Rich countries have acknowledged their role in the crisis and their responsibility to help other countries confront the prohibitive cost of managing emissions and the effects of climate change. They committed, first in 2009 and again in 2015 under the Paris Climate Agreement, to a collective goal: $100 billion a year in grants, loans, private sector investment and more by 2020.
More than a decade after the first pledge, countries have yet to deliver on their promises. It fell $16.7 billion from its $100 billion target in 2020, and is expected to miss it again when contributions for 2021 and 2022 are calculated, according to OECD estimates. There are no penalties for missing the target, except for criticism from those who say governments are not doing enough to combat global warming.
This failure has helped keep climate finance high on the agenda at annual United Nations climate conferences, such as last year’s COP27, which was held in Sharm El-Sheikh, Egypt.
There, anger and concern about the failure of rich countries to meet the financing target helped developing nations win a key concession: developed countries agreed to work on creating a new fund to cover the costs of damage already caused by climate change. To date, most funding has focused on reducing emissions or adapting to expected changes.
“If we tell ourselves we’re spending money and investing in our future in a way that we haven’t, then we’re courting disaster.”
World leaders have acknowledged that damage from climate change is already rapidly outstripping these countries’ capacities to adapt and have begun discussing a new climate finance target that could, it has been said, run into trillions of dollars. At this year’s COP 28 in Dubai, they will discuss the size of the target, who should contribute and in what period of time, and any rules governing how it is delivered.
Some officials from potential recipient countries say that before more money can start flowing, clearer definitions of what counts as climate finance and more transparency in the reporting of contributions are needed. More than 100 times since 2012, developing countries or groups working on their behalf have called for such improvements, according to a Reuters review of UN reports, climate meeting videos, and climate negotiation handouts.
“If we tell ourselves we’re spending money and investing in our future in a way we don’t, we’re seizing the disaster,” said Matthew Samuda, a minister in Jamaica’s Ministry of Economic Growth and Job Creation.
“People deserve more.”
Worldwide, donors have reported that more than $25 billion in funding they claim is related to renewable energy. At least another $5.6 billion has been earmarked for projects they claim will help countries prepare for or respond to climate-related disasters. Reuters found that many of their reports contained too little detail to verify these claims.
Reuters has documented billions more going into projects involving fossil fuels or other initiatives that have little or nothing to do with reducing emissions or adapting to the effects of climate change.
When Italian chocolate company Venchi opened dozens of new stores in Japan, China, Indonesia and elsewhere in Asia, it got help from SIMEST, a public and private company that helps Italian companies expand abroad. Italy has requested a $4.7 million equity investment in climate finance.
A SIMEST official said the agency’s work does not focus on climate change and that it is not involved in climate finance reporting in Italy. A spokesman for Italy’s Ministry of the Environment and Energy Security, which is responsible for UN reporting in the country, said the project contains a climate component but declined to go into detail.
The United States has agreed to lend $19.5 million to developers of the Marriott Hotel franchise in Cap-Haitien, Haiti. At the time of the agreement in 2019, plans called for an improvement to Habitation Jouissant with more rooms, an infinity-edge pool, a rooftop restaurant, and better sports facilities. Now developer Fatima Group says it is remodeling the project, which will become a Courtyard by Marriott property.
The hotel overlooks the sea, but its location on a hillside means that it is not threatened by sea level rise or flooding, said Fatima Group Chairman Fred Billiard. He said the Fatima Group intends, however, to build “climate-resilient infrastructure”. A State Department spokesperson said the hotel loan counts as climate financing because the project included rainwater control and hurricane protection measures.
A Marriott spokesperson said the company is not involved in the franchisee’s financing arrangements and had no role in the US decision to consider the loan as climate financing.
Belgium supported “La Tierra Roja”, which is about a former rugby player who works for a company that cleans forests for the paper industry in Argentina. He falls in love with an environmental activist who protests toxic chemicals polluting the water produced by a paper-making company.
Belgium is considering its contribution of $8,226 — part of a larger grant for the film — to climate finance because the film touches on deforestation, a driver of climate change, said Nicolas Virens Gevert, a spokesman for the Belgian Ministry of Foreign Affairs, Trade and Development.
Some countries count projects that never happened among their climate finance targets. France reported a $118.1 million loan to a Chinese bank for environmental initiatives, as well as loans totaling $267.5 million to upgrade a metro system in Mexico and $107.6 million to improve ports in Kenya. According to the French Development Agency, each project was later canceled without any money being paid. Similarly, the US reported $7 million in insurance coverage for a hydroelectric project in South Africa that never happened.
US Climate Funding Recipients
The United States reported $9.5 billion in grants, loans, and other contributions to developing countries from 2015 to 2020.
Source: Reuters analysis of climate finance data for countries reported to the United Nations
French and US officials involved in the UN reports told Reuters that they document funding in the year that was committed and do not review the reports to correct them. There are no rules requiring them to do this.
By far the largest player in climate finance is Japan. And according to a Reuters review, it has lent at least $9 billion for projects that will continue to rely on fossil fuels. At least some of these projects increase emissions rather than reduce them, including a new 1,200-megawatt coal-fired power plant that Japanese companies are building on Matarbari, an island off the southeastern coast of Bangladesh. Japan has loaned Bangladesh at least $2.4 billion in climate financing for the plant, and it is expected to be operational in 2024.
Sources of Climate Finance in Bangladesh
Rich countries reported $9 billion in loans, grants and other contributions to Bangladesh from 2015 to 2020 as part of their pledge to help developing countries reduce emissions and manage the effects of climate change. This includes $2.4 billion in loans from Japan to build a new coal-fired power plant.
Source: Reuters analysis of climate finance data for countries reported to the United Nations
When Japan helped Bangladesh plan the Matarbari project more than a decade ago, Bangladesh’s power system was experiencing a daily power shortage of 2,000 megawatts, more than a third of its demand. This led to long and frequent periods of power outages, which sparked protests and stunted economic growth. Mohammad Hussain, head of Power Cell, a division of the Bangladeshi Ministry of Energy, said the new plant will help eliminate the constant power shortage, which leads to planned blackouts.
The plant will add 6.8 million tons of carbon dioxide to the atmosphere each year, according to documents from the Japan International Cooperation Agency (JICA), which helped plan and fund the project. That’s more than the city of San Francisco reported in emissions for all of 2019.
Sachiko Takeda, a spokesperson for the Japan International Cooperation Agency, said Japan views Matarbari as a climate change project because it uses Japanese technology that generates more energy with less coal, resulting in lower emissions than conventional energy. JICA documents describing the project say that Matarbari will emit around 400,000 tons of carbon dioxide equivalent emissions per year compared to a typical plant of its size.
Takeda said Japan’s foreign ministry, not JICA, is responsible for reporting on climate financing to the United Nations.
Hiroshi Onuma, senior deputy director of the Climate Change Department of the Japanese Ministry of Foreign Affairs, said that Japan is making calculations to reduce emissions for projects, and a team from the Ministry of Foreign Affairs is evaluating projects before making a decision to report them to the United Nations as climate funding. He declined to explain why Japan considered a coal plant as a climate project.
Funding large projects such as Matarbari has helped Japan carve out a claim as the largest financier of climate finance. It has reported $59 billion in grants, loans and equity investments from 2015 through 2020 and its intention to continue with similar levels of funding through 2025. That’s $14 billion more than Germany, which is the second-largest reported financier over the same period. .
“This commitment stands out as a significant amount among other developed countries,” the Japanese Ministry of Foreign Affairs said in a June 2021 press release. “Japan will continue to lead global efforts to address climate change.”
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