Evidence suggests that current climate change mitigation plans are seriously inadequate and will lead to a catastrophic 2.7 ° C rise in global temperature. It is estimated that US $ 1.6 trillion (RM 6.6 trillion) to US $ 3.8 trillion is needed each year to prevent global warming above 1.5 ° C.

Creative accounting

Rich countries have long broken their pledge at COP16 in Copenhagen in 2009 to mobilize “US $ 100 billion per year by 2020 to meet the needs of developing countries”. The pandemic has worsened the situation, reducing available funding. Poor countries – many of which are already trapped in debt – are struggling to cope.

Although small compared to the funding needed to adequately tackle climate change, it was seen as a good start. The number includes both public and private funding, with sources unspecified as to whether these are public / private, grants / loans, etc.

Such ambiguity has allowed for double counting, poor transparency and creative accounting, noted the United Nations Panel of Independent Experts on Climate Finance. For example, the Organization for Economic Co-operation and Development (OECD) of Rich Countries declared US $ 80 billion in climate finance for developing countries in 2019.

Rigged figures

But the OECD climate finance figures include nonconcessional commercial loans, “roll over” loans and private finance. Some donor governments account for most of the development assistance, even when it is not primarily intended for “climate action”.

In addition, the dispute over which funds to consider “new and additional” has not been resolved since the adoption of the United Nations Framework Convention on Climate Change (UNFCCC) at the Rio Earth Summit in 1992. .

Official development assistance renamed climate finance should be categorized as “reallocated” rather than “additional” funding. As a result, poor countries lose aid for education, health and other public goods.

India challenged the OECD’s claim of US $ 57 billion in climate finance in 2013/14, suggesting instead US $ 2.2 billion! Other developing countries have also challenged this creative accounting and “greenwashing”.

Climate finance anarchy

Developing countries expected the pledged $ 100 billion per year to be largely government grants paid through the UNFCCC’s new Green Climate Fund. Oxfam estimates public climate finance at just US $ 19 billion to US $ 22.5 billion in 2017/18, with little effective coordination of public finances.

Developing countries believed that their representatives would help decide on disbursements, ensuring equity, effectiveness and efficiency. But little is actually managed by the developing countries themselves. Instead, climate finance is disbursed through many channels, including rich country aid and export promotion agencies, private banks, investment funds, and loans and grants from multilateral institutions.

Several United Nations programs also support climate action, including the United Nations Environment Program, the United Nations Development Program and the Global Environment Facility. But all are underfunded, requiring frequent replenishment. Uncertain funding and the lack of meaningful involvement of developing countries in disbursements make planning all the more difficult.

Financialization means that climate finance increasingly involves private financial interests. Claims for private climate finance from rich countries to poor countries are hotly contested. Even the OECD estimate has not increased steadily, fluctuating without direction from US $ 16.7 billion in 2014 to US $ 10.1 billion in 2016 and US $ 14.6 billion in 2018.

The actual role and impact of private finance is also highly contested. Unsurprisingly, private finance is unlikely to help countries that need it most meet policy priorities or offset irreparable damage. Instead, “blended finance” often uses public finances to “reduce the risk” of private investments.

Prioritize profits

Poorer countries desperately need to rebuild their resilience and adapt human environments and livelihoods. Adaptation funds are needed to better cope with the new circumstances created by global warming. The necessary “adaptation” – such as improved drainage, water abstraction, and infrastructure – is expensive, but desperately needed nonetheless.

But “donors” prefer the publicizable “easy wins” of climate change mitigation, especially as they have increasingly provided loans rather than grants. Thus, although the Paris Agreement COP21 sought to balance mitigation and adaptation, most climate finance still seeks to reduce greenhouse gas (GHG) emissions.

As climate adaptation is rarely lucrative, it is of less interest to private investors. On the contrary, private financing favors mitigation investments that generate higher returns. Thus, only US $ 20 billion was earmarked for adaptation in 2019, less than half of the amount spent on mitigation. Unsurprisingly, the OECD report acknowledges that only 3% of private climate finance has been spent on adaptation.

In search of profit, most climate finance goes to middle-income countries, not the poorest or most vulnerable. Only $ 5.9 billion, or less than a fifth of total adaptation funding, went to the 46 UN Least Developed Countries (LDCs) from 2014 to 2018! It is “less than 3% of [poorly] the annual adaptation financing needs of LDCs estimated between 2020 and 2030 ”.

Cruel ironies

The International Monetary Fund recognizes the “unequal burden of rising temperatures”. It is indeed a “cruel irony” that those who are much less responsible for global warming bear the brunt of the costs. Meanwhile, providing climate finance through loans pushes poor countries into more debt.

Increasingly frequent extreme weather disasters are often followed by much larger borrowing due to limited fiscal space in poor countries. But loans for low-income countries (LICs) cost much more than for high-income countries. Thus, LICs spend five times more to get into debt than to deal with climate change and reduce GHG emissions.

Four-fifths of the most devastating disasters since 2000 have been caused by tropical storms. The worst disasters increased public debt 90% of the time within two years, with no prospect of debt relief.

As many LICs are already heavily indebted, climate disasters have been truly catastrophic, such as in Belize, Grenada and Mozambique. Little has gone to the most affected communities and other vulnerable, needy and poor communities.

Funding gap

Based on countries’ long-term mitigation and adaptation goals, the UNFCCC Standing Committee on Finance estimated that developing countries need a total of $ 5.8 to $ 5.9 trillion. until 2030. The UN estimates that developing countries currently need $ 70 billion per year for adaptation. from $ 140 billion to $ 300 billion by 2030.

In July, the “V20” of finance ministers from 48 climate-vulnerable countries called for the fulfillment of the 2009 US $ 100 billion pledge to affirm a commitment to improve climate finance. This should include increased funds, more grants and at least half for adaptation – but the UNFCCC chief noted a lack of progress since.

Only a strict application of rigorous climate finance criteria can prevent rich countries from abusing the currently ambiguous reporting requirements. The currently fragmented climate finance urgently needs more coherence and strategic prioritization of support to those most in need and most vulnerable.

This month’s UNFCCC COP26 in Glasgow, Scotland can and must fix things before it’s too late. Will the new cold war lead the North to do the unexpected to win the rest of the world to its side instead of further militarizing tensions?

Anis Chowdhury, former professor of economics at the University of Western Sydney, held senior positions at the United Nations from 2008 to 2015 in New York and Bangkok. Jomo Kwame Sundaram, former professor of economics, was United Nations Under-Secretary-General for Economic Development. He is the recipient of the Wassily Leontief Award for Advancing Frontiers in Economic Thought.