Climate Justice requires a dramatic increase in climate finance for the Global South

Climate & Natural resources,Knowledge brokering,Simavi27 Jun 2022Jorrit Oppewal

Climate Justice requires a dramatic increase in climate finance for the Global South

The negative effects of climate change are increasingly being felt across the globe. Countries of the Global South, which have contributed very little to the greenhouse gas emissions that are causing climate change, are most exposed to the consequences and yet have the least financial resources available to deal with them. Rich countries therefore have a major responsibility to support the rest of the world through climate finance.

With the 2015 Paris Agreement, rich countries committed to providing $100 billion in additional climate finance per year, from 2020 onwards. The Dutch NGO Simavi asked The Broker to investigate to what extent this commitment has been met, focusing in particular on Dutch climate finance and on the finance for the water sector.

The report The Broker produced has two overall key messages. First, the $100 billion commitment falls far short of what is needed. The entire African continent is responsible for less than 3% of historic emissions. At the same time, Africa and its populations are suffering the most severe consequences of climate change. While this warrants major investments, only 3% of all global climate-related spending is currently being undertaken in Africa. The financing gap has already risen to tens of billions of dollars per year, and is set to increase further without a serious ramping up of global climate finance.

The second message is that rich countries have failed to even meet the $100 billion commitment. They barely reached $80 billion in 2019, even with the use of creative accounting and other techniques to artificially inflate the numbers, such as including the full value of loans for large infrastructure projects with only a marginal link to fighting or adapting to climate change. Another problem is that most of the resources went to climate mitigation, aimed at reducing current and future emissions. Finance for climate adaptation, aimed at investments to deal with unavoidable climate change effects, has lagged significantly, at around $20 billion, which is a fraction of what is needed.

Zooming in on Dutch climate finance reveals other shortcomings that need to be addressed in future climate finance agreements. The first is additionality. Climate finance was supposed to be additional to regular development cooperation (ODA). Yet, in the Netherlands, total ODA spending, including climate finance, has only reduced since the Paris Agreement.

Further, the lack of a clear division of the financial burden between countries means that it is easy for individual countries to do less than they should. The Dutch government argues its fair share to be EUR 1.25 billion, but accounting for inflation and exchange rate movements, and the country’s historic responsibility through its own past emissions, its true fair share would be much higher; at least EUR 1.6 billion. Without a clear rulebook on calculating individual countries’ responsibilities, the collective climate finance target will never be met.

Another issue pertains to the division between public and private finance. The Paris Agreement allows countries to count private capital flows that were mobilized using public resources towards their climate finance. The rules for how to correctly calculate this leave much room for overstating the true amounts. Furthermore, private finance is more likely to go to mitigation and to middle-income countries, leaving the low-income countries that are most in need behind.

Finally, it is important to consider which parties actually end up receiving the climate finance. Dutch climate finance mostly goes to multilateral organisations and international firms. Local actors from the Global South, whether governments, private firms, or local NGOs end up receiving a much smaller share. This must change in order for climate finance to really enable those hit the hardest to decide for themselves what is the best way to cope with the consequences of climate change.