INSIDER: Getting to $100 Billion in Climate Finance: How Close Are We?
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We’re now halfway towards the 2020 deadline – set in 2009 – for developed countries to mobilize $100 billion a year in climate finance. It’s essential to show that developed countries are keeping their commitments so developing countries know they have support for ambitious action when countries meet to forge a new global climate agreement in Paris this December.
So with five years to go, how close are we to $100 billion a year? And how could we get there? With the Organization for Economic Co-operation and Development releasing a report on progress towards the goal today, now is a good time to explore different ways to get to the $100 billion goal.
Visualizing the Climate Finance Pathway
We’ve created an interactive visualization based on WRI’s Getting to $100 Billion working paper. Using a baseline of 2012 (the most recent year donors reported climate finance to the UN), you can select from four possible finance sources to count:
- developed countries’ support reported as climate finance
- multilateral development banks’ climate funding (pro-rated by developed countries’ capital shareholdings in these banks, and subtracting any amounts that go to developed countries)
- Official Development Assistance (ODA) that specifically targets climate change (minus any that was already reported by developed countries as their climate finance)
- private climate finance mobilized by public funds
Leverage factors for mitigation and adaptation can be adjusted to show the amount of private investment mobilized by each dollar of public finance provided. Finally, the rate of public finance growth can be adjusted. Growth in public finance naturally entails political effort, so climate finance will not increase without engagement and leadership. The default settings are based on Scenario 3 in WRI’s paper, using moderate private finance leverage factors and public finance growth rates (the upper limit of the sliders represents the highest rates used in the paper).
Unless you assume extremely high and uncertain leverage factors for private finance, more public finance commitments are needed to reach the $100 billion.
How Do Current Commitments Measure Up?
Last week at the General Assembly in New York, France and the UK announced climate finance commitments for 2020. France will raise its support from its current level of €3 billion ($3.3 billion) a year to €5 billion ($5.6 billion) in 2020; the UK will increase from around £880 million ($1.3 billion) presently to at least £1.76 billion ($2.7 billion) in 2020. Germany had already announced in May that it would double its current provision of around €2 billion ($2.2 billion) a year to €4 billion ($4.5 billion) a year by 2020. Meanwhile, the Asian Development Bank (ADB) announced it would double its climate finance from around $3 billion a year currently to $6 billion in 2020, and the European Bank for Reconstruction and Development (EBRD) committed to increase their climate finance to €18 billion ($20 billion) over the next five years.
The new pledges from developed countries total around $6 billion additional finance in 2020. WRI’s paper suggests an additional $14 billion a year is needed by 2020. This is an indicative amount, based on assumptions of moderate private sector leverage factors: if private sector leverage is lower, then more public finance would be needed; if private finance leverage is proven higher, then public finance provision may not need to grow as much. Some developed countries have also increased their finance since 2012, including through pledges to the Green Climate Fund, which also reduces the gap. However, to build confidence that the $100 billion goal will be met, these donors need to come forward with indications of the level of their finance ambition in 2020. Likewise, other multilateral development banks need to clarify their plans soon.
More Money, More Clarity, Fewer Problems
For finance ministers meeting this week in Lima, three things are essential to progress toward the $100 billion goal:
They must clarify what is being counted towards the target, and develop robust methodologies to account for mobilized private sector investment. Developed country donors set out common principles in September for how they will report on their climate finance, though many methodological details are still to be agreed. The $100 billion commitment is a partnership between contributor and recipient countries, and both need to have confidence that the figures announced are being delivered effectively.
Developed countries and multilateral development banks who have yet to do so need to come forward with ambitious finance announcements that can contribute to reaching the $100 billion goal. Donors should be transparent on the nature of their support, detailing the type of finance provided, and whether it will be earmarked for specific activities, noting that developing countries have emphasized a particular need for grant-based finance for adaptation.
They must establish a clear process for monitoring progress, continue discussions on how to improve reporting of flows and assessing the effectiveness of finance and identify ways to further scale up funds, including through innovative and alternative sources. In addition to mobilizing climate finance, governments also need to take action to shift the trillions of dollars in broader public and private investment flows away from high emissions activities and toward climate solutions, and from risky to resilient practices.
The finance announcements in New York last week were a start, but donor countries need to do more to build confidence. Lima is an opportunity for ministers to take stock of progress so far, come forward with ambitious new commitments, and map out a credible approach for reaching the goal. We hope our interactive visualization will be useful for governments and observers in identifying a credible pathway for meeting the $100 billion target.