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Development aid commitments by European Union countries are at “increasing risk” of being greenwashed to meet climate finance promises to poorer nations that could be a “deal-breaker” for an international agreement to cap global warming later this month.
Developed countries have a goal to mobilise $100 billion a year by 2020 from both public and private sources of finance. A substantial part of that goes into the Green Climate Fund, a pledge to win developing countries’ support at the UN Climate Change Conference (COP21) in Paris.
COP21 aims to limit global warming to two degrees above pre-industrial levels. Developing countries argue they need money from richer countries, whose industrialisation contributed the most to warming, to shift to greener economies.
But many developed countries could relabel existing aid commitments to qualify as climate finance, despite them having an indirect environmental impact, Geneviève Pons-Deladrière, director of WWF’s European Policy Office said.
“There is an increasing risk that they are looking to try relabel existing aid ― we see that already,” said Lies Craeynest of Oxfam EU, who added climate finance could make or break a global agreement.
Agricultural projects receiving funding could simply be rebranded as climate adaptation, she said. The whole pot of aid money should be increased rather than just shifting around existing cash.
Climate Action Network director Wendel Trio warned that relabelling existing aid would not convince developing countries to sign up at the COP21 because they would take a hit in other areas, such as health.
Climate finance could also fall victim to the same accounting practices ― such as counting loans with interest as aid or including domestic administration costs ― that have bedevilled Official Development Assistance (ODA).
It was impossible to say that countries were cooking the books due to a lack of transparency and accountability, Craeynest said, but there was a risk they could do so.
France, the COP21 host, is the only EU country to include loans in its contribution to the Green Climate Fund. $758 million (35%) of its $1 billion contribution must be paid back, albeit at low interest.
In April, the European Commission said the EU would miss its 2015 ODA target of 0.7% of Gross National Income (GNI). Public climate finance is counted as ODA. Germany counts loans to the full value towards their ODA target.
Only the UK, Sweden, Luxembourg, and Denmark surpassed the 0.7% target last year. France, Ireland, the Netherlands, Spain and 11 other member states’ percentage contribution actually dropped.
Member states have now reconfirmed the 0.7% goal, as part of the Sustainable Development Goals, but hope to hit it by 2030, 15 years late.
Defining climate finance
There is also no agreed definition of what constitutes climate finance among developed countries, with different EU member states qualifying it in different ways.
The OECD is working towards creating guidelines to better define climate finance. A senior EU diplomat said the OECD accounting methodology would “put leeks with leeks and carrots with carrots”.
“It will avoid greenwashing by simply recycling the same funds. There is at least at the EU and OECD level a desire to have a common methodology on what is counted as climate finance. And that’s a real novelty,” the diplomat said.
European officials also hailed the estimated $62 billion in climate finance mobilised by developing countries in 2014. The figure, announced in October during talks in Lima, means rich countries are now more likely to reach the goal of providing $100 billion a year by 2020 to help poor countries combat and adapt to climate change.
“These are grants, loans and a mix between grants and loans,” the EU diplomat said when asked how the $62 billion was broken down. “In any case, the figure of 62 billion was clearly announced in Lima. And this figure corresponds to the OECD accounting methodology,” the diplomat said.
But “the chances of a successful Paris climate deal depends on developed countries keeping their past commitments,” said Climate Action Network Europe’s Trio.
Convincing developing countries that the finance will be scaled up consistently after 2020 could be make or break the deal, said Oxfam’s Craeynest.
Leaked finance ministers’ agreement
EU finance ministers will meet next Tuesday’s (10 November) at the Economic and Financial Affairs Council in Brussels.
According to draft conclusions for the meeting seen by EurActiv, ministers will recognise the importance of climate finance to securing an agreement in Paris from 30 November.
Barring changes, the conclusions confirm that the EU will continue to provide public money for climate finance after 2020.
The document cites in brackets ― signalling possible changes ― that the bloc will give about €13.6 billion in climate finance in 2015, a figure not including development banks’ contributions. In 2014, member states and the EU gave €14.5 billion.
Trio said it was astounding that while the Council conclusions called for transparency and accountability in the disbursement of climate finance, the EU did nothing to increase it.
Oxfam, Climate Action Network Europe, and WWF want ministers to set out a concrete plan for climate finance, and how the funds would be paid.
“Finance ministers need to fill the enormous void on climate finance in the [COP21] negotiations, he said. Empowering the world’s power to cope with climate change and still grow economically was a precondition for an agreement and would help convince them to chip in climate finance after 2020,” he added.
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