Today, a consortium of NGOs led by CONCORD Europe jointly published its ‘AidWatch’ report which tracks aid from EU Member States to developing country partners, as part of their international commitment to address global poverty and inequality through financial support. The report seeks to enhance the transparency and effectiveness of financial flows towards enhanced and sustainable development. This year, the report has included a section on climate financing as part of overall development flows.
Climate change is posing ever greater economic and development strains on developing countries, and increased support will be essential to protect vulnerable communities and livelihoods. At the same time, European governments claim that tighter budgets and growing domestic challenges are stalling progress towards meeting their aid commitments. Bearing these trends in mind, it is crucial that public finance, and aid in particular flows consistently and is used effectively. Climate action tends to be funded from development budgets and Official Development Assistance (ODA), thus using one pot of money to address numerous needs. This may make sense in order to support projects and programmes that are truly low-carbon and climate resilient. But the multiplier effect of climate change requires that support is increased if developing countries are to stand a chance of overcoming climate vulnerability and pursuing sustainable development pathways. The report published today has found that sufficient financial support is not yet in place.
Summary of findings on climate finance:
Inconsistency in reporting:
Overall, there is room for improvement when it comes to reporting climate ODA and non-ODA climate finance. Across the EU there is a significant variation in how the EU and its member states report climate finance and climate-related ODA – from the years covered (annual versus multi-year), to differences in reporting mitigation and adaptation support. Such a variation makes it difficult to compare finance reporting across countries, entities and time. Additionally, the adherence of countries to OECD DAC varies from country to country, while the EU’s Monitoring Mechanism Regulation (MMR) remains a voluntary procedure among EU member states. As a result, the extent to which certain provisions and flows are genuinely climate-focused is questionable.
It is crucial that donor countries properly assess and define what can truly be considered climate-related spending and what that means vis-à-vis ODA budgets and planning, even when a project also funds other, cross-cutting and non-climate issues. Doing so is not only crucial to ensure transparency, but it is essential to promote effective and additional action in developing countries.
Adaptation is underfunded:
From the data that EU member states make available, it appears that adaptation is underfunded compared to the cost and needs in developing countries. In a recently published climate finance roadmap donor countries pointed out the need to double public adaptation finance by 2020. This marks a good start, particularly as adaptation projects are essential in highly vulnerable countries which do not attract the same scale or support that mitigation receives (especially from the private sector). However, the projected support for adaptation still does not address the mounting costs of climate change in developing countries or bring a balance to the levels of support as compared to mitigation.
Climate finance diverting funds from other ODA needs:
Development action should help catalyse climate action and enhance climate resilience in recipient countries. This requires an increase of overall support, not a diversion of sources from pocket to another. However, as mentioned earlier, research and reports on development and climate finance in the EU shows there is a trend of using ODA to provide climate finance. The AidWatch report found that four countries – Ireland, France, Italy and Luxembourg – increased ODA for climate action but actually reduced ODA as a whole.
It is essential that ODA targets are met while countries also provide and scale up climate action support. One form of support should not come at the cost of the other.
The future of financing:
Having missed ODA targets by their prior deadline of 2015, many EU member states have now pushed their attainment back to a distant future. A future that is likely to further envelope climate finance into overall development support. Although donor countries do not have a crystal ball to predict the future, it is clear that climate change will multiply the vulnerability and needs of partner and recipient countries. This means that mutual development and climate action effectiveness are of utmost importance when providing and mobilising financial support for the EU’s partner countries. Greater transparency, consistency and adequacy of pledges is essential.