For the world’s poorest, latest trends in climate finance are going in the wrong direction

Oxfam analysis of how climate change funds are allocated and accounted for shows very concerning trends for the world’s poorest countries and communities.

“Climate Finance Shadow Report 2018” looks at the latest donor reports for 2015 and 2016 and finds that:

• Increases in climate finance are largely due to an upsurge in loans, especially to middle-income countries.
• Government grant money isn’t meeting needs and isn’t rising fast enough. Grants represent an estimated $11 to $13 billion, compared to $10 billion in our last assessment covering 2013 and 2014.
• Funding for adaptation continues to be neglected, making up only an estimated 20 percent of public climate finance, up from 19 percent in 2013 and 2014.
• The share of the pie going to least developed countries hasn't gotten bigger; it's still just around 18 percent of public finance.

“Despite people in poor Caribbean islands staring down supercharged hurricanes and others in Africa reeling from brutal droughts, the money flowing to the world’s poorest and most vulnerable to climate change remains woefully inadequate,” said Tracy Carty, Oxfam’s climate change policy expert.

One of the major problems described in the report is how many donors overreport the value of the funds they’re providing. One way is to overcount the climate change value of a development project where climate change is just one aspect of a broader program.

Another involves counting loans and other types of non-grant financing at full face value, obscuring the actual level of assistance developing countries receive by a huge margin. 

Oxfam is urging governments to end this practice and count the “grant-equivalent” of their climate loans, meaning only counting the net transfer of finance to a developing country once repayments, interest and other factors are accounted for. The OECD recently agreed on similar standards for counting development aid.

“Counting the grant-equivalent is quickly becoming the standard for aid spending; there’s no reason why it shouldn’t be the same for climate finance,” said Carty.

Oxfam estimates the net, climate-specific public finance in 2015 and 2016 is around $16 to $21 billion per year. This is significantly lower than the estimated $48 billion per year in public climate finance, if donor numbers are taken at face value.

“Governments have to agree new accounting standards for climate finance under the Paris Agreement at this year’s COP climate conference in Poland,” said Carty. “This is an opportunity to agree fair and robust standards that can’t be missed.”

The Oxfam report also shows how much money different governments are providing as grants. While the Netherlands, the United Kingdom, Sweden and others provided more than 90 percent of their climate finance in 2015 and 2016 as grants, France and others have fallen far behind.

The Shadow Report shows that despite French President Emmanuel Macron claiming leadership on combating climate change, France’s finance numbers tell a different story. Just seven percent of the country’s climate finance was given out as grants in 2015 and 2016, far below other neighboring countries.

“With only two years left before the $100 billion deadline and the eyes of millions in the developing world watching, we hope to see Macron’s actions to financially support the world’s poorest countries match his inspiring words,” said Armelle le Comte, Oxfam France’s climate lead.