Rich nations ‘overstating international climate finance by up to $88bn’

Nearly 60% of low-income countries are now in debt.

While affluent nations claim to have mobilised nearly $116bn in climate finance in 2022, Oxfam believes the true financial effort amounts to only between $28bn and $35bn, with only $15bn earmarked for adaptation.

In 2009, developed countries pledged to deliver $100bn of climate finance every year to nations on the frontlines of the climate crisis. This pledge was formally ratified in 2015.

Oxfam’s findings indicate that although rich countries reported delivering $92bn as public finance in 2022, approximately 70% of this sum was in the form of loans. Many of these loans were extended at profitable market rates, contributing to the growing debt burdens of recipient nations in the Global South.

Oxfam International’s climate change policy lead Nafkote Dabi said: “Rich countries have been short-changing Global South countries for years by doing climate finance on the cheap.

“Claims that they are now on track with their financial promises are overstated, as this real financial effort is much lower than the reported figure seems to suggest.”

Debt trap

Earlier this year, a coalition of leading industry voices wrote a letter International Monetary Fund (IMF) and World Bank to change their financial systems for mitigating the climate crisis while reducing global debt, as research revealed that developing countries will be unable to meet their net-zero targets due to piling debt.

While leaders expressed significant concern and worry at the following spring meetings of the IMF and World Bank, there was a lack of substantial action.

Nearly 60% of low-income countries are now in debt and they collectively spend six times more repaying their debt than what the World Bank lends in a year.

Dabi added: “Low- and middle-income countries should instead get most of the money in grants, which also need to be better targeted toward authentic climate-related initiatives that will help them adapt to climate harm and move away from fossil fuels.

“At the moment they’re being penalised twice. First, by the climate harm they did little to cause, and then by having to pay interest on the loans they’re being given to deal with it.”

COP29

The next UN climate COP, COP29, takes place in Azerbaijan this winter. Earlier this year, COP29 President-Designate Mukhtar Babayev announced that the Presidency will collaborate with various stakeholders, including parties, multilateral financial institutions, the private sector, financial services industry and philanthropic organisations, with an aim to mobilise climate finance more effectively and expedite investment towards climate resilience.

In order to achieve the UN’s sustainable development goals (SDGs), the world needs to mobilise $5.4trn a year by 2030, according to the UN. However, there is currently a $3trn shortfall under present policies.

Related article: UK accused of ‘moving goalposts’ to meet £11.6bn climate finance pledge

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