Wealthy nations finally deliver promised climate aid, as calls for more equitable funding for poor countries grow

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International climate negotiations have long been haunted by a broken promise.

In the wake of collapsed negotiations at the United Nations climate conference in Copenhagen in 2009, wealthy nations, led by the United States, pledged to provide developing countries with $100 billion in climate-related aid annually by 2020.

The money was meant in part to ease tensions between the rich countries that had contributed the most to climate change historically and the poorer nations that disproportionately suffer the effects of a warming planet.

But rich countries fell short of the target in both 2020 and 2021, deepening mistrust and stymying progress during the annual United Nations climate conferences, which are known by the abbreviation COP.

A new report from the Organization for Economic Cooperation and Development, or OECD, confirms what the international organization began to suspect just before last year’s COP28: that wealthy nations finally surpassed the $100 billion goal in 2022.

And while they were two years late delivering on their promise, rich countries partially compensated for their earlier shortfalls, contributing nearly $116 billion in climate aid to developing countries in 2022, according to the latest data available.

That additional funding helps fill the roughly $27 billion gap resulting from rich countries’ failure to meet the $100 billion threshold in each of the two years prior.

“If you underachieved in the first two years, overachieving in the rest of the period is a good way to make up for that, to make amends,” said Joe Thwaites, a climate finance expert at the Natural Resources Defense Council, a U.S.-based environmental nonprofit.

Even $100 billion, however, is far lower than the developing world’s estimated need. United Nations-backed research projects that developing countries (excluding China) will need an eye-popping $2.4 trillion per year by 2030 to transition away from fossil fuels and adapt to climate change.

Serious questions also remain about the quality and accounting of the existing funding. According to the OECD report, more than two-thirds of the public finance in 2022 was provided in the form of loans rather than no-strings-attached grants.

That means developing countries are required to pay the money back, often with interest at market rates.

A recent Reuters investigation also found that some aid providers required recipients to work with companies based in donor countries, meaning that much of the aid money ultimately found its way back to wealthy nations.

Such findings are likely to inform talks next week, as climate negotiators meet in Bonn, Germany, in preparation for COP29 in Baku, Azerbaijan, at the end of the year. Negotiators need to agree on a new collective goal for climate aid to developing countries this year.

So far, different countries have submitted a range of proposals, with some nations floating $1 trillion annually as an appropriate number. Wealthy countries also want to expand their ranks so that some relatively rich countries that are technically classified as “developing,” like the oil-rich states of the Persian Gulf, can contribute funds toward the goal. Historically, only countries that the United Nations designated as “developed” in the 1990s have been on the hook.

The new OECD report’s findings may be advantageous to wealthy nations as they negotiate these thorny issues, according to Thwaites. “Developed countries were not necessarily arguing from a position of strength or moral high ground, having failed to meet the $100 billion on time,” he said.

If countries continue to provide a similar level of funding for the next few years, they could make up for the shortfall. “Making up for 2020 and 2021, meeting the goal in those two years, could help rebuild a bit of trust,” Thwaites added.

The OECD report found that funding from all types of sources — multilateral development banks, the private sector, and public finance from governments — grew across the board in 2022. The increase in private-sector funding was particularly notable, jumping by more than 50 percent to a total of $21.9 billion.

The report indicated specific progress on funding for adaptation measures like sea walls and disaster-resilient infrastructure, an oft-overlooked area of climate finance. In 2021, countries pledged to double adaptation finance from the $19 billion provided in 2019 to $38 billion by 2025. According to the OECD report, adaptation funding had already risen to $32.4 billion one year after the pledge.

As in past years, loans continued to make up the majority of funding. While developing countries have called on wealthy nations to move away from loans as the primary form of aid, all parties seem to agree that loans can be appropriate in some circumstances.

For projects that generate revenue — such as investments in renewable energy — loans tend not to have a detrimental effect because they pay for themselves.

But for measures that don’t generate revenue — in particular, adaptation measures like sea walls — loans can trap countries in cycles of debt. As a result, the call for increasing grant-based funding has grown louder in recent years.

“A lot of countries are in debt distress,” said Thwaites. “And if they take on more loans for adaptation, where it doesn’t necessarily generate a return on the investment, that’s a challenge.”

Header image by Beata Zawrzel/NurPhoto via Getty Images

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