leader in public climate finance. He added that, “with our added support together with increase private capital, and from other donors, we’ll be able to meet the goal of mobilizing $100 billion to support climate actions in developing nations.”

Beyond the raw numbers, Oxfam’s analysis shows serious gaps in the way the available international climate finance is distributed.

Based on rich countries’ pledges to date, only about one-quarter of the dollars in 2025 will be devoted to climate adaptation, even though the countries receiving the funds are already on the front lines of severe climate impacts. For years, developing countries and climate advocates have been calling for a 50-50 split between funding for adaptation and efforts to reduce greenhouse gas emissions.

And the lion’s share of the funding—70%—will take the form of loans, not grants, notwithstanding Johnson’s brave words about the world’s wealthiest countries “reaping the benefits of untrammelled pollution”. That’s good enough for a climate finance methodology adopted by the OECD around the time of the Paris climate conference in 2015. But in a Climate Finance Shadow Report last year, Oxfam International concluded that:

• Only about one-fifth of the US$59.5 billion for international climate finance that rich countries reported in 2017 and 2018 went to least-developed countries, and only 3% to small island states;

• Only 20% of the funding took the form of outright grants, while about 40% consisted of loans at full commercial rates;

• The actual value of climate finance to developing countries might be less than half of what rich countries are reporting, largely due to the cost of administering and paying interest on loans;

• More than half of the funding went to projects conducted for some other purpose that had a secondary climate goal;

• Only about a third of the funded projects took gender equality into account;

• The majority of rich countries’ climate finance commitments counted toward their previous promises to increase Official Development Assistance to 0.7% of their gross national income—meaning that the climate dollars would be spent instead of, not in addition to, other ODA investments.

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