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The $100 billion dollar question: what does the latest OECD report tell us?

Climate Change

Climate Finance Shadow Report 2020 Cover – designed by Lucy Peers

Climate change is deadly, costly, and those least responsible for causing it are being hardest hit. In 2009 developed countries* committed to mobilise $100 billion per year by 2020 to help developing countries adapt to climate change and reduce their emissions.

Two weeks ago Oxfam published its Shadow report on climate finance 2020 which assesses progress towards that goal based on the latest donor reports. Today OECD, on behalf of developed countries, published their update of where things stand. Here are five key takeaways on the OECD report:

1. OECD estimates that reported climate finance provided and mobilised reached $78.9 billion in 2018 – the public finance share of this was $62.2 billion. But according to Oxfam’s estimates the true value to developing countries may be much lower.

A closer look reveals that donor reports overstate public climate finance by a huge margin. Most loans are counted at their full-face value, rather than as the amount of money given to a developing country once repayments, interest and other factors are accounted for (the grant equivalent). There are also significant inaccuracies in how the climate component of broader development projects is counted. Taking account of these issues, Oxfam estimates the value of support may be only a third of climate finance reported ($19-22.5bn/year 2017-18).

Source: Oxfam shadow report on climate finance 2020 (2020)

2. OECD estimates that loans made up 74 percent of public climate finance in 2018, grants just 20 percent

As this OECD chart shows, grants have barely increased since 2013, while loans have more than doubled – Oxfam’s estimates are aligned. But what these numbers don’t show is that a huge proportion of loans are non-concessional – around half ($24 billion/year 2017-18) according to Oxfam’s estimate. The terms of this non-concessional finance are largely undisclosed, but include market rate loans and bi-lateral lending that does not qualify as Official Development Assistance (ODA).

Source: OECD (2020), Figure 1.3.

3. OECD estimates that 66% of climate finance to Least Developed Countries (LDCs) was loans, and 50% to Small Island Developing States (SIDS) (2016-18)

There is a misplaced assumption that most loans are going to middle-income countries – but as OECD (and Oxfam estimates) show, that’s not the case. The world’s poorest countries, many of whom are grappling with unsustainable debt crises, do not have access to enough grant-based support and are having to take out loans to respond to the climate crisis for which they are least responsible.

Debt makes it more expensive for countries to access capital, and at worst significantly depletes investment in critical sectors such as education, health and agriculture. Reduced fiscal space for these sectors and basic infrastructure also curtails countries’ ability to take transformative action on climate change, and makes them more vulnerable to climate shocks. Finance that should be helping countries respond to climate change risks harming them in other ways.

4. OECD estimates that just 14% of climate finance provided and mobilised went to LDCs and 2% to SIDS (2016-18)

In light of their extreme vulnerability, global cooperation on climate change includes agreement on the preferential treatment of these countries in the provision of financial support. Yet as these latest figures show, LDCs and SIDS are being neglected by funds that should be helping them and the resources they have to cope are incommensurate with the increasing risks they face.

5. OECD estimates that just 21 percent ($16.18 billion) of all climate finance provided and mobilised was for adaptation, 70 percent for mitigation ($55 billion) and 9 percent was cross-cutting ($7.1 billion).

Last but certainly not least, OECD and Oxfam estimates point to the enduring neglect of adaptation in the provision of climate finance. Nonetheless, between 2016 and 2018 adaptation finance did increase by over 50% – the most significant rise in adaptation finance to date. A rate of increase that must continue given unprecedented climate impacts that are disproportionately affecting developing countries, and if the Paris Agreement commitment to ‘achieve a balance between adaptation and mitigation’ finance is to be realised.


*Oxfam is moving away from terms like ‘developed countries’ and ‘developing countries’, but since the $100 billion commitment refers to ‘developed countries’ and ‘developing countries’ we have used these terms to refer to those groups.

Author

Tracy Carty

Tracy Carty is Senior Policy Adviser at Oxfam GB and joint author of Oxfam’s Shadow report on climate finance 2020.