New Delhi: Developed countries provided and mobilised $115.9 billion in climate finance for developing countries in 2022, exceeding the annual 100 billion goal for the first time and reaching a level that had not been expected before 2025, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday — a claim that was immediately contested by experts who believe the number to be an overestimate.
They also raised concern over loans accounting for the bulk of this finance — which dilutes the very concept of climate finance.
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“Meeting an unambitious objective with an outrageous delay is not something to be congratulated. The newly released OECD numbers may show some progress regarding the increased role of public climate finance and more finance going to adaptation. However, loans are again taking the lion’s share of climate finance, which goes against any concept of climate justice,” Rebecca Thissen, Global Lead Multilateral Processes at Climate Action Network said in a statement.
The OECD report admitted this.
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In 2022, as in previous years, developed countries’ public climate finance provided bilaterally and through multilateral channels mainly took the form of loans (69% or $ 63.6 billion) and, to a lesser extent, grants(28% or $25.6 billion), the “Climate Finance Provided and Mobilised by Developed Countries in 2013-2022” report said.
Over the period 2016-2022, close to 90% of financing provided by multilateral development banks took the form of loans. In contrast, the mix was comparatively more balanced for multilateral climate funds (39% loans, 54% grants) and bilateral providers (57% loans, 39% grants), the report added.
OECD is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate economic progress and consists mostly of high income countries. Developing countries have raised several doubts in the past on developed countries’ delivering climate finance.
“While it was a matter of deep regret that the goal of developed countries to mobilise jointly $100 billion per year by 2020 was not met on schedule, the COP29 Presidency welcomes today’s announcement that for 2022 they have collectively mobilized $116 billion. It is always essential to fulfil past promises, but even more so this year as the Presidency is bringing the parties together to agree a fair and ambitious new climate finance goal. We are calling on developed countries to continue to mobilize jointly the previous goal through to 2025 so that we can build solidarity and send everyone a strong signal of our intention to enable action and enhance ambition,” said COP29 President-Designate Mukhtar Babayev in a statement.
And it is important to understand just how much money is needed, Thissen added. “ Before any self-congratulatory statements, we shall not forget that the 100 billion promise was never based on real needs for adapting to climate change or reducing emissions in the Global South, and totally ignored losses and damages caused by climate impacts. Looking ahead, we must ensure the future climate finance goal reflects those real needs, provisioned primarily by public grant-based finance”.
It is also important to look at the loans closely, said Sehr Raheja of Centre for Science and Environment.
“Between 2016 and 2022 as well, of the total loans given by multilateral climate funds and MDBs, those of non-concessional nature (more or less market rates, and significantly less generous terms than concessional loans), have dominated. It’s useful to consider to what extent this form of climate finance helps or harms developing countries. The ask for more grants based and concessional lending has been a constant from developing country groups at climate negotiations, and it would appear that this is yet to reflect in real-world implementation.”
Raheja added that there needs to be transparency in “the process of accounting for the new figure of $ 115 billion” and pointed out that “a widely agreed upon definition of what even constitutes climate finance is yet to emerge.”
Indeed, the process is riddled with “ambiguity and inadequacies” said Harjeet Singh, a climate activist and expert on loss and damage. “Much of the funding is repackaged as loans rather than grants and is often intertwined with existing aid, blurring the lines of true financial assistance. It’s not just about the numbers; it’s about integrity and genuine support. As we stand today, the financial needs of developing countries for transitioning away from fossil fuels and dealing with climate impacts have skyrocketed into the trillions.”
“This isn’t the time for creative accounting or fiscal loopholes. Rich countries urgently need to step up, clear these smokescreens, and deliver real, substantial financial support,” he added.
In 2009, at COP15 in Copenhagen, developed countries committed to a goal of raising $100 billion a year by 2020 to address the needs of developing countries. They specified that the finance would come from a wide variety of sources, public and private, bilateral, and multilateral, including alternative ones. The climate finance goal was formalised at COP16 in Cancun but not delivered until last year.
“The lack of definition of climate finance leads to a lack of trust and transparency on a matter that should be as clear as crystal. According to the OECD, the estimate of climate finance provided and mobilised by developed countries in 2020 was about $83 billion as against an amount of $21 to $24.5 billion, if the Oxfam estimates from their Climate Finance Shadow Report are taken,” Bhupender Yadav, union environment minister said during a meeting of ministers on climate finance in Dubai at COP28 last year.
