100 billion / UNFCCC

$100 billion goal remains unmet: Impacts of recent pledges on climate finance by 2025

As the long-standing promise by rich countries to ramp up climate finance to assist poorer nations to $100 billion a year from 2020 remains unfulfilled, Oxfam estimates that recent pledges by developed countries will not suffice to reach the goal, not even five years later, accumulating a considerable shortfall of committed funds over the years 2020-2025.

Figure 1: What recent pledges mean for climate finance by 2025
climate finance by 2025

Not only have rich countries most likely not kept their promise to ramp up finance to assist poorer countries in confronting the climate crisis to reach $100 billion a year by 2020. They also might not get to that level by 2025. Based on recent pledges by rich countries, Oxfam estimates that climate finance in 2025 may amount to $93-95 billion, with most of public finance provided in the form of debt-increasing loans. Finance to assist countries in adapting to climate change may remain heavily neglected, with possibly only $26-27 billion allocated to adapation in 2025. Each year the $100 billion goal is not met adds to an overall shortfall in committed climate finance, estimated by Oxfam to amount to $68-75 billion over 2020-2025.

A few days ago, the OECD reported that in 2019 climate finance by developed countries to support developing countries’ efforts in confronting the climate crisis has reached $79.6 billion – a mere 2% increase over 2018 levels. Of this total, $20.1 billion was spent on adaptation, continuing the negligence of the needs of the most vulnerable countries. Around 70 per cent of public finance was provided in the form of debt-increasing loans.

While official data for climate finance in 2020 will be available only next year, it is safe to say that developed countries almost certainly will have missed their deadline for ramping up climate finance to $100 billion a year by 2020, as promised back in 2009 and confirmed at virtually every large UN climate gathering ever since. At the 2015 UN climate summit in Paris, it was then decided to extend the goal through to 2025 and to work on a new goal for the time after that.

By now, the $100 billion promise has become an integral part of the carefully crafted balance of trust between rich and poor countries in the international climate regime – which is probably why developed countries have, undeterred by the trends visible in the data for quite some time now, stuck to a mantra of being on track to keep their promise.

Recent pledges on post-2020 climate finance: a mixed bag

Refreshingly, at least some have now understood they can no longer maintain that narrative. This has led to some countries making new commitments to relating to climate finance in the post-2020 period. The UK for instance has pledged to double its climate finance over until 2025 compared to the past five-year-period (before you get too excited about it: alongside massively cutting development assistance). Germany has pledged to increase climate finance ‘from 4 to 6 billion’ a year by no later than 2025 (although it remains unclear what these six billion Euros refer to). The US had pledged to double annual levels by 2024 compared to the 2013-2016 annual average (welcome, but widely seen as insufficient given the US’ economic power and high responsibility for causing the climate crisis). Australia’s pledge to provide AU$1.5 billion over the next five years is no increase over current levels, and the same is true for the €6 billion a year from France and the ¥1.3 trillion a year from Japan. Many countries have not made any pledges yet, including G7 member Italy, New Zealand, Spain, Norway or Sweden. Some countries (e.g. Denmark or Switzerland) have plans on climate finance but didn’t communicate them at high-level occasions. Yet, they may lead to a (slight) increase.

Climate finance by 2025

Oxfam has now made an assessment what all these pledges and plans may amount to by 2025, by estimating the increases of individual countries’ and the multilateral development banks’ climate finance by 2025 over their 2019 levels. Countries with no plans or pledges to increase were assumed to remain where they are. Oxfam further assumed that the annual output of multilateral climate funds or the mobilisation of private finance will remain at current levels – since developed countries have made no commitments to boost these two components of the $100 billion balance sheet. A methodology note can be found here, and the resulting data sheet can be found here.

Oxfam estimates that in 2025 overall levels may be $14-16 billion higher than they were in 2019, reaching $93-95 billion in total annual climate finance by 2025 – if countries adhere to their plans and pledges, and countries that have been silent so far do indeed keep their current levels. This means that developed countries would not only not reach the promised level of climate finance by 2020 but might not even get to it five years later, at the end of the 2020-2025 period.

