Climate financing adds to poor countries’ debt pile: Oxfam

The money being pledged by developed countries to their developing counterparts as climate assistance was making them sink into ever-increasing debt, for a crisis not of their making, a new report by global nonprofit group Oxfam has said.

Developed countries had committed in 2009 to mobilise $100 billion every year by 2020 to help developing countries cut their carbon dioxide emissions and adapt to the effects of climate change.

But around $47 billion of the total climate financing of $59.5 billion pledged in 2017-2018 was forwarded as loans, according to Oxfam’s Climate Finance Shadow Report 2020.

In total, developed countries gave only $12.5 billion in the form of grants, $22 billion in loans with better-than-market rates and around $24 billion in loans with standard market rates.

Only a fifth (20.5 per cent) of climate financing went to Least Developed Countries (LDCs) and just three per cent to Small Island Developing States (SIDS), Oxfam estimated.

Only a quarter of funding was spent helping countries adapt to the impacts of the climate crisis. Sixty-six per cent of funds were spent helping countries cut emissions or climate mitigation.

The report did note that the amount of funding for climate adaptation had increased. It had risen to $15 billion per year in 2017-2018 from $9 billion per year in 2015-2016.

But with the bulk of climate financing still flowing to mitigation, “a significant scale-up in adaptation financing was needed” if the 2015 Paris Agreement commitment to achieve a balance between adaptation and mitigation financing was to be realised.

Only around a third of climate financing projects in 2017–18 were designed to respond to the different needs of women and men, according to the report.

There was a lack of data on how much climate financing was being spent at the local level in partnership with local communities. The limited data that did exist, suggested it was very little.

Providing climate financing in the form of loans and other non-grant instruments “risked contributing to the unsustainable debt burdens of many low-income countries”, the document said.

Over 550 global civil society organisations had called on G20 finance ministers to cancel countries’ debts in the wake of the novel coronavirus disease (COVID-19) pandemic. Instead, they suspended debt repayments for six months.

Recommendations

Oxfam said climate financing could be funded through a range of sources, including redirecting some fossil-fuel subsidies which cost governments over $320 billion in 2019 alone.

Climate financing needed to be reported in a way that better reflected its real value to developing countries and the real effort made by developed countries, the report suggested.

Parties at the 26^th Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) that will take place in November 2021 should agree to a number of things, the report urged.

They should agree to accelerate the scale-up of grant-based financing for adaptation and reduce the share of climate financing provided in the form of loans. They should also rule out non-concessional climate financing and accounting standards under the UNFCCC for all donors.