There is lots of talk on how to administer what money is available, unfortunately huge amounts are loans, not grants, and much of it tied up in difficult red tapeAs the first week of the November 6-17 UN climate summit in Bonn, Germany, drew towards a close, the European Union, Switzerland and Canada reiterated their commitment to increase financial help to developing countries to USD 100 billion per year by 2020. But right now, the grants given for this purpose since this promise was made in 2009 will not total much beyond USD 45 billion, according to officials in the UN Framework Convention on Climate Change (UNFCCC) secretariat.
The figure given by developed countries is far higher, and some estimates put it at around USD 90 billion. But analysts at the Climate Action Network (CAN) – the umbrella group of NGOs that track global climate negotiations – have calculated that around half the advertised amount are loans.
Considering that most of the extra greenhouse gases now warming the atmosphere have been emitted by rich nations since the start of the Industrial Age, “this is like crashing into someone’s car, and then giving them a loan to pay for the repairs,” said a CAN member.
A recent joint report from the World Bank and its associates said they had collectively committed USD 27 billion in climate finance last year. Of that, only 4% was in the form of grants.
Governments of some developed countries mention the total climate finance figure in public without mentioning how much of it is in the form of loans, but that can be seen in the biennial reports submitted to the UNFCCC secretariat. France reported that only 2% was provided as grants, Japan 5%, and Germany 45%. Norway, Sweden, Denmark, Switzerland and Canada are among countries that said their climate finance consisted exclusively of grants.
Given the historical responsibility of developed countries, the UNFCCC and the 1997 Kyoto Protocol are both based on the principle that providing finance to developing countries to combat climate change and deal with its effects is an essential aspect of global justice. Developing country governments and most NGOs have held this implies providing money in the form of grants and not loans.
The main opposition to this has come from the US, Japan, Australia and New Zealand, who point out that right now China is the world’s largest greenhouse gas emitter, and India the third largest. It was largely due to this opposition that the principle of differentiation between developed and developing countries was largely ignored in the 2015 Paris climate agreement, though it was kept in the text.
How do you count
An associated problem is the weakness of the UNFCCC system for defining, categorising, tracking, and evaluating climate finance. Other UN organisations such as UNDP and UNEP do not report their climate related activities to UNFCCC, which makes it even harder to figure out how much money is being spent where and for what. This is one of the important topics under discussion at this summit, but progress has been painfully slow.
Developed countries that give the money have always been more keen to fund mitigation projects that would control greenhouse gas emissions, while developing countries want equal amounts for projects that help adaptation to climate change impacts. This tussle has seen the virtual death of the UNFCCC’s Adaptation Fund, which was given hardly any money for a long time. At the beginning of this summit, the German government announced a grant of 50 million Euro to this fund. That will enable it to survive for another year.
Other funds – such as the LDC fund meant to help the poorest developing countries – are also in intensive care, as most of the money now goes to the Green Climate Fund (GCF). Many observers had welcomed this consolidation instead of having a plethora of funds with little money in their accounts. But now many developing countries are complaining about the detailed and rigid processes of the GCF, just as they have done about the World Bank for years.
One genuine problem is that the GCF wants to see the extent of co-benefits before financing a project. If a developing country wants money to set up a solar power farm, the GCF wants to know the volume of carbon emissions that will be saved by moving over from coal and oil. That is good on paper, but the really small developing countries are finding that their emissions are so little their proposals are being rejected. “We emit almost nothing. How much emission reduction can we show,” the head of Bhutan’s National Environment Commission Thinley Lhamo plaintively asked on the sidelines of this summit.
These are among the problems developing countries want to discuss as part of pre-2020 climate action (the Paris agreement becomes operational in 2020). India’s lead negotiator Ravishankar Prasad told indiaclimatedialogue.net, “We need to know how much of the money being talked about is public finance.” Senior Chinese negotiator Chen Zhihua said this was a “life and death” issue for developing countries and would impact all other elements under negotiation in the Paris agreement.
Prasad said, “The issue requires adequate space. We know we are developing guidelines for global stocktake, transparency arrangements and implementation of nationally determined contributions. Information (on public finance by developed countries) is very relevant for developing countries as this would contribute to each and every agenda item listed under negotiations.”
But with developed countries opposing the inclusion of all pre-2020 action in the agenda of this summit, the issue is yet to be resolved. The facilitator of the finance discussions proposed that countries figure out modalities so that they could communicate finance information to the UNFCCC once every two years, but there is no consensus on this either. The US delegate said, “No additional matters need to be addressed.”