On October 6, the Organization for Economic Co-operation and Development (OECD) released a report in conjunction with the Climate Policy Initiative (CPI) entitled Climate Finance in 2013-14 and the USD 100 billion goal. The 61-page report examines the state of global climate finance and whether it is reaching the internationally-agreed upon target of $100 billion in annual funding by 2020, which was set by the Copenhagen Accord at the 15th Conference of Parties (COP 15) in 2009. Overall, the report found that climate finance increased from $52.2 billion in 2013 to $61.8 billion in 2014, an increase of around $9.6 billion. This puts current public and private climate finance $38.2 billion away from the international target, with about four and a half years to make up the difference before the 2020 deadline. U.S. Secretary of State John Kerry commented that the new report “shows developed countries are well on our way to meeting the goal.”
Of the total funds mobilized between 2013 and 2014, 77 percent were allocated towards mitigation, 16 percent towards adaptation, and seven percent towards cross-cutting efforts. The report does not include any pledges to the Green Climate Fund (GCF), a financial mechanism the United Nations created during COP 15 to support climate adaptation and mitigation efforts. OECD could not include the GCF since it only began operations in 2014, and thus has had no fiscal outflows that could be measured.
CPI and OECD calculated total global climate finance using data from both public and private sources, as well as by factoring in export credits. Public financing through bilateral financing agreements between nations and Multilateral Development Banks (MDBs) made up 71 percent of climate finance from 2013-2014, amounting to $40.7 billion. Meanwhile, private capital mobilization made up 26 percent of total estimated climate finance with a total of $14.7 billion. Export credits represent the remaining three percent at around $1.6 billion.
The report estimates that between 2013 and 2014, countries reported a total of $22.8 billion in bilateral climate finance to the United Nations, an increase of 57 percent from 2011-12, when the total was $14.5 billion. Through discussions with key donor countries representing more than 80 percent of the overall increase in funds, it was found that the increase was driven by further allocation of funds toward climate change, as well as a “widening” of financial statistics. This widening allows more non-traditional sources of climate finance to be included in estimates, such as Other Official Flows.
Interestingly, the report notes that over 11 percent of cases of bilateral climate financing were "south-south," or from one developing nation to another. These include sustainable development efforts by the New Development Bank BRICS (a multilateral bank operated by Brazil, Russia, India, China and South Africa) and the Asian Infrastructure Investment Bank (AIIB) led by China. Loans from these entities can be significant, and the report states that they have a "critical role" in the transition to a low-carbon and resilient future.
In developed countries, state-supported export credits saw a small increase from $1.2 billion in 2013 to $1.6 billion in 2014. These credits are awarded by official export credit agencies to help domestic companies take on the risk of exporting goods and services to developing countries. The report focused exclusively on the renewable energy sector, as there is not enough data from all OECD member nations regarding other sectors. The wind sector has claimed the lion's share of export credits, with 72 percent of all renewable export credits, followed by the hydropower sector with 22 percent. Although export credits could finance climate change mitigation and adaptation projects, the report found that they have not yet been used in this way.
Beyond the OECD and CPI's assessment of the current status of climate financing, there has been discussion regarding what level of financing is truly needed to help developing countries mitigate and adapt to climate change. Is the $100 billion a year goal enough? The Global Commission on the Economy and Climate (GCEC), of which the CPI is a partner, reports that in order to reach a low-carbon scenario, there must be global infrastructure investment of around $93 trillion between 2015 and 2030. While this amounts to investments of more than $6 trillion per year, the GCEC report shows that $89 trillion in investments will already happen under current policies, so there only needs to be additional investment of around $267 billion per year. However, the World Bank puts the figure between $700 billion and $1 trillion per year, or at least $369 billion more than the $331 billion in climate finance currently taking place every year. This is more than three times higher than the agreed upon annual $100 billion goal.
Author: A. James Richmond
- "Climate Finance in 2013-14 and the USD 100 billion goal," OECD Report
- "Finance for climate action in developing countries reaches USD 62 billion in 2014, says new report," CPI Press Release
- Secretary of State John Kerry’s Statement on the OECD Report
- "Seizing the Global Opportunity," Global Commission on the Economy and Climate Report
- "Almost two-thirds of climate fund for developing nations already pledged," The Guardian