OECD: Aid for tackling climate change in poor countries is in fact mostly non-concessional loans to reduce emissions

According to the latest report issued by the Organization for Economic Cooperation and Development (OECD), money distributed amongst underdeveloped countries by its member states to curb climate change serves mostly to cut emissions rather than to adapt to those changes.

In 2018, 36 OECD countries channeled US$78.9 billion to address climate change in developing countries. The report found that only 21% of this amount was allocated to adapt to climate change impacts while in 2017 this was 19%. Thus, more than two-thirds of funding is used for efforts to reduce emissions although beneficiaries have called on many occasions for this to be allocated more fairly and for more finance to be channeled to decreasing the impacts of climate change.

The total amount of financial resources grew by 11% compared to 2017 which is in line with the Paris Agreement requirements with the majority of the money being publicly sourced and only 18.5% coming from the private sector.

Furthermore, the report found that the vast majority of this money had not been donated but was made available in the form of loans. Between 2013 and 2018 the level of ‘climate’ loans made by OECD countries grew from 52% to 74%, while the number of grants reduced from 27% to 20%. As observed by Oxfam, half of these loans were non-concessional which the charity’s representatives deem to be scandalous.

“Climate finance is a lifeline for communities facing record heatwaves, terrifying storms, and devastating floods. Wealthy countries should stop inflating their figures with loans that will be repaid, and start increasing grants, especially for the most vulnerable countries to use for adaptation,” said Tracy Carty, senior policy advisor on climate change at Oxfam.

Like the public sector, the loans made to projects by the private sector focused mainly on cutting emissions rather than adapting to climate change.

In addition, the OECD report indicated that middle-income countries received roughly 70% of public financial resources while the poorest states benefitted from only 14% and Small Island Developing States (SIDS), which are particularly vulnerable to climate change impact, received only 2%.

When considered the financial policy of OECD countries, and bearing in mind which states contribute the most to global warming, the situation does not seem to be particularly fair. The poorest countries are those most affected by climate changes and are also those where emissions are at the lowest level.

According to the Paris Agreement, wealthy nations are obliged to deliver $100 billion in support every year between 2020 and 2025 to help the poorest states to address climate change. Unfortunately, the OECD report did not reveal if this commitment had been fulfilled and this may not be disclosed before the first quarter of 2022. However, although this commitment remains in force, the effects of the COVID-19 pandemic cannot be underestimated since it has affected both developed and developing countries and may therefore significantly impact the financial policies of the former leaving them unable to meet their climate funding obligations.