Africa: five infuriating facts about climate finance

by MMC
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An in-depth new analysis reveals that less than a third of donor commitments actually went to climate projects.

The injustices of climate change are well known and deeply felt in Africa. The continent is responsible for only 4% of global carbon emissions, but is suffering some of the worst impacts of the crisis. Climate change has made a historic drought in East Africa 100 times more likely, which has left 20 million people undernourished. That makes devastating damage from Storm Daniel, which killed thousands in Libya last year, 50 times more likely. Africa is home to 14 of the 20 countries most vulnerable to climate change.

To correct this injustice, industrialized countries – historically the largest carbon emitters in the world – have agreed to help developing countries finance their climate projects. The historic 2015 Paris Agreement recognized the principles of “equity” and “common but differentiated responsibilities” in the fight against climate change.

At least that’s the theory. Financial promises from rich countries have so far covered a tiny proportion of the sums needed. The $700 million pledged to the new Loss and Damage Fund during the COP28 climate negotiations, for example, was understandably celebrated, but represents less than 0.2% of the $400 billion per year needed to compensate. irreversible damage caused by climate change.

To add insult to injury, high-income countries make it incredibly difficult to track how much they actually contribute and where that money is spent. Climate finance reporting is a disaster: confusing, slow and inaccurate. We are in the fight of our lives and no one is verifying and posting receipts properly.

That’s why my colleagues and I at the ONE Campaign spent months cleaning and analyzing climate finance data and launched Climate financing files. They reveal in unprecedented detail how much governments and international institutions are spending to support countries vulnerable to climate change.

Here are five infuriating facts we discovered.

1) Nobody knows how much climate finance is being provided

In the age of information and the digitalization of everything, it is astonishing (and tragic) that we lack accurate public accounting of international climate finance. This is partly because there are no standardized reporting rules, guidelines or definitions that apply to all donors. Instead, high-income countries and international financial institutions decide for themselves what constitutes climate finance and what does not. Depending on who’s counting, you can get drastically different numbers.

For example, data reported to the Organization for Economic Co-operation and Development (OECD), which tracks and reports official flows like aid, uses an approach that counts projects with a climate component – ​​regardless of their size – 100 %. climate finance.

Data reported to the United Nations Framework Convention on Climate Change (UNFCCC) – the official body responsible for collecting the data – aims to reduce overcounting. But, as the chart below shows, donor reporting methodologies vary widely. Some suppliers do what you might expect: that is, calculate the actual climate portion of a project and report those numbers. But the majority use simplistic shortcuts which can lead to significant overcounting.

For projects whose primary objective is climate, most donors report them as 100% climate funding. For partially climate-focused projects, most donors apply a certain fixed percentage to calculate the amount that should be counted as climate expenditure. The most common fixed percentage is 40%, followed by 50%, followed by 100%. This means that if a project has only a small climate focus, 40% of the total project – or even 100% in some cases – can be counted as climate finance.

These decisions can have a huge impact on climate finance figures. As an illustration, we took 22 randomly selected projects declared to the UNFCCC by country A, which assessed their contribution to climate finance on a case-by-case basis. We applied two different methodologies to these projects: for the first, we counted 100% of projects marked “main” and 40% of projects marked “significant”; for the second, we counted 85% of projects marked “main” and 50% of projects marked “significant”. For the same projects, countries using these methodologies would have reported a third less and a fifth less than country A. If reported to the OECD, the total would be inflated by 50%.

2) Rich countries provide much less than they claim

Our analysis reveals that the claims of climate funders are greatly exaggerated. Nearly half of the climate financial commitments recorded by the OECD are never declared as disbursed. Either these commitments are never kept (i.e. broken promises) or key data is missing (i.e. poor accounting).

We found that between 2013 and 2021, $228 billion in climate finance commitments remained undisbursed. For another $69 billion of projects, we couldn’t even find disbursement data, making progress impossible to assess. This represents an impressive $297 billion between 2013 and 2021.

3) “Climate finance” is used to build coal-fired power plants

The lack of standardized reporting rules allows for all kinds of creative accounting. Japan considers financing coal-fired power plants to be climate finance. Japan and the United States have used climate finance to increase the use of natural gas. Italy financed a chocolate factory, equipped its police and – with the EU – labeled counterterrorism efforts as climate finance.

A UK announcement in October 2023 perfectly illustrates the absurdity of letting providers decide what matters to achieve their goals, without standardized processes and oversight. The UK is considering broadening its definition of climate finance so it can take credit for providing more – without actually providing more money. Including to apply It has set coefficients for some of its multilateral and humanitarian aid rather than counting actual spending, the same imprecise methodology used by many other climate providers that often results in inflated figures.

In total, at least $1 in every $5 of commitments in the OECD’s open dataset between 2013 and 2021 – worth $115 billion – is spent on things that have little or nothing to do with the climate.

Taking into account the undistributed $228 billion and the $69 billion in missing disbursement data, this means that only $204 billion was actually spent on climate projects between 2013 and 2021. This does not even represent a third of the total $616 billion expected to be committed to climate finance in 2021. this period.

4) Only a small fraction goes to the most climate-vulnerable countries

The world’s 20 most vulnerable countries received a total of $1.7 billion in climate finance in 2021. This represents only 6.5% of the $26.1 billion these countries need each year to fight climate change. climate change.

As a result, cash-strapped African countries are being forced to choose between tackling climate change or investing in other pressing priorities, like feeding, caring for and educating their populations. The Democratic Republic of Congo, for example, needs $4.8 billion in climate finance per year to implement a green energy transition and adapt to climate change, but has only received $182 million in international suppliers in 2021. This huge deficit means that his government, and many others like It will have to decide whether to underfund efforts to combat climate change or divert support from other critical priorities like health which , in the DRC, represented only 0.7% of GDP in 2020, well below the recommended threshold of 5%.