Trump administration weakening global resolve on climate change funding

According to Bloomberg News, finance ministers of the G20 countries are pushing for a focus on private rather than public funds to meet the climate change financing pledges set in the Paris Climate Agreement. This report points to the most significant way in which the Trump presidency is compromising global momentum in fighting climate change.

The provision of climate “aid” to the developing world is arguably the most contentious aspect of international climate policy. While the developed world did agree to provide at least $100 billion/year in climate financing to the developing world by the year 2020, there is no clear consensus on who is giving and receiving, what type of funding counts, or how ‘climate’ funds differs from other forms of aid and investment. The world has made far more progress in defining the terms and targets for emissions reductions than for climate financing.

The type of funding is the largest area of disagreement. Developing countries have pushed for the majority of the funding to flow from public coffers, effectively as an add-on to international aid. That means funding would come directly from aid agencies or be funneled through international organizations like the World Bank and the new Green Climate Fund.

The developed world, which already struggles to meet international aid promises, has never been strongly committed to the provision of public climate funds. Many countries, including the U.S. and Canada, have argued for a greater reliance on private investment. Even if that is not always stated publicly, it is clear in the negotiations and if you dig into the actual numbers. For example, the widely praised financing pledge made by Canada’s Liberal government shortly after the election amounts to ~$800 million/year through 2021. However, Canada’s fair share of the $100 billion/year pie is roughly $4 – 5 billion/year (based on fraction of developed world population or emissions). The shortfall is expected to be met largely via private investment.

Enter President Trump. When the Trump administration announced it would cut support for the Green Climate Fund and all other international climate aid, it provided political cover to other developed (and rapidly industrializing) countries to cry poor about public climate aid. It is, in that sense, not surprising to see the G20 ask that the multilateral aid organizations look to raise funds from private sources.

Does it matter whether climate financing is public or private?

To be fair, there are legitimate arguments for a focus on private funding. For one, it may be more politically realistic. Yet, in the end, what is most important is not the source of the money, rather whether it is effective at helping the developing world respond to climate change. And that’s where a heavy reliance on private investment is concerning.

First, with more private money, it will be even harder to ensure that the climate financing is “new” and “additional” to existing financing – let alone that it is actually helping the recipient country respond to climate change. Measuring and tracking climate financing is highly contentious, as my colleagues Milind Kandlikar, Sophie Webber, and I described in a paper last year:

Reports on climate finance repeatedly warn that the question of what counts as ‘climate aid’ remains unresolved (Buchner et al 2011, Donner et al 2011, UNFCCC 2014). This is not surprising because international climate finance is a complicated ecosystem with many providers and intermediaries, each using their own definition of climate aid. For example, the countries who provided the $35 billion in initial fast start financing (FSF) over the 2010–2012 period each employed their own method to define whether aid was new and additional (Brown et al 2010, Stadelmann et al 2011, Nakhooda et al 2013), and even used different methods in reporting to different bodies (Haites 2014). The UNFCCC itself concluded that depending on the method of analysis ‘virtually none’ to ‘almost all’ of the FSF could be considered additional (UNFCCC 2014).”

It is hard enough to identify whether a given aid project would have happened under business-as-usual (i.e., the project is “additional” to aid that would have happened without the climate policy); it is even harder to do so with private investment. With a focus on private sources, there is likely to be more disagreement about levels of climate financing from donor countries and more gaming of the accounting system.

Even more concerning is that private financing is less likely to go towards climate change adaptation and reducing disaster risk. If you include all forms of investment and financial flows in accounting of climate financing, adaptation gets the short straw. According to a 2015 report, only 10-12% of all the public and private ‘climate’ financing in 2013 and 2014 went from the developed world to the developing world, and only 1% supported adaptation in the developing world.

Unless incentives are put in place, a greater focus on private financing will likely mean a lesser focus on helping developing countries deal with the impacts of climate change.

Leave a Reply

Your email address will not be published.