Will Glasgow Fix Broken Climate Finance Promises?

Yves here. Someone had to perform the unpleasant hype of looking at obviously too meager commitments made at the Glasgow climate summit, look under the hood to see what they really amounted to, and compare that against what needs to happen to prevent catastrophic outcomes. Needless to say, the tally by Anis Chowdhury and Jomo Kwame Sundaram is pretty sobering.

By Anis Chowdhury, Adjunct Professor at Western Sydney University and University of New South Wales (Australia), who held senior United Nations positions in New York and Bangkok and Jomo Kwame Sundaram, a former economics professor, who was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. Originally published at Jomo Kwame Sundaram’s website

Current climate mitigation plans will result in a catastrophic 2.7°C world temperature rise. US$1.6–3.8 trillion is needed annually to avoid global warming exceeding 1.5°C.

Creative Accounting

Rich countries have long broken their 2009 Copenhagen COP16 pledge to mobilize “US$100 billion per year by 2020 to address the needs of developing countries”. The pandemic has worsened the situation, reducing available finance. Poor countries – many already caught in debt traps – struggle to cope.

While minuscule compared to the finance needed to adequately address climate change, it was considered a good start. The number includes both public and private finance, with sources – public/private, grants/loans, etc. – unspecified.

Such ambiguity has enabled double-counting, poor transparency and creative accounting, noted the UN Independent Expert Group on Climate Finance. Thus, the rich countries’ Organisation for Economic Co-operation and Development (OECD) reported US$80bn in climate finance for developing countries in 2019.

Fudging Numbers

But OECD climate finance numbers include non-concessional commercial loans, ‘rolled-over’ loans and private finance. Some donor governments count most development aid, even when not primarily for ‘climate action’.

Also, the dispute over which funds are to be considered ‘new and additional’ has not been resolved since the 1992 adoption of the UN Framework Convention on Climate Change (UNFCCC) at the Rio Earth Summit.

Official development assistance redesignated as climate finance should be categorized as ‘reallocated’, rather than ‘additional’ funding. Consequently, poor countries are losing aid for education, health and other public goods.

India has disputed the OECD claim of US$57bn climate finance in 2013-14, suggesting a paltry US$2.2bn instead! Other developing countries have also challenged such creative accounting and ‘greenwashing’.

Climate Finance Anarchy

Developing countries expected the promised US$100bn yearly to be largely public grants disbursed via the then new UNFCCC Green Climate FundOxfam estimates public climate financing at only US$19–22.5bn in 2017-18, with little effective coordination of public finance.

Developing countries believed their representatives would help decide disbursement, ensuring equity, efficacy and efficiency. But little is actually managed by developing countries themselves. Instead, climate finance is disbursed via many channels, including rich countries’ aid and export promotion agencies, private banks, equity funds and multilateral institutions’ loans and grants.

Several UN programmes also support climate action, including the UN Environment Programme, UN Development Programme and Global Environment Facility. But all are underfunded, requiring frequent replenishment. Uncertain financing and developing countries’ lack of meaningful involvement in disbursements make planning all the more difficult.

Financialization has meant that climate funding increasingly involves private financial interests. Claims of private climate finance from rich to poor countries are much contested. Even the OECD estimate has not been rising steadily, instead fluctuating directionless from US$16.7bn in 2014 to US$10.1bn in 2016 and US$14.6bn in 2018.

The actual role and impact of private finance are also much disputed. Unsurprisingly, private funding is unlikely to help countries most in need, address policy priorities, or compensate for damages beyond repair. Instead, ‘blended finance’ often uses public finance to ‘de-risk’ private investments.

Putting Profits First

The poorest countries desperately need to rebuild resilience and adapt human environments and livelihoods. Adaptation funds are required to better cope with the new circumstances created by global warming.

Needed ‘adaptation’ – such as improving drainage, water catchment and infrastructure – is costly, but nonetheless desperately necessary.

But ‘donors’ prefer publicizable ‘easy wins’ from climate mitigation, especially as they increasingly gave loans, rather than grants. Thus, although the Paris COP21 Agreement sought to balance mitigation with adaptation, most climate finance still seeks to cut greenhouse gas (GHG) emissions.

