A leading global charity has hit out at the use of loans to artificially increase the money claimed to be invested in the fight against climate change.
Oxfam has today issued new research which says the true value of money provided by developed countries to help developing nations respond to the climate crisis may be just a third of the amount reported.
The charity’s Climate Finance Shadow Report 2020 estimates that donors reported $59.5 billion per year on average in 2017 and 2018 – the latest years for which figures are available. But the true value of support for climate action may be as little as $19-22.5 billion per year once loan repayments, interest and other forms of over-reporting are stripped out.
The research is released ahead of a report by the Organisation for Economic Co-operation and Development (OECD) on developed countries’ progress towards the goal of providing $100 billion in climate finance per year by 2020.
Eighty percent ($47 billion) of all reported public climate finance was not provided in the form of grants but mostly as loans. Around half ($24 billion) of this finance was non-concessional, offered on ungenerous terms. Oxfam calculated that the ‘grant equivalent’ – the true value of the loans once repayments and interest are deducted – was less than half of the amount reported.
The estimate of $19-22.5 billion also includes overreporting of climate finance where action to combat climate change was only part of a broader development project.
Tracy Carty, Senior Policy Advisor on climate change at Oxfam and one of the report authors, said: “Climate finance is a lifeline for communities facing record heatwaves, terrifying storms and devastating floods. Even as governments struggle with the effects of COVID-19, they must not lose sight of the mounting threat from the climate crisis.
“The UK government should use its position of global influence as host of the COP26 climate summit next year to urge other developed countries to provide more climate finance in the form of grants instead of loans, allocate more finance for adaptation and prioritise the most vulnerable countries – including Least Developed Countries and Small Island Developing States. They should seize the opportunity to set a new path for climate finance beyond 2020 by agreeing robust common accounting standards and a specific finance goal for adaptation.”
The analysis also raises serious concerns about how developed countries are allocating climate finance. Of total reported public climate finance in 2017-18, Oxfam estimates:
- Around a fifth of funding went to the Least Developed Countries and just three percent to Small Island Developing States, which face the gravest threat from climate change and have the fewest resources to cope
- Only a quarter of funding was spent helping countries adapt to the impacts of the climate crisis while two thirds of funds were spent helping countries cut emissions. However, the volume of funding for adaptation rose significantly from $9 billion per year in 2015–16 to $15 billion in 2017–18.
The analysis also shows that some countries are better than others at providing climate finance in the form of grants, rather than loans. France provided almost 97 percent ($4.6 billion) of its bilateral climate finance as loans and other non-grant instruments, with a grant equivalent value of just $1.3 billion (27 percent). By comparison the UK, Sweden and Denmark provided the vast majority of their climate finance as grants.
Ms Carty said: “The excessive use of loans in the name of climate assistance is an overlooked scandal. The world’s poorest countries, many of whom are already grappling with unsustainable debts, should not be forced to take out loans to respond to a climate crisis not of their making.”