October 26, 2021: The United Kingdom was forced to open the COP 26 climate summit in Glasgow with a last-ditch bid to mobilize US$100 billion per year in international climate finance from the world’s wealthiest nations, after a diplomatic effort led by Canada and Germany failed to reach a funding target that was first promised in 2009.
The success of the UK’s arm-twisting, in its role as President of this year’s UN climate conference, will determine whether the COP process can regain the trust of developing countries that are already facing severe impacts of climate change, climate finance experts told The Energy Mix yesterday. A failed climate finance package could severely undermine confidence in the 2015 Paris Agreement itself, producing an even narrower path for climate stabilization efforts that are already falling far behind schedule.
“This lack of ambition is breathtaking,” and “it is the people living on the front line of the climate emergency who will bear the brunt,” said Fionna Smyth, head of global policy and advocacy at London, U.K.-based Christian Aid. “It is over a decade since the world’s richer countries agreed to $100 billion a year in climate finance by 2020. It was already a drop in the ocean, yet still the target has been missed and is now set to be watered down.”
“This plan claims that rich nations will meet their target three years late, but conveniently fails to mention the money that poorer countries are owed for every year they fell short,” added Oxfam Senior Climate Policy Adviser Jan Kowalzig. “This shortfall, which started to accumulate in 2020, will likely amount to several tens of billions of dollars. These are achievable amounts of money—governments have spent trillions on COVID-19 fiscal recovery packages, which show their ability to act in an emergency. This is an emergency.”
That was just some of the blistering criticism that followed yesterday’s announcement by Canadian Environment Minister Jonathan Wilkinson and Jochen Flasbarth, German state secretary for the Environment, Nature Conservation and Nuclear Safety, that weeks of behind-the-scenes talks had missed a key deadline to secure the $100-billion annual commitment. The funds were to be available each year beginning in 2020. But under the Climate Finance Delivery Plan [pdf] that Wilkinson and Flasbarth brokered on behalf of COP 26 President Alok Sharma, the target year to make good on the pledge is postponed to 2023.
Because of epic delays and limited transparency in international climate finance reporting, countries won’t be able to verify the 2023 figure until 2025.
Breaking a ‘Totemic’ Promise
The 2020 climate finance promise was first adopted by 23 wealthy countries at the 2009 UN climate conference in Copenhagen. Now, Politico Europe says those governments have broken a “totemic” pledge, undermining “a bargain where developing countries were to cut emissions in return for climate finance”.
With a full accounting still a year away, Politico says it’s likely the countries’ 2020 climate finance contributions fell $20 billion short. The delivery plan suggests a pathway to deliver an average of $100 billion per year between 2021 and 2025, but observers say those numbers rely too heavily on private sector contributions and may not be enough to make up the 2020 shortfall.
In their prepared remarks, the two ministers tried to make the most of a decidedly tepid result.
“It is critically important for developing countries to be able to trust that the developed world will make good on its promises, starting with the $100-billion climate finance goal,” Wilkinson said. “While more work needs to be done, I hope today’s report can instill confidence and trust that developed countries will deliver on their promises to the developing world.”
“Developing countries have been rightfully disappointed that, so far, developed countries have not delivered on the $100-billion promise that was already given in 2009,” Flasbarth said. And after a process that “has created momentum to help comply with the finance commitment overall in the period up to 2025,” he added, “we are very aware that… a lot of work remains. However, it is my strong hope that with this plan, we can show the international community that developed countries remain committed to deliver on their promises.”
Citing data from the Organization for Economic Cooperation and Development (OECD), the delivery plan says climate finance commitments increased from $58.5 billion in 2016 to $79.6 billion in 2019, the last year for which figures are available. Funding to address climate change impacts came in at $20.1 billion, a doubling since 2013 but still far short of developing countries’ and climate community advocates’ demand that 50% of financing be devoted to climate adaptation. Outright grants from public agencies accounted for just 27% of the 2019 total, compared to 71% coming from loans that some of the world’s poorest, most vulnerable countries will eventually be expected to repay.
