Rich countries overstating “true value” of climate finance by up to $88 billion, says Oxfam

“Real” financial effort by rich countries to provide climate finance to Global South is less than a third of what the reported figure seems to suggest.

Rich countries have again effectively short-changed low- and middle-income countries as part of international climate change negotiations by as much as $88 billion in 2022, the latest year of newly reported figures, says Oxfam.

Rich countries say they mobilized nearly $116 billion in climate finance in 2022 ―for the first time surpassing the $100 billion a year they originally had promised to reach by 2020, to help Global South countries cope with the worsening effects of climate breakdown.

However, while nearly $92 billion of the reported amount was provided as public finance, nearly 70 percent of this money was again in the form of loans. Many of these loans require little to no financial effort from rich countries ―they are provided at profitable market rates, all adding to Global South countries’ debt levels.

Oxfam estimates that the "true value" of climate finance provided by rich countries in 2022 is only between $28 billion and $35 billion, with at most only $15 billion earmarked for adaptation.

These figures reflect climate-related loans as their grant equivalents, rather than at their face value, in order to gauge rich countries’ real financial effort. Oxfam accounts for the difference between loans at market rate and those at preferential terms, while also considering the overly generous claims about the climate-related significance of these funds.

Climate finance is a prickly issue within international climate talks. This discrepancy between financial promises and reality continues to undermine the trust that countries need from each other. It is also materially vital ―in many countries it is what makes climate action possible.

“To put $35 billion into perspective, that’s how much money oil and gas corporations make in just six days,” said Oxfam International’s Climate Change Policy Lead Nafkote Dabi. “Rich countries have been short-changing Global South countries for years by doing climate finance on the cheap. Claims that they are now on track with their financial promises are overstated, as this real financial effort is much lower than the reported figure seems to suggest.”

“Low- and middle-income countries should instead get most of the money in grants, which also need to be better targeted toward authentic climate-related initiatives that will help them adapt to climate harm and move away from fossil fuels,” Dabi said. “At the moment they’re being penalized twice. First, by the climate harm they did little to cause, and then by having to pay interest on the loans they’re being given to deal with it.”

Governments meeting at COP29 in Baku, Azerbaijan, later this year to adopt a new global climate finance deal called the New Collective Quantified Goal must not repeat the mistakes of the previous commitment of $100 billion per year but instead ensure that rich countries provide significantly more finance, and are made more accountable and their financing more transparent.