As climate adaptation is rarely lucrative, it is of less interest to private investors. Rather, private finance favours mitigation investments generating higher returns. Thus, only US$20bn was for adaptation in 2019 – less than half the sum for mitigation. Unsurprisingly, the OECD report acknowledges only 3% of private climate finance has been for adaptation.

Chasing profits, most climate finance goes to middle-income countries, not the poorest or most vulnerable. Only US$5.9bn – less than a fifth of total adaptation finance – has gone to the UN’s 46 ‘least developed countries’ (LDCs) during 2014-18! This is “less than 3% of [poorly] estimated LDCs annual adaptation finance needs between 2020-2030”.

Cruel Ironies

The International Monetary Fund recognizes the “unequal burden of rising temperatures”. It is indeed a “cruel irony” that those far less responsible for global warming bear the brunt of its costs. Meanwhile, providing climate finance via loans is pushing poor countries deeper into debt.

Increasingly frequent extreme weather disasters are often followed by much more borrowing due to poor countries’ limited fiscal space. But loans for low-income countries (LICs) cost much more than for high-income ones. Hence, LICs spend five times more on debt than on coping with climate change and cutting GHG emissions.

Four-fifths of the most damaging disasters since 2000 have been due to tropical storms. The worst disasters have raised government debt in 90% of cases within two years – with no prospect of debt relief.

As many LICs are already heavily indebted, climate disasters have been truly catastrophic – as in BelizeGrenada and MozambiqueLittle has trickled down to the worst affected, and other vulnerable, needy and poor communities.

Funding Gap

Based on countries’ own long-term goals for mitigation and adaptation, the UNFCCC’s Standing Committee on Finance estimated that developing countries need US$5.8-5.9 trillion in all until 2030. The UN estimates developing countries currently need US$70bn yearly for adaptation, rising to US$140–300bn by 2030.

In July, the ‘V20’ of finance ministers from 48 climate-vulnerable countries urged delivery of the 2009 US$100bn vow to affirm a commitment to improve climate finance. This should include increased funds, more in grants, and with at least half for adaptation – but the UNFCCC chief has noted lack of progress since.

Only strong enforcement of rigorous climate finance criteria can stop rich countries abusing currently ambiguous reporting requirements. Currently fragmented climate financing urgently needs more coherence and strategic prioritization of support to those most distressed and vulnerable.

This month’s UNFCCC COP26 in Glasgow, Scotland, can and must set things right before it is too late. Will the new Cold War drive the North to do the unexpected to win the rest of the world to its side instead of further militarizing tensions?

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  1. Glossolalia

    Will Glasgow Fix Broken Climate Finance Promises?

    I’m guessing Betteridge’s law of headlines applies here.

  2. The Rev Kev

    Unfortunately Glasgow was always going to be a failure. Nowhere near enough urgency, too much local politicking, too much big power rivalry and not enough profits in it for the big corporations. And we are all going to have to live with the consequences. So it will be a matter of BOHICA.

    1. Code Name D

      It should be obvious by now that these “clement conferences” are just elaborate photo ops for the establishment. One gets to have these high class “slum it” parties where you get to shake hands with African Puppet Leaders (who tend to be White I noticed.). Lobbyists also get to ply their trade with boat loads of money. Clement Conferences are about giving the appearance of taking global warming seriously while at the same time preventing any form of real change.

    2. ChrisFromGeorgia

      Do we need a new tagline for these things? “Climate clowns” has a nice ring.

      Sort of like the “Trade traitors” moniker I saw used for moderate dems who supported the failed TPP. I am sure the NK commentariat can come up with something appropos.

  3. marieann

    Those are all good ideas and I’d vote for any or all of them. Of course I won’t get a chance to vote, us little people do what we are bid by our betters.

    I am sadly but not unexpectedly disillusioned by our so called leaders and know that nothing will be done re: climate change.

    For the years I have left I will watch my planet fall apart…all I can to is keep my own little bit as green and beautiful as I am able.

    1. Irrational

      Sadly I agree with you, I wish it were otherwise. World leaders are unlikely to agree on anything meaningful and if they do enforcement would be impossible.

