G7 Summit: Germany pledges to increase climate finance

G7 summit in Cornwall: German chancellor Angela Merkel pledges to reach 6bn€ in climate finance per year no later than 2025

Surprise at the last minute: just before the emd of the G7 summit, Germany commits to increase the budget allocations for climate finance from currently around four billion euros to six billion euros annually by 2025 at the latest. A doubling to eight billion euros a year would have been more appropriate for a country like Germany, but the commitment that has now been made is a welcome step forward.

Back at the Petersberg Climate Dialogue, Chancellor Angela Merkel dodged the moment to make a commitment as expected, backed by her finance minister Olaf Scholz. In her speech to the assembled ministers, the Chancellor expressed the view that Germany was already doing enough to support poorer countries confronting the climate crisis. Any gaps, for example to achieve the ten-year-old promise of developed countries to provide 100 billion US dollars annually from 2020 in climate finance, would have to be filled by other countries or the private sector. Angela Merkel rightly had to take criticism for this stance (e.g. here, here and here).

The G7 summit has been Merkel’s last chance to impress the international community on climate policy, before political activity in Germany first dives into the summer break and then switches to election campaign mode for the general elections in autumn. It is remarkable that the Federal Press Office announced the commitment almost as a minor matter in a message to journalists accredited for the G7 summit (along with a tweet from government spokesperson Steffen Seibert).

Details of the commitment remain vague. The wording, “to increase the German funds for international climate action from four to six billion euros” (own translation) creates some confidence insofar as the baseline of four billion euros is composed of resources from the federal budget (plus grant equivalents of loans), so one would assume this also applies to the goal of six billion euros by 2025. Loans and other funds would be added (as is the case for the baseline). There is really no other way to understand the promise as it has been communicated so far. But: there are no more precise details on the commitment, and the federal government has used creative accounting on climate finance commitments in the past.

Further commitments: Japan, Canada, France – and an end to coal financing

Germany was not the only country with commitments on climate finance. The United Kingdom and the United States had previously promised to double their climate finance over the next years Canada used the G7 summit for a similar commitment to a doubling. France said it will maintain the level it has achieved (mostly in the form of loans), amounting to around 6 billion euros annually between now and 2025. Japan, too, only promised to keep the 1.3 trillion yen annually – almost all of it loans, often at market conditions. Italy remained silent.

The final communiqué of the G7 summit also includes agreements on climate finance. The G7 countries jointly plan to give up to $ 2 billion to the Climate Investment Funds (as part of the above pledges) to accelerate the transition away from coal to renewable energy in developing countries. In addition, the G7 countries want to end public support for new coal-fired power plants by the end of 2021. For fossil energies in general, the aim is to end public financing “as soon as possible” – due to the lack of a timeline, however, this has to be seen as a rather hollow announcement.

After the G7 is before COP26

And now? The 100 billion target applies to all developed countries, not just the G7 members. Most of them have not yet committed to increasing their contributions. Whether and when the 100 billion target will finally be met remains to be seen. The next political opportunity for new commitments are the G20 summit and of course the UN climate conference COP26 in Glasgow.

The federal government should now use the time to create more clarity about how the new commitment will be fulfilled over the coming years – it must go hand in hand with a growth in the budgets of the ministries contributing to climate finance, and in particular the development ministry, in order to avoid that other priorities of development co-operation and poverty eradication suffer. Significantly more climate finance should also be provided through multilateral channels such as the Adaptation Fund.

Unfortunately, the new commitment did not include a promise ensure that by 2025, half of all cliamte finance would be allocated to supporting adaptation, as the particularly vulnerable countries have repeatedly called for. Currently, just under a fifth of climate finance from Germany goes into adaptation. Since loans are less suitable for supporting adaptation measures, a correspondingly larger proportion of the budget (which is mainly used for grants) would have to be used for adaptation so that the overall total for adaptation reaches 50 per cent.

Und: auch wenn die neue Zusage der Bundesregierung ein erfreulicher Schritt nach vorne ist, sollte nach der Bundestagswahl die neue Bundesregierung die Haushaltsmittel für die Klimafinanzierung noch einmal erhöhen – bis 2025 auf jährlich acht Milliarden Euro. Das wäre für ein reiches Land wie Deutschland und angesichts der wachsenden Bedrohung, die die Klimakrise in den ärmeren Ländern zunehmend darstellt, angemessener.

And: even if the federal government’s new commitment is a welcome step forward, after the federal elections in autumn the new government should increase the budget for climate finance further – to eight billion euros annually by 2025. That would be more appropriate for a rich country like Germany and given the growing threat that the climate crisis poses to poorer countries.

Jan Kowalzig, Oxfam