Wealthy countries have ramped up financing to help developing countries cut carbon emissions and cope with the impact of climate change. Climate finance provided by developed countries for developing countries totalled $78.9 billion in 2018, up 11 per cent from $71.2bn in 2017, according to a new report from the Organisation for Economic Co-operation and Development.
The increase was driven by a rise in public climate finance, while private climate finance was flat, the report added.
Climate finance refers to local, national or transnational financing – drawn from public, private and alternative sources of financing – that seeks to support mitigation and adaptation actions that will address climate change.
The United Nations Framework Convention on Climate Change aims to mobilise $100bn per year by 2020 to help developing countries tackle and adapt to climate change.
“Climate finance to developing countries continues to grow but in 2018 was still $20bn short of the 2020 goal of mobilising $100 billion,” said José Angel Gurría, OECD secretary-general.
“Early 2019 data from the European Union and its member states, the largest provider taken collectively, indicate that bilateral public climate finance may have continued to increase last year.”
This week, the US formally left the Paris Agreement, a global climate change pact, which was forged five years ago to avert the threat of catastrophic climate change.
US President Donald Trump triggered his country’s departure from the Paris Agreement a year ago, but leaves 189 countries committed to curbing global warming. Democratic presidential candidate Joe Biden has said he favours re-joining the pact.
Climate finance is needed for mitigation, because large-scale investments are required to significantly reduce emissions. Climate finance is equally important for adaptation, as significant financial resources are needed to adapt to the adverse effects and reduce the impacts of a changing climate, according to the UNFCCC.
The OECD report titled Climate Finance Provided and Mobilised by Developed Countries in 2013-18 found that public climate finance from developed countries reached $62.2bn in 2018. Bilateral public climate finance accounted for $32.7bn, up by 21 per cent on 2017, and multilateral public climate finance attributed to developed countries accounted for $29.6bn, up by 8 per cent on 2017.
The level of private climate finance mobilised was virtually flat, at $14.6bn in 2018, after $14.5bn in 2017.
Climate-related export credits remained small at $2.1bn, accounting for less than 3 per cent of total climate finance, the OECD report added.
"Donors need to urgently step up their efforts to support developing countries to respond to the immediate effects of the pandemic and to integrate climate actions into each country's recovery from the Covid-19 crisis to drive sustainable, resilient and inclusive economic growth," Mr Angel Gurría said.
The report showed that out of the overall climate finance in 2018, 70 per cent went to climate change mitigation activities, 21 per cent went to adaptation and the remainder to crosscutting activities.
More than half of total climate finance targeted economic infrastructure – mostly energy and transport – with most of the remainder going to agriculture and social infrastructure, notably water and sanitation.
From 2016 to 2018, Asia benefited from the largest share of climate finance at 43 per cent, followed by Africa (25 per cent) and the Americas (17 per cent).
In terms of distribution by income group, 69 per cent of climate finance went to middle-income countries, 8 per cent went to low-income countries and 2 per cent went to high-income countries, with the remaining 21 per cent allocated at regional rather than country level, according to OECD.
In terms of public finance instruments, both loans and grants increased in absolute terms. The share of loans, however continued to rise, reaching 74 per cent of the $62.2bn public finance figure in 2018, up from 52 per cent in 2013. The share of grants decreased from 27 per cent to 20 per cent. The share of grants was higher to low-income countries, at 42 per cent, while the share of loans was higher in middle-income countries, at 88 per cent.
Meanwhile, Francesco La Camera, head of the International Renewable Energy Agency, said this week that clean energy investments need to double to $2 trillion per year over the next three years to achieve sustainable goals in line with the Paris agreement.
The Abu Dhabi-based agency estimates that increasing annual investment to $2tn per annum between 2021 and 2023 will encourage more private sector investment, providing an effective stimulus for the global economy.