We further estimate that in 2025, adaptation finance may reach $26-27 billion per year (within the overall total), showing that adaptation efforts remain heavily underfunded, putting vulnerable countries into an increasingly difficult situation. Another key concern remains that most of current public finance is provided in the form of loans – and this is set to continue through to 2025, risking increasing debt for poorer countries, many of which have contributed little to nothing to the climate crisis.

It should be noted that the above estimates are based on the figures as provided by developed countries and using the self-granted methodology by which developed countries count their climate finance (and that they also imply in their pledges). This methodology has been shown to allow for gross overestimation of the climate-relevance of provided funds and of the actual net value of provided support, e.g. by counting loans at their face value and not their grant equivalent (if they have any, e.g. in the case for concessional loans). Discounting for these two forms of overestimation shows that climate-specific net support may actually be considerably lower than reported figures imply, as shown by Oxfam’s climate finance shadow report.

Accumulated gap over 2020-2025

If the $100 billion goal remains unmet over the years 2020-2025, developing countries will receive less support in each of those years than what developed countries had aimed to provide and mobilise. In a third estimate Oxfam looked at this shortfall in climate finance that accumulates over the years 2020-2025 as the $100-billion goal remains unmet.

Assuming a linear growth of climate finance from 2019 levels to the estimated 2025 levels, the accumulated gap over 2020-2025 may add up to reach a total of $68-75 billion. Instead of six times $100 billion, developed countries would provide only $525-532 billion over the six-year period. Obviously, reaching the $100 billion level in any year between now and 2025 could, depending on when this happens, reduce the accumulated gap considerably.

Developed countries can fix it – if they want to

That developed countries have so far not kept their $100 billion promise is for the most part a result of a lack of political will. Keeping up the rhetoric on the overall goal is one thing, backing it up by bold commitments from their national budgets is quite another, as the past has shown.

German state secretary Jochen Flasbarth and Canadian environment minister Jonathan Wilkinson have now been asked by the UK COP26 presidency to lead a process among developed countries do work out a ‘delivery plan’ on the $100 billion promise and present it ahead of the upcoming UN climate summit in Glasgow.

Such a delivery plan will only be successful if developed countries that have made pledges (far) below their fair share increase those pledges (e.g. US, Australia) , and countries that have not made any pledges so far, make them now (e.g. Italy, Spain). It is vital that such pledges do increase the share of grants in the mix – just adding more loans to the balance sheet risks pushing developing countries further into debt, and loans are unlikely to contribute much to supporting urgently needed adaptation efforts.

A key ingredient of the plan would be a commitment by developed countries to increase the proportion of climate finance that is allocated to support adaptation efforts. Ideally, developed countries would commit, as part of the delivery plan, to increase the share so that by 2025, 50% of all climate finance supports adaptation. Since mobilised private finance as well as loans are more likely to contribute to mitigation efforts, developed countries’ budget allocations for climate finance would have to provide a correspondingly greater share for adaptation.

The delivery plan should also recognise the issue of the accumulated gap described above and present a plan how to compensate for underperformance over the years where the $100 billion goal remains unmet.

Finally, developed countries could use the delivery plan to recognise a few basic elements for the negotiations of the new climate finance goal that will build on the $100 billion goal, for the period after 2025. For instance, developed countries should already now recognise that public finance will have to increase further, that the new goal should include of a focused set of sub-goals, such as one for specifically supporting adaptation efforts. It should also include provisions to cater for the growing needs for finance to support efforts to address (including recovering from) unavoidable losses and damages due to climate change.

The ‘delivery plan’ will soon emerge from the consultations currently undertaken by Germany and Canada. If it is presented well ahead of the COP26 and shows how and by when the $100 billion goal will finally be met, it could contribute greatly to success in Glasgow. If on the other hand it turns out rich countries keep their pockets close, confidence in the international climate regime may take a serious blow every year the $100 billion goal remains unmet.

Jan Kowalzig, Oxfam