German climate finance / Transparency

German climate financing: on the way toward greater transparency?

It is crucial for the international climate negotiation process that the industrialized countries implement their financial pledges as transparently as possible. A transparent resource allocation by industrialized countries could contribute to building trust between developed and newly industrialized countries. This issue will certainly be taken into account at the climate negotiations – and in doing so, measuring, reporting and verifying (MRV) are three aspects that will play a key role. At present, there is no standardized MRV system in place at the international level that would permit the uniform evaluation of international climate finance. As a step in that direction, reporting guidelines were established at the most recent climate summit in Durban in late 2011. While that certainly counts as progress, by itself it is far from enough.

Enhanced transparency through fast-start finance

As for German climate finance, the Fast Start Finance period from 2010 to 2012 has certainly led to greater transparency – at least with regard to its quantitative representation:  According to the federal government, Germany provided resources for Fast Start Finance on top of its existing climate financing from the year 2009. Specifically, the federal government earmarked €900 million for international climate financing; for Fast Start Finance, it pledged €350 million for 2010, €409 million for 2011, and €501 million for 2012. The total for the German contribution to climate financing can thus be derived from these figures – for the year 2010, it was €1.25 billion.

The total for 2010 is also generally consistent with the information available elsewhere: The federal government’s reply to an inquiry by Green Bundestag MP Thilo Hoppe on climate financing in September 2011 indicated that Germany had provided around €1.2 billion for climate financing in 2010. A similar figure can be found in a questionnaire completed by Germany in 2011 for an EU report, which states that Germany had reserved €1.261 billion for climate financing in 2010.

Confusion: divergent figures for climate financing for 2010

It is therefore surprising that the website of the Federal Ministry for Economic Cooperation and Development states that €1.424 billion were budgeted for climate financing in 2010. The money seems to have multiplied quite miraculously in 2010.
How is that possible? Is it because commitment appropriations – pledges for the future – were also added to the tally? One could have assumed that only cash amounts (i.e. the outflow of concrete financial resources in the relevant financial year) would have been stated.

Let’s illustrate this with a comparison. Adding up cash resources and commitment appropriations without labelling them appropriately is like adding the figures for an employee’s monthly salary (corresponding to cash) and his annual salary (corresponding to commitment appropriations). Someone earning €4,000 a month would have an annual salary of €48,000. It would be as if he had stated that he earned €52,000 in January – thus adding his monthly and annual salary.

Did the federal government thus arrive at the large sum for 2010 by adding apples and oranges? This is merely conjecture – as we must emphasize at this point. While it’s quite gratifying that the government has since provided more detailed information on its website, the figures presented there are cause for confusion.

Progress: project lists for 2010 on BMZ website

The Federal Ministry for Economic Cooperation and Development (BMZ) recently published project lists for bilateral cooperation on climate-related issues for the year 2010 on its website. While this is a move toward greater transparency, …

it unfortunately only represents the first step. When compared to the information provided by the Federal Ministry for the Environment (BMU) for the International Climate Initiative (ICI), the BMZ lists are a bit disappointing – the presentation of the BMZ projects does lack a certain depth. A statement with regard to the quality of the projects is virtually impossible based on the available data. Only four things are disclosed: the title of the project, the implementing organization, the scope (mitigation, adaptation or forest protection) and the allocated funds.  It is also noteworthy that for technical reasons, 25, 50, 75 or 100 percent of BMZ funding was credited to climate financing on an empirical basis in 2010, depending on the thematic focus of the project. Of course, a note on how the individual projects were taken into account would have been helpful here – it does, after all, make a difference whether a project was deemed 25 percent or 100 percent climate-relevant.

The BMZ could use the transparency of the ICI as its model for the presentation of climate-related projects. The ICI website provides a summary for the individual project, names the partners in the target countries, the duration of the project, and a reference to the project website.

We certainly must acknowledge that we are moving down the path toward more transparency for the German contribution to international climate financing. Nevertheless, we still have a long way to go to do justice to the aspects of measuring, reporting and verifying at the national and international levels.

Anja Esch
5 August 2012