Pledges & Commitments / 100 billion / German climate finance

Climate finance at the Petersberg Climate Dialogue: Litmus test for Germany’s continued solidarity with the Global South

Merkel at Leaders Summit on Climate

Twice already, most recently at the Leaders Summit on Climate, Chancellor Merkel vaguely confirmed that Germany will contribute fairly to cliamte finance over the next years. In order to not sound like a broken record, she might want to use the 2021 Petersberg Climate Dialogue to follow up with a concrete commitment.

When German Chancellor Angela Merkel welcomes ministers from around 40 countries for the 2021 edition of the Petersberg Climate Dialogue later this week, the audience will listen carefully if she makes a commitment to significantly increase urgently needed financial assistance for developing countries to confront the climate crisis.

It’s crunch time. Over ten years ago, rich countries had pledged to ramp up financial assistance to support cutting emissions and adapt to a changing climate in poorer countries to reach $100 billion a year by 2020. Official data from developed countries’ self-reporting of climate finance provided for the year 2020 will only become available next year. Yet, when extrapolating past developments and adding country-specific information on planned levels for 2020 where available, it seems unlikely that the goal has been met – something that also the Independent Expert Group on Climate Finance in its report to the United Nations has found.

100-billion goal out of reach?

This is not good news at all. The 100-billion-goal has been a central pillar of the international climate regime since 2009. Not fulfilling it will seriously undermine the carefully crafted balance of trust between developed and developing countries on which the Paris Agreement had been built. At the same time, the needs in developing countries are growing. Climate impacts are now estimated to be far more severe than estimated back in 2009 when the goal had been set, with rising costs of adapting to a changing climate to protect people’s lives and livelihoods. UNEP estimates that adaptation cost in developing countries may rise to up to $300 billion a year by 2030; Bangladesh, one of the particularly vulnerable countries, reports spending $5 billion per year on adaptation already. Also, the 100-billion goal was set in a context oriented around a 2°C temperature limit. The Paris Agreement, based on better understanding on the severity of risks, aims at keeping warming at below 1.5°C – with consequences for the speed and scale, by which the world needs to cut emissions to zero, and the associated additional finance needs in developing countries.

Refreshingly, some countries seem to have heard the call – most recently the United States, who, at their Leaders Summit on Climate, not only unveiled their future targets to cut emissions under the Paris Agreement but also pledged to double public climate finance by 2024 (compared to a 2013-2016 baseline). Even before that, the UK, holding the presidency for the next UN climate summit COP26, pledged to double their contribution to climate finance for the coming 5-year-period. Concerned about success at COP26, the UK has also called on all developed countries to come forward with new commitments of rising climate finance to meet and even surpass the 100-billion-goal.  Most recently, even the UN Secretary General António Guterres has urged the G7 countries to make new commitments.

Next up: Germany

With its own climate summit around the corner, it is now Germany’s turn. Germany has been a large donor in international climate finance for some time now – rightly so, considering Germany’s sensational wealth and economic strength as well as its substantial responsibility for causing the climate crisis through past and present emissions. Germany has shown leadership on climate finance in the past, by making early pledges to the Green Climate Fund, and by committing, on the home stretch to the Paris Agreement in 2015, to double annual federal budget allocations for climate finance to reach around €4 billion a year by 2020. Such moves by Germany have clearly helped build trust between developed and developing countries – and put other developed countries under pressure.

Yet, according to Germany’s own reporting to the UNFCCC, public climate finance from Germany has been stagnating for the past years. For 2019, Germany reported €4.3 billion from the federal budget (meeting the 2015 pledge a year early!) plus around €2.5 billion in mobilised capital for loans and other non-grant instruments, for a total of €6.8 billion – nearly the same level as in 2017 and in 2018. For 2020 the situation is likely to have remained the same, and for 2021 there are no increases planned either, keeping levels considerably below the all-time highs of 2015 and 2016 (see figure 1).

Figure 1: German Climate Finance 2014-2021
Chart: German climate finance 2014-2021

The green areas show the funds from the federal budget, for example for bilateral grants or payments into multilateral funds. The orange bars show the funds raised (‘mobilized’) by KfW and DEG on the capital market that are used to form (concessional) loans as climate-related development co-operation. For 2020 and 2021 only figures for budget resources and an estimate on grant equivalents of future loans are available, with no information on planned mobilised finance (i.e. the orange areas). Note that for 2021, some of the titles of bilateral co-operation have been given budget restrictions that may lower German climate finance. The likely effect is shown by the shaded area next to the 2021 bar (more here). Source: Own illustration based on government data and additional government information.

Fair pledge by Germany: double annual climate finance by 2025

Against this backdrop it has been refreshing, twice already, at the Climate Ambition Summit in December 2020 and at the Leaders Summit on Climate two weeks ago, to hear Chancellor Angela Merkel clarify that Germany will contribute its fair share to international climate finance also beyond 2020. The upcoming Petersberg Climate Dialogue, co-hosted jointly by Germany and the UK, offers an excellent opportunity to convert this important but vague confirmation into a concrete pledge. A truly fair contribution to the rising needs in developing countries would require Germany to once more double, by 2025, its annual levels of public climate finance – as just last week called for by former UN Secretary General Ban Ki-moon in a guest article in the Handelsblatt (English here) – and allocate at least half of this to support adaptation.

The decision by Angela Merkel whether or not to step up on climate finance and demonstrate global leadership will be taken as you read these lines. What is clear is that a climate finance commitment by Angela Merkel at the Petersberg Climate Dialogue 2021 is the litmus test for Germany’s continued solidarity with the Global South in the worsening climate crisis – and could become an important part of the Chancellor’s lasting legacy on climate action. A Chancellor who once was dubbed, by some, as ‘Klimakanzlerin’.

Jan Kowalzig, Oxfam