Where is the $100 billion in climate finance?
Policy Pulse - 10 June 2019 - George Anjaparidze
As delegates start arriving in Bonn for the summer session of the UNFCCC, scheduled to formally start on 17 June, there is one question that is on everybody’s mind “Where is the $100 billion in climate finance?”
Since the 2009 Climate Summit in Copenhagen, developed countries have consistently reiterated their intention to provide $100 bn per year by 2020 to support climate action in developing countries. Although there is still time to achieve this target, the slow progress to-date is holding back action.
Data from OECD DAC provides a good measure for assessing net financial flows from OECD countries (See Chart). On aggregate, net financial flows in 2017 were $30.3 bn higher compared to 2013. Official flows showed bilateral ODA growing by $19.6 bn and multilateral ODA growing by $3.6 bn. NGOs based in OECD countries increased their contributions by $10.2 bn. Private flows at market rates exhibited higher volatility but remained mostly flat, lower by $3.1 bn in 2017 compared to 2013.
The increase in net financial flows should be welcomed. However, the data also points to the need to massively scale-up finance to meet the $100 bn per year target by 2020. The latest estimates from the Biennial Assessment of the Standing Committee on Finance (SCF) indicate that developed countries provided $34 bn in 2016 through bilateral, regional and other channels. This suggest that the increase in total flows has also translated to higher climate finance but falls significantly short of the 2020 target.
The SCF estimates that in 2016, a total of $681 bn in climate finance was mobilized in developed and developing countries, a significant increase compared to 2013. Domestic finance and flows from multilateral development banks (MDBs) help, in part, to explain the increase in available finance for climate action in developing countries. In 2017, climate financing from the world’s six largest MDBs reached a seven-year high of $35.2 bn, up 28% on the previous year and a 48% increase since 2013.
The last IPCC report estimates that to transform the energy system about $2.4 trillion per year of investments is needed to keep global warming within a 1.5°C scenario. Further resources will also be needed to support adaptation. While the $100 billion from developed countries is only one element of the financing landscape, it represents an essential component that can leverage larger private flows and build confidence for further scaling-up climate action in developing countries.
The 2020 climate finance target is at risk as developed countries face ever greater strains on public resources. Given these challenges, developed countries need to go beyond using budgetary contributions. They need to identify innovative approaches to mobilize finance in a predictable way. In this context, climate change negotiators in Bonn need to send a strong political signal ahead of the UN Climate Action Summit, including through expressing support to the work of the Leading Group on Innovative Financing for Development. The UN Climate Action Summit in September needs to deliver an immediate scale-up in climate finance and put in place mechanisms to secure predictable finance flows for climate action.
About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economics and infrastructure.