• Wed. Apr 24th, 2024

COP28 debates climate finance amid inflated accounting ‘mess’

World leaders meet at the UN climate summit in Dubai on Monday (4 December) to hammer out deals to help bridge the climate finance gap. Less wealthy nations in particular lack the necessary funding to build solar and wind power, lay out modern power grids and protect against the worsening effects of climate change.

At the opening ceremony of COP28 last week, major powers agreed to finance a Loss and Damage fund to help low-income countries deal with the effects of global warming.

It was hailed as a breakthrough. “The early adoption of the fund creates positive momentum,” said EU climate commissioner Wopke Hoekstra shortly after the agreement was made public.

But, as one onlooker reportedly remarked the fund as it stands is “clearly inadequate.”

The world’s wealthiest nations had collectively agreed to put €393m in the fund. Yet, by some estimates, annual climate damages in the ‘Global South’ already amount to €400bn a year. One thousand times what is currently in the fund.

This is just one example of climate finance falling short. It is estimated that overall investments in climate mitigation and adaptation needs to rise by €3.5 trillion a year by 2028.

Closing the gap between what is needed and what is actually distributed is one of the main topics in Dubai on Monday. One nagging problem, however, is that no one really knows how much is actually being spent.

Standardising reporting rules will also be discussed on Monday, but no agreement is expected until next year’s climate summit at the earliest.

Meanwhile, the G20 has called for ‘an ambitious, transparent and trackable’ climate finance goal in 2024 from a “floor” of at least $100bn [€90bn].

This would extend the existing $100bn pledged annually by countries between 2020 and 2025. The OECD hinted the target was met in 2022 — two years after the deadline — but no public data is available to confirm this.

“Data sets are such a mess. There is no clear definition of climate finance,” said David McNair, executive director of the ONE campaign, a global campaign to end poverty.

He retraced the data with a group of researchers and found that two-thirds of the commitments reported so far have yet to be disbursed — or have little to do with climate.

Part of the problem is that countries self-report, resulting in very loose interpretations of what constitutes climate finance.

Japan for instance reported investments in a coal mine as climate finance. Italy registered investments in a chocolate store as climate investment.

The data trouble extends to the OECD, which monitors aid flows using so-called Rio Markers.

A marker is a way to flag projects that support a policy objective (like climate change). But this system counts every project as 100 percent climate finance, even when the climate component of the investment is small.

This means official climate finance data is significantly inflated.

By retracing the projects reported by countries and multilateral institutions, the researchers found that out of the $616bn [€566bn] in reported spending, only $204bn was actually distributed.

The results have been shared with the OECD. “We hope they will take this seriously,” said Mcnair.

Puffed-up figures suit wealthier nations eager to hit their climate finance targets. But people in low-income countries often on the climate frontline are “egregiously affected,” Mcnair said.

Nigeria received 76 percent less [or €4.1bn] than was promised between 2013 and 2021, Senegal 66 percent less [€2.6bn] , and Kenya 52 percent less [€4.1bn].

The overall picture is the same. The world’s 20 most climate-vulnerable countries, including Somalia, Eritrea and Afghanistan, received €1.6bn in climate finance in 2021—just 6.5 percent of what is needed annually.

The amount the Democratic Republic of the Congo needs to reach renewable energy targets and protect against floods and droughts is €4.3bn a year—over 15 times the national health budget.

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