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Africa

Africa: Five Maddening Facts About Climate Finance

todayJanuary 12, 2024 1

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New in-depth analysis finds that less than one-third of donors’ commitments have actually been dispersed for climate projects.

The injustices of climate change are well-known and keenly felt in Africa. The continent is responsible for just 4% of global carbon emissions yet experiences some of the worst impacts of the crisis. Climate change made the historic drought in East Africa, which left 20 million people hungry, 100 times more likely. It made the devastating damage wrought by Storm Daniel, which killed thousands in Libya last year, 50 times more likely. Africa is home to 14 of the world’s 20 most climate vulnerable countries.

To correct this injustice, industrialised countries – historically the world’s largest carbon emitters – have agreed to help developing countries finance their climate projects. The landmark 2015 Paris Agreement acknowledged the principles of “equity” and “common but differentiated responsibilities” in tackling climate change.

At least that’s the theory. Rich countries’ financial pledges to date cover a miniscule proportion of the sums needed. The $700 million pledged to the new Loss and Damage Fund at the COP28 climate talks, for instance, was understandably celebrated yet accounts for less than 0.2% of the $400 billion/year needed to compensate for the irreversible harms caused by climate change.

To add insult to injury, high-income countries make it incredibly difficult to track how much money they’re actually contributing and where it’s being spent. Climate finance reporting is a mess: it’s confusing, slow, and imprecise. We’re in the fight of our lives and no one is adequately checking and publishing the receipts.

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

Here are five maddening facts we discovered.

1) Nobody knows how much climate finance is being delivered

In this age of information and digitised everything, it is astounding (and tragic) that we lack accurate public accounting of international climate finance. That’s partly because there are no standardised reporting rules, guidelines, or definitions that apply across all donors. Instead, high-income countries and international financial institutions decide for themselves what is and isn’t climate finance. Depending on who’s counting, you can get drastically different numbers.

For instance, data reported to the Organisation for Economic Co-operation and Development (OECD), which tracks and reports official flows like aid, uses an approach that counts projects that have any climate component — regardless of how small — as 100% climate finance.

Data reported to the UN Framework Convention on Climate Change (UNFCCC) — the official body tasked with collecting the data — is meant to reduce overcounting. But, as the chart below shows, donors’ reporting methodologies vary significantly. A few providers do what you might expect – i.e. calculate the actual climate portion of a project and report those figures. But the majority use simplistic shortcuts that can lead to significant over-counting.

For projects whose main focus is climate, most donors report them as 100% climate finance. For projects with a partial climate focus, most donors have a certain fixed percentage that they apply to calculate how much should be counted as climate spending. The most common fixed percentage is 40%, followed by 50%, followed by 100%. This means that if a project only has a small focus on climate, 40% of the total project – or even 100% in some cases – may be counted as climate finance.

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

2) Rich countries are providing much less than they claim

Our analysis reveals that climate finance providers’ claims are vastly overstated. Nearly half of climate finance commitments counted by the OECD are never reported as disbursed. Those commitments are either never delivered (i.e. broken promises) or missing key data (i.e. poor accounting).

We found that between 2013 and 2021, $228 billion in climate finance commitments had not been disbursed. For an additional $69 billion in projects, we couldn’t even find disbursements data, making progress impossible to assess. That amounts to an eye-popping $297 billion between 2013 and 2021.

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

The lack of standardised reporting rules enables all kinds of creative accounting. Japan has counted the financing of coal-fired power plants as climate finance. Both Japan and the US have used climate finance to expand the use of natural gas. Italy has financed a chocolate shop, outfitted its police, and — along with the EU — labelled counterterrorism efforts as climate finance.

A UK announcement in October 2023 perfectly illustrates the absurdity of letting providers decide what counts toward their targets, with no standardised process or oversight. The UK plans to broaden its definition of climate finance so it can take credit for providing more of it — without actually providing any more money. That includes applying fixed coefficients for some of its multilateral and humanitarian aid rather than counting actual spending, the same imprecise methodology that many other climate providers use that often yields inflated figures.

Added together, 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 climate.

Taking into account the $228 billion not dispersed and $69 billion missing disbursement data, this means just $204 billion has actually been dispersed for climate projects between 2013 and 2021. That is not even one-third of the total $616 billion supposedly committed to climate finance in that 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 disbursements in 2021. That’s just 6.5% of the $26.1 billion those countries need each year to address climate change.

As a result, cash-strapped African countries are being forced to choose between addressing climate change or investing in other pressing priorities, like feeding, caring for, and educating their people. The Democratic Republic of the Congo, for instance, needs $4.8 billion in climate finance per year to implement a green energy transition and adapt to climate change yet received just $182 million from international providers in 2021. That enormous shortfall means its government, and many like it, have to decide whether to underfund climate change efforts or divert support away from other critical priorities like healthcare which, in the DRC, accounted for just 0.7% of GDP in 2020, far below the recommended 5% threshold.