  4. Guy Hooper

    The larger parts of the future are being clarified. Leaders will not do enough to prevent a sharp break between business as usual and “what comes after” (WCA). WCA will be centered on local production of food and stuff. There will be less stuff and global supply chains will reduce to just critical minerals (if we’re lucky). Air travel will become very expensive and most people will live their lives within the radius of EVs. Continental travel will be by train.

    WCA is discontinuous with business as usual because there will be no planned transition (ref Glasgow and etc.). The best outcome is that WCA happens with minimal war. The level of civilization will be measured by what technology is preserved. If we lose the ability to make chips, then we are headed into a VERY local existence. The most dangerous point will be when the financialization model collapses. Money matters. When the saved wealth of individuals evaporates, governments will fall and something new will arise (feudalism, oligarchy, fascism, dictatorship…anarchy) because the democratic model is no longer credible.

    The new order, if there is one, will resort to force to silence dissent. The luxury of being able to opine on sites like NC will be part of our past and these rich virtual communities will be dissolved. In WCA, some of us will remember that we had it all: vacations on mighty cruise ships, global travel, the information and creativity of a global civilization at our fingertips. The new existence will be smaller, more familial, clannish, and very hierarchal. For those who cry “freedom” and ignore physic’s existential boundaries, a rude surprise awaits. They will no longer be able to cry anything except “Yes, sir” to the new elites.

    Surprise. They will look a lot like the old elites.

    1. lambert strether

      > If we lose the ability to make chips, then we are headed into a VERY local existence

      I disagree. The Victorian Era did perfectly well with the telegraph, ships, rail, print, etc.

      Now, if we lose our ability to work with basic construction and manufacturing materials….

        1. drumlin woodchuckles

          But true. The Victorian Era did have telegraph, ships, rail, print, etc.

          And the post Civil War era had better telegraph, and telephone, ships, rail, print, etc.

          Dystopian literature, movies, etc. are designed to erase all that from memory and imagination.
          One wonders if semitopian or mid-topian, etc. literature, movies, etc. could be imagined and made. Solar punk. Solar steampunk. Solar ecosteampunk. Etc. Biopunk. Ecopunk.
          Someone should give it a try.

  5. Ghost in the Machine

    I love books. I collect them faster than I can read them. I find comfort in being surrounded by shelves of them. Fortunately, they don’t require much energy to read.

  6. Darthbobber

    Precisely nothing is happening in Glasgow (other than a Rangers win and a Celtic draw over the weekend.) Even the hypers found it difficult to expect much from this round.

    Biden is in good company in bringing no significant initiative or commitment to the party. I can’t think of anybody who did. Even at the level of rhetoric as a substitute for action everything is sounding flat.

  7. JohnA

    If anything, the behaviour of the priviledged elite will make things worse. The 400 private jets, the mega yachts of Gates and Bezos et al. The queen demanding action while it recently emerged that she successfully lobbied for her extensive properties to be exempt from environment efficiency legislation. Johnson insisting on flying back from Glasgow to London to save time. All utterly farcical. It is like the New York Met ball where the elite were maskless and the servants masked.
    The planet will obviously survive one way or another, It is humanity that will suffer. If we go the way of the dinosaurs, unlike them, we had it coming.

  8. Matthew G. Saroff

    FWIW, people are making it too complex.

    Do a carbon tax, not cap and trade, and make it like a Value Added Tax (VAT), that is refundable upon export and assessed upon import.

    This is already legal under internal trade agreements, and serves the function of making a race to the bottom on carbon less remunerative.

    It also does not require an agreement with payments/bribes to implement.

    All cap and trade does is raise prices and line the pockets of Wall Street speculators.

  9. Solarjay

    The needle really won’t move and in week it will be eclipsed by some new fake issue and relegated to page 43.

    I keep trying to figure how can we get things to change snd I keep coming back to: the big companies have to make more money than the profit from solar and wind. Yea sounds bonkers, but if they made a ton of money they would be all over it. Solar snd to a lesser extent wind are very low margin products, with low yearly overhead/ maintenance. For solar everything is pretty much solid state.
    CCS and DCA are complex and expensive, and they do work. Gen 4 nuclear plants are less likely complex than Gen 1 or 2 but still require lots of people and all with guaranteed profits. Maybe that’s all wrong, but so far nobody has a good explanation how to move things in the right direction at a pace that is meaningful. I keep looking.