In their joint statement, Wilkinson and Flasbarth both touted their own countries’ stepped-up climate finance commitments. But as The Energy Mix went to virtual press last night, it was not known whether Wilkinson would still be in position as environment minister beyond Tuesday morning, when Prime Minister Justin Trudeau was scheduled to announce a major Cabinet shuffle.
Funding Total ‘Just Sneaks In’…Or Not
The delivery plan presents two funding scenarios through 2025 that show “a positive trend in public climate finance, that developed countries will make significant progress towards the US$100 billion goal in 2022 and provides confidence that it would be met in 2023.” A chart supplied by the OECD shows:
• A more optimistic scenario that delivers $521 billion between 2021 and 2025, with no distinction between grants and loans, that depends on $90.3 billion from private investors;
• A more modest calculation that lands at $497 billion over five years and still needs $78.1 billion in private finance to get there.
Which means that, if all goes well, the higher-end total “just sneaks in” with enough money to meet the $100-billion pledge for 2021-25 and make up the shortfall for 2020, one analyst said.
Oxfam Canada climate policy specialist Anya Knechtel said the higher figure is “a very optimistic projection” when “we haven’t seen countries delivering fully on their pledges. The problem with this plan is that it’s again based on unsubstantiated pledges from countries that we can hope will deliver fully, but the history to date hasn’t shown that that’s necessarily the case.”
The plan also leans heavily on private sector financing that “hasn’t met expectations in the past,” she told The Mix. “The underlying problem with that is that we need to see more grants-based funding, particularly for climate change adaptation, and a plan based on a mobilization of private capital won’t address the growing need for adaptation financing.”
And that’s still the more optimistic news, Knechtel said. “In the less optimistic, more conservative, and possibly more likely scenario, you don’t necessarily see the whole $100-billion pledge being reached. So it’s really going to be a matter that time will tell,” based on a delivery plan that is “once again a projection of pledges, and not necessarily real commitments to deliver. That’s the challenge we’re seeing.”
Showing the Math
None of the official documents identify the countries that have come forward with new contributions to the $100-billion goal, or those that haven’t.
“We asked for more transparency,” said Eddy Pérez, international climate diplomacy manager at Climate Action Network-Canada and co-chair of CAN-International’s finance working group. “It’s a huge mistake to send a document that doesn’t give you answers to critical questions. If you have specific information that shows what each country is contributing to the $100 billion, that tells you with certainty what commitments they’re making to close the gap. With the projection we’re getting right now, we can’t assess that” until the funds have spent in 2023, then reported through the OECD two years later.
In addition to Canada and Germany, observers say Spain and Portugal have stepped up, and while President Joe Biden announced plans last month to double the United States’ contribution to US$11.4 billion, analysts said the total still fell far short of the country’s fair share contribution. Even that amount could face stiff opposition in a fractious U.S. Congress, Axios warned at the time.
Overall, “most developed countries have not yet mobilized finance in accordance with their fair share,” the Washington, DC-based World Resources Institute (WRI) said in a release yesterday. “The United States is responsible for the greatest shortfall, and Australia, Canada, Italy, Greece, Iceland, and Portugal, among others, must do more.”
That matters even more because “delivery on this climate finance goal will be key to unlocking more ambitious climate commitments from developing countries and ensuring progress in international climate negotiations,” wrote WRI analysts Joe Thwaites and Julie Bos in a technical paper released last month. “Developed countries’ ability to deliver $100 billion in climate finance annually will also set the tone for deliberations on a future collective climate finance goal, from a floor of $100 billion, which governments decided in Paris in 2015 would be agreed upon before 2025.”
In addition to scaling up their climate finance pledges, the Climate Finance Delivery Plan calls on the 23 countries to put more money into adaptation, make grant-based financing a priority for the poorest, most vulnerable countries, address barriers that impede developing countries’ access to climate finance, and report progress more transparently.
