By Sarah Colenbrander, Laetitia Pettinotti and Yue Cao
Executive summary
Developed countries have committed to providing and mobilising $100 billion of climate finance each year between 2020 and 2025. However, they fell short of this target in 2020 and 2021, and look likely to do so again in 2022. To date, failure to deliver on the climate finance goal has been laid at the feet of developed countries collectively, with little analysis going into which ones are primarily responsible for the gap, or even what constitutes a ‘developed country’.
This paper provides new evidence to apportion responsibility for the climate finance gap. We hope that our analysis will be able to enhance the accountability of those countries that are currently not providing a fair share of climate finance, thereby stimulating greater collective ambition. We further hope that the ideas this paper puts forward will be able to support the articulation of the new climate finance goal in order to improve both the quantity and the quality of climate finance going forward.
First, we allocate responsibility for the $100 billion goal among developed countries. For the purposes of this analysis, we define ‘developed countries’ narrowly as Annex II countries to the United Nations Framework Convention on Climate Change (UNFCCC), a definition that dates back to 1992 but is nonetheless the only relevant explicit country categorisation under the climate accords. To allocate responsibility among these countries, we use the methodology that we developed in the lead-up to 26th Conference of the Parties (COP26), which defines each country’s fair share based on their gross national income (GNI), cumulative territorial emissions since 1990 and population size (Colenbrander et al., 2021). In this paper, we apply our approach to more recently available climate data as well as to developed countries’ climate finance commitments going forward to 2025.
We find that only seven countries provided and mobilised their fair share of climate finance in 2020 (see Table ES1 in the PDF): Sweden, France, Norway, Japan, the Netherlands, Germany and Denmark. Meanwhile, looking forward to 2025, only four countries have made climate finance commitments commensurate with their fair share: Norway, Sweden, France and Japan. Germany and Denmark come very close (and may fall short only because of the specific framing of their climate finance pledges), while the Netherlands has made generous near-term commitments.
The US is overwhelmingly responsible for the climate finance gap. Having provided just 5% of its fair share in 2020, the US should ideally have provided and mobilised billions more to enable climate action in developing countries. Australia, Canada, Italy and Spain are also notable laggards, in both absolute and relative terms (see Figure ES1 in the PDF). Looking forward to 2025, the pledges Australia, Canada and the US have made continue to fall far short of their fair share. By comparison, Italy and especially Spain have shown a welcome increase in climate finance ambition.
The findings in Table ES1 and Figure ES1 illustrate the shortfall from $100 billion accounting only for Annex II countries’ bilateral and multilateral contributions. These understate a country’s climate finance flows, as they do not include multilateral development bank capital outflows and private finance mobilisation. Nonetheless, our findings usefully reveal the vast disparities in countries’ climate finance contributions and pledges relative to their fair share.
Recognising that the quality of climate finance is important as well as its quantity, we offer four metrics to assess the quality of developed countries’ climate finance provision: levels of concessionality, the balance between mitigation and adaptation finance, the balance between bilateral and multilateral finance, and the risk of double-counting. France and Japan – which both provided their fair share in 2020 – stood out for the relatively poor quality of their climate finance. These countries provide a very high share of their resources bilaterally and as loans, with only a small fraction going to climate change adaptation.
Climate finance is just one part of developed countries’ international public finance portfolio. It was always intended to be new and additional to official development assistance (ODA), which serves other purposes. We therefore undertake an additional analysis to determine which developed countries were providing a fair level of international public finance, benchmarking their 2019 provision of ODA against 0.7% of GNI and their 2019 provision of climate finance against their fair share of the $100 billion goal (as determined by our own methodology).
Once again, we find that the US is the most significant laggard in both absolute and relative terms. The country provides just 17% of its fair share of international public finance, accounting for $160 billion of the global shortfall of $300 billion. Most of the remaining gap can be attributed to the same countries that fall significantly short on international climate finance, including large economies like Australia, Canada, Italy and Spain. However, Japan – which provides its fair share of climate finance (see Table ES1) – is near the bottom of the league table in terms of its broader envelope of international public finance.
The analyses above all focus on Annex II countries but the climate accords actually commit ‘developed countries’ to provide and mobilise climate finance. In the absence of a legal definition of ‘developed countries’ within the UNFCCC, we offer two possible metrics to assess which countries could contribute climate finance. First, we consider countries’ ability to pay as captured by per capita GNI. Second, we consider countries’ historical responsibility for climate change as captured by per capita cumulative territorial emissions since 1990. We benchmark non-Annex II countries against Annex II countries using three different thresholds, identifying which ones have higher per capita incomes and/or cumulative emissions than (1) three Annex II countries, (2) five Annex II countries and (3) half of the Annex II countries.
Using these two metrics and three thresholds, we generate a list of countries that should arguably consider providing and mobilising international climate finance (see Figure ES2). The list is dominated by Small Island Developing States, oil producers and former economies in transition. Many of these countries are highly vulnerable to either the physical or the transition risks associated with climate change. Strikingly, China does not qualify under our criteria. Our findings underscore the need for a nuanced dialogue around expanding the contributor base, informed by the principle of common but differentiated responsibilities and respective capabilities.
Two countries would be eligible to provide climate finance even if we applied the highest threshold to both our metrics: Qatar and Singapore have per capita incomes and per capita cumulative emissions higher than is the case for half of the Annex II countries. If we lower the threshold to five Annex II countries, Israel also qualifies (its per capita emissions are above half of those of Annex II countries and its per capita income is above that of five Annex II countries). Brunei, Kuwait, South Korea and the United Arab Emirates exceed at least three Annex II countries on both metrics. Given both their ability to pay and their historic responsibility for climate change, there is a strong case for these seven countries to now contribute climate finance.
The methods we use to assess whether individual countries could provide climate finance, and – if so – how much, are all based on normative choices, which we hope will inform and catalyse public debate. Definitions, criteria-setting and norms reflect power relations at a given time, and the climate negotiations are no exception. Determining the fair share of climate finance of each developed country and identifying which additional countries could or should contribute will be a fiercely contested process. We further hope that this new evidence base will be able to support advocacy and diplomatic efforts to ratchet up ambition, particularly among those countries that are currently not providing their fair share of climate finance.
Finally, we hope that the ideas this paper puts forward will be able to support articulation of the new climate finance goal in order to improve both the quantity and the quality of climate finance going forward. At stake is a functional international climate regime, capable of acknowledging and resolving issues that jeopardise trust, cooperation and action.