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Early climate aid topped goal, but most not new money - study

Source: Thomson Reuters Foundation - Fri, 8 Nov 2013 15:03 GMT
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Fake euro banknotes are seen in a block of ice symbolising austerity measures, during a demonstration by trade unions and workers in central Brussels, Belgium, Feb. 21, 2013. REUTERS/Eric Vidal
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LONDON (Thomson Reuters Foundation) - Rich nations delivered as much as $35 billion in “fast-start” climate assistance from 2010 through 2012, aimed at helping poorer countries shift to cleaner development paths and adapt to the impacts of climate change, exceeding their $30 billion commitment, a new report says.

But 80 percent of the total was also counted as “overseas development assistance”, suggesting that much of the money was not “new and additional” as donor countries had promised, said Smita Nakhooda, a researcher on climate finance and energy issues at the Overseas Development Institute and a lead author of the report, which will be officially released next week.

Only 44 percent of the money came in the form of grants, with much of the rest provided as loans. And 80 percent of the total went to support efforts to reduce carbon emissions rather than helping poorer nations adapt to climate change – a division way off the 50-50 split envisaged between adaptation and mitigation spending, said Nakhooda.

In addition, only about 30 percent of the funds were channeled through recipient governments – the rest went through multilateral funds, development institutions and other organisations.

The close look at early “fast-start” climate finance is important because it gives an indication of how a much-larger pot of climate assistance promised by rich nations - $100 billion a year by 2020 – may be raised and spent, and what may need to shift by 2020 to ensure the money is actually mobilised and then used successfully.

Early climate finance can create an “enabling set of signals”, Nakhooda told an event looking at “How to pay for a greener future?” at the Overseas Development Institute (ODI) on Thursday.

Much of the $100 billion a year in promised climate finance will need to be raised from private sources, cash-strapped governments argue. But private climate finance has overwhelmingly gone to mitigation projects, the study shows, raising questions about how much-needed adaptation measures will be funded.

Nakhooda said private money is going to helping businesses adapt - or at least the large ones that have a firm grasp of the climate risks ahead. But difficulties in defining what counts as adaptation spending, and measuring how effective it is, are reasons why private funding is harder to find, or at least measure.

“Part of the challenge is definitional,” she said. In Zambia, for instance, multilateral climate funds are now looking at supporting agribusinesses to help them manage long-term climate risks, including through measures like insurance. How do such actions get counted, or measured, as adaptation?

‘BIG DATA REVOLUTION’

Shelagh Whitley, a researcher for ODI’s climate and environment programme, said transparency in the use of climate finance will also be crucial to scaling it up and determining its effectiveness.

“You can’t get an assessment of effectiveness if you don’t get information on what has been spent and how it’s been spent,” she said, calling for a “big data revolution” to “get more of this information out in the public domain”.

The ODI study shows that Asia won the largest share of “fast-start” climate finance, something Nakhooda called “understandable” since its economies are growing quickly.

African nations – particularly “least developed countries” – and small island states won the most adaptation funding, the study finds.

Monica Araya, a climate advisor to Costa Rica and former climate negotiator for the country, said African and small island states are often are first in line for international funding, as they are judged to be the most vulnerable to climate impacts. That means countries like hers – which also face worsening climate pressures, particularly storms and other extreme weather – are having to turn to banks for loans outside U.N.-led climate finance to fund their own adaptation efforts.

“In the negotiations, Latin America doesn’t count as a most vulnerable region,” she said, despite countries like El Salvador having seen several years of record storms that cut gross domestic product (GDP) by as much as 4 to 6 percent.

“People are seriously worried,” she said. “The (Costa Rican) government says, ‘If we have a big tragedy related to weather, what do we do?’ Insurance is getting very expensive,” she said.

That worry is shared by a growing number of countries that are increasingly moving to take action on climate change amid worsening extreme weather, regardless of what is happening at the U.N. climate negotiations, said Tom Mitchell, head of the climate programme at ODI.

The message is: “Let’s not wait for an international process to deliver,” he said. “That’s likely to be a number of years down the path… All the science tells us we need to act now, and we need to act now with a lot of vigour,” he added.

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