Deconstructing climate finance

Developed countries are nowhere close to meeting their targets

In the run-up to the 26th Conference of the Parties of the UN Framework Convention on Climate Change (UNFCCC), media reports have claimed that developed countries are inching closer to the target of providing $100 billion annually in climate finance to developing countries by 2025 (the original target was 2020). This view has been bolstered by the Organisation for Economic Co-operation and Development (OECD), which claimed that climate finance provided by developed countries had reached $78.9 billion in 2018.

These claims are erroneous. First, the OECD figure includes private finance and export credits. Developing countries have insisted that developed country climate finance should be from public sources and should be provided as grants or as concessional loans. However, the OECD report makes it clear that the public finance component amounted to only $62.2 billion in 2018, with bilateral funding of about $32.7 billion and $29.2 billion through multilateral institutions. Significantly, the final figure comes by adding loans and grants. Of the public finance component, loans comprise 74%, while grants make up only 20%. The report does not say how much of the total loan component of $46.3 billion is concessional. From 2016 to 2018, 20% of bilateral loans, 76% of loans provided by multilateral development banks and 46% of loans provided by multilateral climate funds were non-concessional. Between 2013 and 2018, the share of loans has continued to rise, while the share of grants decreased. The overwhelming provisioning of climate finance through loans risks exacerbates the debt crisis of many low-income countries.