New report sheds light on EU climate finance

In April 2018, CAN Europe member Act Alliance EU has published a report about EU climate finance. The report provides an analysis of climate finance reporting and accounting practice. It also documents how EU institutions, as well as EU member states, allocate their climate support to developing countries. The picture painted is not as bright as we hoped it would be.

With more pressing and urgent climate and sustainable development challenges, the scale and effectiveness of financial support for addressing these challenges cannot be underestimated. Delivering on international commitments to provide financial support to countries facing adverse climate impacts is an on-going and crucial topic of discussion amongst decision-makers in the international arena. As is the ability to track, measure and assess climate finance support, in order to guarantee that those who face the worst effects of our changing climate will not be left behind.

Being the largest donor of development aid and climate finance, the EU and its member states are in a firm position to set a high standard on financial support to partner countries. The time to re-establish that standard is ripe: the development of the next Multiannual Financial Framework (the EU budget) and the on-going UN climate discussions on reporting climate finance provide the perfect spaces for the EU to ensure that its financial support for climate action is honouring the international commitments and conventions that the EU is a Party to.

Against this backdrop, the report published in April gives a reality check on EU climate finance; where we are, where we need to be and how we can make the journey more successful. The picture painted is not as bright as we hoped it would be. The main findings of the report highlight a number of issues and trends:

The on-going lack of support to climate adaptation, despite the mounting costs of climate change which are felt much more severely in developing countries. In 2016, only 30% of the total climate finance from EU institutions and EU member states went to adaptation. For EU institutions alone the figure was 34% the same year.

A substantial amount of EU climate finance is delivered as loans. In 2016 41% of climate finance from EU institutions was provided as loans. For some EU Member States, e.g. France this number is even higher (94% in 2016).

There is an ongoing challenge in defining what climate finance is “new and additional” to international development finance. There currently is no UN agreement defining “new and additional”. The same funding is also reported under development aid, mainly Overseas Development Assistance (ODA); as a result, the same money is counted towards two separate targets that donor countries have to meet.
It is crucial that the EU works with developing countries to ensure that all EU international development finance is climate-sensitive. With that said, future reporting of climate-specific finance by the EU and its member states should transparently differentiate between funds specifically targeted at climate action versus funds where climate considerations have been taken into account but where the climate is not the main objective.

The EU has allocated a relatively big share of the climate finance to richer developing countries. The country which receives by far the biggest amount of climate finance (almost the same amount as all the Least Developed Countries together) is Turkey.

Achieving a fair, sustainable and climate resilient world is aspirational but completely possible. Accessible, effective and transparent climate financing is a pre-requisite to making that aspiration a reality.

The Report can be found here.

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