The abyss of climate finance: how are 100 billion spent a year?

In 2020, only 83 billion out of 100 billion were mobilized for climate finance

Most of the money is spent on projects that have little to do with climate, although the label is “climate finance“. The aim is rarely to implement the most urgent adaptation measures. It is the result of Oxfam’s analysis of the use of climate finance funds from wealthier countries for those most vulnerable to the climate crisis.

This year, at the Cop28 in Dubai, the figure of 100 billion dollars per year earmarked for climate finance should finally be reached. The deadline decided back in 2009, in theory, was 2020, but between pandemic and reluctance of countries the resources mobilized have always been too scarce. In 2020, only $83 billion was raised. But even if the goal is finally crossed in December, the quality of spending remains very questionable.

What does not work in climate finance

There is a huge problem with how to count these resources, Oxfam explains in the report “Climate Finance Shadow Report 2023″. Countries label climate finance in a very “creative way” of the resources that in reality had already been mobilised by other funds, for example for international development aid. So these are often not new funds. Resources that end up in health or education projects are also counted as climate aid. On balance, writes Oxfam, the real amount of climate finance mobilized in 2020 does not go beyond 21-24.5 billion dollars.

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It is not the only critical aspect. This climate finance takes too often – 51% of the time – the form of loans (which must be repaid and therefore weigh on already vulnerable countries) and too rarely subsidies. Loans are often on market terms. Very rarely do funded projects take into account crucial aspects such as gender issues or support initiatives led by local organisations. And yet: only 33% of public resources allocated to climate finance go into adaptation measures, while 59% in mitigation actions. Adaptation serves recipient countries, mitigation serves donor countries.

A situation that does not bode well for the fate of the post-2025 climate finance targets, of which we will soon begin to discuss. Nor for the ongoing negotiations on the new loss and damage fund created at COP27 last year. “In line with the “polluter pays” principle, innovative financing options such as a maritime transport emission tax, wealth tax or an excess fossil fuel profit tax should be developed,” Oxfam argues.