Posted on 17 December 2020
The money, promised by developing countries in 2009, is yet to be fully realized. But some promising signals have emerged, giving new hope.
Love it or hate it – and few following the climate negotiations are indifferent to it – the commitment by developed countries to scale up their climate finance under the UN Framework Convention on Climate Change (UNFCCC) to at least US$100 billion per year by 2020, and maintaining at least that level going forward matters.
It is one of the pillars of the Paris Agreement and global cooperation in addressing the climate crisis. It is taken by developing countries as both a practical need and an important political signal.
The pledged amount includes resources to support developing countries in building resilience to climate impacts, protecting nature, reducing greenhouse gas emissions and aligning their development pathways to net-zero carbon futures.
Developed country negotiators at times try to downplay the importance of the US$100 billion commitment, saying that what’s important is “shifting the trillions” of private financial flows. Developing countries, in turn, are wary of giving too much attention to private financial flows in the context of the UNFCCC and Paris Agreement as it could be used to support this attempt to “switch the channel” away from the US$100 billion.
Since the pledge was made a decade ago, progress towards meeting it has been slow, even with the generous accounting rules that allow for counting the full value of loans, even non-concessional loans at market rates, as if they were grants, and including projects that are only marginally addressing climate crisis issues.
On these terms, as calculated by OECD, in 2018, the total had reached around $79 billion, and most of the growth over the previous four years had been in the form of loans, which can risk further indebting developing countries, especially in the context of the economic crises resulting from the COVID-19 pandemic.
The scramble to respond to the economic disruption caused by the pandemic has created uncertainty. There have been massive disruptions and redirections of public and private financial flows at the domestic and international levels, rising debt levels in all countries, and increased doubt about whether the commitment will even be met in 2020.
A recent report by the UN - Delivering on the US$100 billion climate finance commitment and transforming climate finance - puts the spotlight squarely on whether Parties are on track to meet the US$100 billion commitment. The report takes a fresh, honest and nuanced look at the prospects for meeting the US$100 billion commitment, and makes some important recommendations for meeting and surpassing it.
While the report concludes the promise is unlikely to be met in 2020 it suggests using the COVID-19 crisis to fundamentally shift all investments and financing – public and private - in coming years to head off the deepening climate crisis in smart ways. Some useful recommendations include:
- Support for a collective goal to surpass the US$100 billion per year target in 2021 and beyond with scaled up international public finance.
- As the bedrock of international public finance, the US$100 billion commitment can work in concert with all pools of public and private finance.
- By 2025 developed countries should double or triple the current figure of just over US$12 billion in grants for climate action.
- The international community should explore innovative and alternative sources of public finance, including Special Drawing Rights.
- Meeting the commitments in the Paris Agreement will require a vast and fundamental shift in private finance and in the financial system as a whole.
There is reason to hope that these recommendations will not fall on deaf ears, as many such appeals have in the past. In his closing remarks at the Climate Ambition Summit 2020, COP26 President Alok Sharma made a strong appeal to developed countries to meet the US$100 billion commitment. He also called for improved access, ensuring gender responsive financing, increased share of adaptation and grant-based financing, aligning economic recovery finance with the Paris Agreement, and to support Nature-based Solutions.
He said the UK will also convene a meeting of climate vulnerable and donor countries in March 2021 to address the connected challenge of climate change and development.
This will be an excellent opportunity for donor countries to respond to the recommendations of the report just released by the UN, and decide how they will meet and exceed the US$100 billion challenge in 2021 and the years to come. They must consider this goal as complementary, and indeed as the report says, the bedrock, for aligning all finance, public and private, with the goals of the Paris Agreement.
NOTE: The report was prepared by The Independent Expert Group on Finance, and released by the UN on 11 December 2020.
Mark Lutes is Senior Advisor for Global Climate Policy at WWF International Climate & Energy.