Climate funding: What you need to know about the data

CANBERRA — In 2009, high-income countries committed to mobilizing $100 billion per year in climate finance by 2020, with the goal of supporting low- and middle-income countries in combating the challenges of climate change. In assessing the data behind the commitment, loosely defined terminology and timelines are the greatest barriers to determining if this achievement has been made or will be made this year. Primary sources of data are the biennial reports to the United Nations Framework Convention on Climate Change by countries supporting this commitment. But official development assistance — or ODA — as reported to the Organisation for Economic Co-operation and Development, is also an important way to monitor progress, with the two datasets sometimes providing inconsistent results. Raimund Zühr and Sinead Dwyer from SEEK Development have been delving into OECD data since 2015 to create country profiles on climate funding through the Donor Tracker website. They told Devex the data raises more questions than answers. “The data that exists on climate finance is messy and difficult to understand,” Zühr said. “But the data we have — which is not perfect — already shows that the donor community is not doing enough.” Donor rhetoric on climate action has not led to an increase in climate-related programs, Dwyer said, adding that the share of ODA has been “pretty constant at around 20%.” “So four-fifths of the money going into development assistance isn’t even significantly related to climate change,” she said. After investigating the data, Zühr and Dwyer shared with Devex important lessons they have learned about climate financing to improve understanding of the challenges and limitations. Climate financing is loosely defined — and some countries are taking advantage of it Climate is a crosscutting area of development assistance, making it difficult to assign a definitive “climate” value in ODA data. But this is further challenged by loose definitions that can make comparing data between countries problematic. OECD uses a methodology implemented by Development Assistance Committee members and other bilateral and multilateral donors to assign programs a rating of “principal,” “significant,” or “0” — the lowest score — in its targeting of climate objectives. A project is marked “principal” when climate change mitigation or adaptation is explicit in the design and purpose of the activity. It is rated “significant” when climate change mitigation or adaptation is explicitly indicated in its purpose but is not the main driver of the project. In addition, some projects are not assessed for climate change drivers, although this has been reduced in the most recent data. “One of the big issues when working at the project level is if you are doing a massive project that is principally climate-related, you can tag all that money as being climate-related — which would be a generous way of looking at it,” Dwyer said. “The climate marker used is subjective, and there is going to be variation across countries and how they perceive it.” While the OECD does perform quality assurance on the data, Dwyer said there were inconsistencies with UNFCCC-reported data, creating a challenge for analysts outside the donor system in understanding and interpreting the differences. “One of the things I find difficult getting my head around is how these numbers don’t match up to what is reported by countries on their climate financing,” she said. “Countries use OECD DAC data, but they cut it in a different way so they can report all the principal funding and some of the significant funding. But this does tell us the OECD numbers are overstating how much money is actually flowing into climate finance.” Climate finance is also meant to be new and additional money, according to the 2009 pledge, to ensure donors are not redistributing funds from other areas of development assistance. But even this definition, Dwyer said, has seen different interpretations to suit donor purposes. “Australia, for example, reports their funding as ‘new and additional’ because it is part of new budget appropriations for a new year, which is a creative definition of ‘new,’” she added. Despite these challenges, OECD projections indicate donors are on track to meet the 2020 targets — a notion that Zühr and Dwyer cannot confirm. “There is no conclusive evidence that we have got there, but as the agreement was made in a fuzzy enough way, it is also hard to say we haven’t,” Dwyer said. Data is not timely The most recent data available from the OECD on climate finance — covering both donor contributions and private financing — ends with 2018. But as this data covers disbursed funds, what it may be showing are programs and decisions that were being made in 2016 or earlier. This means that data supporting transparent reporting on climate initiatives announced today may be four years away, making it hard to judge the actions of donors critically. “To be fair to the donors, it is important to consider a balanced angle,” Zühr said. “The latest data is 2018, and we will see changes of new announcements going forward.” He cites the example of Germany as a country making large policy announcements recently that may not be seen for years. Because of this, Zühr suggested that it is important to assess data as well as policies. But the question remains whether donor countries have left it too late to support climate targets. “One of the things I find difficult getting my head around is how these numbers don’t match up to what is reported by countries on their climate financing.” --— Sinead Dwyer, SEEK Development “The reality is that climate finance numbers are not anywhere where they need to be in 2018, by which time we should be seeing a change in donor budgets,” Zühr said, with Dwyer adding that there is no evidence that climate action has been streamlined as expected. “In the U.K., for example, they say they are trying to align all of their climate finance,” she said. “But still, the actual number going towards climate finance is tiny: Only 30% of their ODA is positively favoring climate. And this is from a country performing better than others.” Climate finance can be countered by funding fossil fuel projects What the climate finance data also misses is the negative impact of funding fossil fuel projects, which Zühr said is an important consideration for overall progress. Last month, the OECD reported that 2019 data showed a 38% increase in funding of fossil fuel projects across 44 advanced and emerging economies, following a decline since 2013 — countering much of the funding and action supporting climate change adaptation and mitigation. “It is important to know not just the climate figure for a country, but what they are doing in other sectors that might be detrimental to climate objectives,” Zühr said. “That requires an in-depth analysis of the entire ODA portfolio that is not easy to answer quickly. But it is a necessary detail to consider when we are talking about how countries are responding to and supporting action on climate change.” Through its climate profiles, Donor Tracker is assisting in bringing the data together. But Zühr said these can only be as transparent as the donors.