Delegates at this year’s UN climate summit are once again grappling with how to fill the major gap in global climate finance, as new research from the Grantham Research Institute on climate change and the environment estimated that the world will need $2.4trn of investment per year to curb carbon emissions and adapt to climate change. On Monday 4 December the Cop28 host, the United Arab Emirates, pledged $270bn in green finance by 2030, while a number of development banks took steps to increase their funding.
In his September speech rowing back on a number of the UK’s core net zero pledges, Rishi Sunak insisted that the UK would remain “as committed as ever to helping developing countries”. In Dubai on 1 December, the new Foreign Secretary David Cameron defended the UK’s “unbelievably strong record” on climate. But a report from the London-based think tank ODI finds that Britain, alongside Australia, Spain and Canada, stands out for its “relatively poor performance” when it comes to providing a “fair share” of climate finance.
In 2009, richer nations pledged $100bn in annual climate funding for developing countries until 2020, later extended to 2025. The target has been missed every year to date.
Based on the latest available OECD data from 2021, ODI finds that just eight countries contributed their “fair share” of the $100bn goal in 2021: Norway, France, Sweden, Denmark, Germany, Switzerland, Luxembourg and the Netherlands.
The report notes that the decision taken by some countries, such as Japan and France, to contribute mainly through loans rather than grants, is the subject of “major debates”, given that loans can increase the indebtedness of developing countries “at a time when fiscal space is already seriously squeezed”.
A country’s “fair share” is determined by ODI using three equally weighted criteria: its economic size; its cumulative (historic) emissions; and its population. In 2021, the UK provided just two thirds (66 per cent) of its “fair share” of the $100bn goal according to ODI – a total of $3.87bn (£3.2bn) via bilateral climate finance, multilateral development banks and other funds.
This is “still massively short of what the UK should contribute”, says Dr Laetitia Pettinotti, research fellow at ODI told Spotlight. She notes that Britain “should be more ambitious” given the size of its economy.
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ODI calculates that the UK should be contributing more than $5.8bn (£4.7bn) annually – more than double its existing spending for 2021. Due to this shortfall, Britain is third on ODI’s list of the six countries most responsible for the climate finance gap in 2021. The US is by far the biggest laggard, with a staggeringly large gap of $34bn in 2021.
In 2021, ahead of Cop26 in Glasgow, the UK government unveiled a plan to deliver £11.6bn in international climate funding (ICF) between 2021-22 and 2025-26, equating to £2.3bn ($2.8bn) annually.
The UK is already falling short of this target – which includes expenditure from the UK’s aid budget spent on climate-related aid projects overseas, and excludes multilateral funding – according to an October investigation by Carbon Brief, based on “provisional” figures obtained from the government via freedom-of-information requests (FOIs).
The investigation reveals that the UK's ICF spending fell from £1.6bn in the financial year 2020-21 to £1.5bn in 2021-22, and is now £2bn, or 40 per cent short of what it ought to be to reach its target.
In October, the government announced new plans to significantly ratchet up spending in order to meet its £11.6bn target, along with revised figures for historic ICF spending. Carbon Brief notes that the government appears to have “added” an extra £450m to its ICF spending between 2021-22 and 2022-23, due to “expanding the range of spending it categorises as climate finance”.
Although the government has now published a breakdown of how it aims to reach its target, details remain unclear, says Pettinotti. She adds that its delayed publication is “problematic”.
“Climate finance is supposed to be predictable and adequate so that developing countries can plan their climate actions. If they don’t know when and how much they will receive how can they adapt?”
A condensed version of this article first appeared in a New Statesman Spotlight supplement on sustainability.