Climate Finance Abracadabra – ECO’s Watching You!

27 June 2019

ECO is watching how developed countries progress on their climate finance in light of the annual US$100bn goal. One way to keep track of the direction of provided mitigation and adaptation finance is using the climate-related development assistance as reported to the OECD’s DAC, even if the climate finance reported to the UNFCCC doesn’t necessarily match this data. ECO is fully aware of some challenges already identified with the methodology. Different analyses have shown that there is a significant over-reporting in applying the Rio Markers, which indicate the level of climate relevance. For example, indicating that the “principal” objective (Rio Marker 2) of a project is either adaptation or mitigation relevant, means 100% of the budget will be counted as climate relevant. When giving a project Rio Marker 1 (‘significant”), 40 to 50% of the project is usually counted as climate finance (OECD member countries” practice varies), even though it can have only little detectable climate relevance. 

Where the European Commission, Sweden, Norway and others are scaling the Rio-marker 1 (“Significant”) with 40%, these “coefficients” differ across countries from 0% (Portugal) to 100% (Japan, Luxembourg, Greece, Slovak Republic, Slovenia, Poland and Iceland). This is a sad example of the lack of common reporting standards among OECD member states. Unfortunately, most of these countries did not indicate their coefficient (in BR3), except Iceland and Norway. The source for the other countries is the OECD-CPI report from 2015.

This over-reporting thus leads to an artificially-high amount of overall reported climate finance. The future common tabular format needs to explicitly include a column showing the climate-specific part of the budget for the projects. 

ECO has looked closer at 2017 figures, the most recently available ones, reported to OECD/DAC (based on funding commitments) and has found interesting results. There seem to be some magicians in certain countries which have managed to massively increase the finance reported with the climate markers. Most interesting are the reported numbers on adaptation and the increase in projects marked with Rio Marker 2. The reporting from Italy shows a 5-fold increase. EU institutions (excluding the European Investment Bank) €” the largest contributor in absolute terms€”had an increase of more than 70% in 2017 compared to 2016. So can we assume that in one year the EU institutions have increased their 100% adaptation-relevant projects by 70%? The list of other donor countries that increased their funding by more than 100% includes Norway, Spain, Portugal, Poland and Luxembourg. 

ECO would applaud if these numbers reflected an actual increase in adaptation finance from these countries. However, as we approach 2020, some countries might feel the need to round up some numbers to “fulfill” the US$100bn target. Developed countries will get to their next climate finance reporting under the UNFCCC by the end of 2019, and the OECD/DAC numbers are one important input to that. ECO suggests that developing countries ask their counterparts whether this is real money or just advanced (almost magical) accounting exercises. How has this increase in climate finance been felt on the ground where it is highly needed? Navigating the climate crisis would be a lot easier if reported support actually reflected the real world.

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