How to Get a Better Result
There’s still a possibility that more rich countries will step up with new climate finance commitments before or during COP 26, which begins this Sunday and continues through November 12—although Knechtel said the lack of a clear, simple list of who’s promised what will make it hard to distinguish new pledges from rehashed announcements.
The bigger challenge for negotiators will be to build trust between the rich nations that are holding back the funds and the poorer, acutely vulnerable countries that are seeing the worst impacts of the climate emergency, even though they did the least to drive up greenhouse gas concentrations in the atmosphere.
“Rebuilding trust is the right term,” Knechtel said. “Developing countries have every right to feel a lack of trust in the promises from the developed countries,” that much more because of the deeply flawed international distribution of COVID-19 vaccines. “There’s going to be a need for a very strong demonstration of a commitment to deliver, a strong demonstration at this COP that countries are willing to step up more.”
The 2009 target was set at a time when “we were living in a different climate reality,” she said, and since then, the same high-emitting countries that have lagged on greenhouse gas reductions have also shown a “lack of commitment and delivery on climate finance”.
By toxifying negotiations at a crucial moment in the COP process, Pérez said the 23 developed countries have only made things harder for themselves.
“The plan does not provide a sufficient response on the $100-billion pledge from the perspective of quantity, quality, or accountability,” he said. “So in Glasgow, the price of cooperation to reach an ambitious climate action package will increase, and developing countries are going to come in with a much more direct ask on the issues that weren’t addressed in the delivery plan,” particularly climate adaptation funding and grant-based financing.
All of this is happening, Pérez added, even though “there are certainly some developed countries that wanted a much more ambitious plan.” Germany’s Flasbarth and Canada’s Wilkinson can still push for those gains after the COP gets under way, “but only if developed countries hear the message that they need to step up.”
Earlier this month, a committee of the UN Framework Convention on Climate Change (UNFCCC) concluded that developing countries will need nearly $6 trillion by 2030 to cover 40% of their commitments under the Paris Agreement, Carbon Copy reports.
Knechtel said she hoped the delivery plan isn’t the final word on climate finance. “I hope it leaves countries with the space and the intent of going further, to go where they need to go and have a responsibility to go,” she said. “I think it’s true that countries play a game of announcing improved pledges and increased targets at these big events because it shines a spotlight on them. If that’s what it honestly takes to move it forward, so be it.”
But she stressed that “this is not charity. This is justice. This is what climate justice is about, recognizing and accepting responsibility for the emissions countries have put into the atmosphere and the impact that’s having. It needs to happen soon, and COP 26 should be a critical turning point for action.”
Can the UK Deliver?
Now that the German and Canadian ministers have issued their report, Pérez said it will be up to Sharma to finish the job.
“This delivery plan was supposed to help us close a chapter and move on,” he said. “Now, the UK COP 26 President needs to bring countries together to deliver on a Glasgow climate finance package that brings confidence to countries. In the first week of COP 26, ministers from developing and developed countries should try to move closer together and reassure each other on the need to deliver on climate finance, in line with the UK’s agenda to keep 1.5°C within reach. Because those go hand in hand.”
A key question is how much moral authority Sharma will be able to assert with his credibility shredded by the UK government’s decision to boost its climate finance contribution after cutting back on Overseas Development Assistance. None of the observers who weighed in on the Climate Finance Delivery Plan addressed that contradiction directly, but Oxfam Canada’s Knechtel stressed that “climate finance should be additional to ODA. That’s so critical, because we cannot finance climate action at the expense of other development needs.”
In Monday’s announcement, Sharma cast the delivery plan as “a step towards rebuilding trust,” but stressed that “we can and must do more to get finance flowing to developing nations. So in the lead up to COP 26, it’s vital we see further pledges from the donor community and action on key priorities such as access to finance and funding for adaptation.”