G77 Paves the Way for Robust Climate Finance Accounting

6 May 2018

For too long donor reports on climate finance have been based on a mishmash of approaches and some questionable methodologies.  This resulted in over-counting support in many donor reports.  Reaching an agreement on a new set of rules at COP24 presents a long overdue opportunity to address this and build confidence that the US$100 billion commitment will be met in a fair and robust way.

ECO congratulates the G77 on providing a comprehensive, clear, and constructive submission which can help pave the way for an agreement on accounting standards. Importantly, the submission includes a proposal that Parties shall report both the face value and the grant-equivalent of their climate finance, as well as proposing that only the grant-equivalent shall be counted towards climate finance obligations.

This is a major point because a high proportion of climate finance is provided in the form of loans, which most donors are counting at face value. According to Oxfam’s recent analysis of 2015-16 numbers, loans are estimated to be 2/3 of overall public climate finance. The fact that they are being counted at face value is overstating the net assistance to developing countries by around an estimated $20 b per year (2015-16).

The Third Biennial Reports shows that France provided only 7% of its climate finance as grants, Spain 18%, Germany 36%, and Japan somewhere between 8% and 28%. Reporting the non-grant instruments at their full-face value means donors supplying a high proportion of loans can claim credit for providing more climate finance than they are, in comparison to countries providing mainly grants €“ such as the UK, the Netherlands and Sweden.

For aid spending, donors have already agreed on headline ODA figures to be reported on a grant-equivalent basis from next year. Rules for reporting to the UNFCCC need to follow suit. If counting loans at full-face value is no longer deemed acceptable for aid, then it should not be acceptable for climate finance either.