  10. Alice X

    There is little I can add to these comments, except to say; in fifty years, when they look back they will ask: why didn’t we do more? Large assumptions of humanities future pending of course. I will be long gone even though I was a minimalist.

  11. Sound of the Suburbs

    Why is progress so slow on environmental issues?
    We need to get to the heart of globalist doublethink to see the problem.

    Why will globalisation be an environmental disaster?
    Western companies couldn’t wait to off-shore to low cost China, where they could make higher profits.
    Maximising profit is all about reducing costs.
    China had coal fired power stations to provide cheap energy.
    China had lax regulations reducing environmental and health and safety costs.
    China had a low cost of living so employers could pay low wages.
    China had low taxes and a minimal welfare state.
    China had all the advantages in an open globalised world.

    Environmentally friendly measures cost money and reduce profit.
    The goal is to maximise profit.

    Why do firms move to Mexico and export into the US?
    Companies prefer Mexico with its cheap labour, lax health and safety standards, and lack of environmental regulations.
    They can expose workers to hazardous chemicals and just pump toxic waste straight out into the environment, without incurring the costs associated in dealing with them in an environmentally friendly way.
    Every avenue must be explored to reduce costs.
    The lower the costs, the higher the profit.

    The more environmentally friendly you are, the less internationally competitive you will be.
    “ ….. today, authorities in Inner Mongolia approved restarting production at 38 open-pit coal mines to boost China’s supplies ….”
    “Meanwhile, Chinese banks are financing a blizzard of new coal plants across South East Asia as part of the Belt and Road”

    Coal is one of the cheapest forms of energy.
    It will help them keep costs down.
    As we shut down coal fired power stations in the West, new ones opened up in South East Asia.

    “Show me the incentive and I’ll show you the outcome” Warren Buffet’s partner Charlie Munger
    Environmentally friendly measures cost money and reduce profit.
    That’s the problem.
    The incentives push everyone towards being environmentally unfriendly.

    1. Henry Moon Pie

      “Change the goal” is the second highest leverage point in Donella Meadows hierarchy of system leverage points. Quarterly profits and stock price are horrible goals that have ruined everything from the climate to product quality to worker rights. The problem is that the goal is the product of the highest leverage point–the paradigm–and our capitalist, consumerist, materialist paradigm is killing us in many ways, not just climate.

      For some time, it’s been clear to me that we’re headed for Mad Max or totalitarianism (think Gilead because we’re never getting to Gattaca) unless there’s a widespread and radical change in paradigm in the WEIRD countries. There are people working on it, and it’s a growing phenomenon, but my guess is that we’ll have to go through more pain to make enough people ready to ditch their love for McMansions, Navigators and Mammon.

      On the “bright” side, that pain seems to be coming in waves higher and more frequent all the time.

  12. Henry Moon Pie

    What will you do about the poor who will be unable to heat their houses in the winter with a carbon tax? It will also make food more expensive. At the same time, a flat carbon tax will hardly put a crimp in the billionaires jetting to Paris for lunch. The world’s richest 10% account for 45% of carbon emissions, and a carbon tax will have scant effect on that.

    Tax nudges aren’t going to work because the lowest hanging fruit is luxury consumption, and a carbon tax high enough to affect that will completely crush the poor. Instead, ban or tax at prohibitively high rates luxury consumption while instituting a UBI to protect those who will necessarily lose jobs as a result.

  13. drumlin woodchuckles

    Here is a Ben Garrison cartoon illustrating what several tens of millions of Coaly Roller Americans believe.
    Those Americans who want to “do something” about global warming will have to do what they can in their own areas to begin seceding their own area economies away from the Coaly Roller region economies. Only a civil war of conquest and total domination against the Coaly Rollers would force them into acquiescing to any global dewarming plans or actions. And the energy at all levels it would take to win such a Civil War would be better spent on Velvet Stealth Secession of the Blue Zones and getting the Blue Zones to engineer and roll out their own separate low-emissions political economy zones.

    Anyway, here is the cartoon. And remember, tens of millions of Americans think this way and will not change what they think, ever. Ever. And only the terminally dumm would even waste the effort to try.


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