Rich Countries Fail to Deliver on USD 100 Billion Climate Finance Pledge in 2022

Rich countries claimed they provided nearly USD 116 billion in climate finance to developing nations in 2022. However, Oxfam International reported that the actual support was not more than USD 35 billion. This discrepancy has further strained trust between developed and developing countries, which is crucial for effective climate action.

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Climate Finance Commitments

At the 2009 UN climate conference in Copenhagen, wealthy nations pledged to provide USD 100 billion annually from 2020 to help developing countries tackle climate change. Despite this promise, delays have persisted, causing friction during annual climate negotiations. In May, the OECD stated that developed countries had met this goal by providing nearly USD 116 billion in climate finance in 2022.

However, Oxfam's analysis revealed that almost 70 per cent of this amount was in the form of loans, many at profitable market rates. This has added to the debt burden of already indebted countries. Oxfam estimated the true value of climate finance provided by rich countries in 2022 to be between USD 28 billion and USD 35 billion, with only up to USD 15 billion allocated for adaptation.

Impact on Developing Nations

The gap between financial promises and reality continues to undermine trust between nations. This trust is essential as many countries' climate actions depend on this finance. Chiara Liguori, Oxfam GB's Senior Climate Justice Policy Advisor, stated, "Rich countries have been short-changing lower income countries for years by doing climate finance on the cheap."

Oxfam's figures reflect climate-related loans as their grant equivalents rather than face value to gauge the real financial effort of rich countries. The organisation also considered the difference between loans at market rates and those at preferential terms while accounting for overly generous claims about the funds' climate-related significance.

Need for Grants Over Loans

Liguori emphasised that low- and middle-income countries should receive most of the money as grants. These grants need better targeting towards genuine climate-related initiatives that help them adapt to the impacts of the climate crisis and move away from fossil fuels. "At the moment they’re being penalized twice," Liguori said. "First, by the climate harm they did little to cause, and then by paying interest on the loans they’re having to take to deal with it."

According to new data from the OECD, rich countries claimed they mobilised USD 115.9 billion in climate finance for Global South countries in 2022. Nearly USD 92 billion of this amount was public finance, with 69.4 per cent provided as loans in 2022, up from 67.7 per cent in 2021.

Future Climate Finance Goals

Climate finance will be a central topic at the UN climate conference in Baku, Azerbaijan. The world must agree on a New Collective Quantified Goal (NCQG) — a new annual amount developed nations must mobilise starting in 2025 to support climate action in developing countries. However, reaching a consensus on NCQG will be challenging.

Some wealthy nations argue that high-emission and economically capable countries like China and petro-states should also contribute to climate finance. Developing countries cite Article 9 of the Paris Agreement, which states that climate finance should flow from developed to developing nations.

Developed nations want funds prioritised for those most vulnerable to climate impacts, such as least developed countries and small island developing states. Developing nations insist that all deserve support and demand clarity on what constitutes climate finance. They argue that development finance should not be counted as climate finance and oppose funds being provided as loans.

According to UNEP, adaptation funds required for developing countries are estimated between USD 215 billion and USD 387 billion annually this decade. Oxfam's estimates are based on research by INKA Consult and Steve Cutts using OECD datasets for 2021 and 2022.

The ongoing discrepancies between pledged and actual financial support highlight a significant challenge in global efforts to combat climate change. Ensuring accurate reporting and equitable distribution of funds remains critical for building trust and achieving meaningful progress in addressing the climate crisis.