Climate Finance Update: $89.6 Billion in 2021, Doubts Over $100 Billion Goal

November 29, 2023

According to a recent report from the Organization for Economic Cooperation and Development (OECD), developed countries contributed and mobilized a total of $89.6 billion in climate finance for developing countries in 2021. This marked a 7.6% increase from the previous year. However, adaptation finance saw a decrease of 14%, totaling $4 billion.

Uncertain Achievement of $100 Billion Goal

The OECD report suggests that the $100 billion goal set for developed countries providing financial support to developing nations might have been achieved in 2022. Yet, the lack of conclusive data raises questions about the validity of this claim.

Significance of OECD’s Latest Analysis

Published just before the 28th Conference of Parties to the United Nations Framework Convention on Climate Change (COP28), the OECD’s analysis holds significant importance. The report evaluates progress toward the commitment made by developed countries at COP15 in 2009 to provide $100 billion annually from 2020 to 2025 for addressing climate needs in developing nations.

Tracking Progress: OECD’s Annual Climate Finance Report

The OECD’s annual climate finance report serves as a crucial tool for tracking progress towards the $100 billion goal. It not only outlines overall trends but also provides detailed analysis on scaling up adaptation financing and mobilizing private sector finance.

Key Highlights from the Reports

Public Climate Finance: In 2020, public climate finance from bilateral and multilateral sources amounted to $73.1 billion, nearly doubling from $38 billion in 2013.
Adaptation and Cross-Cutting Finance: While adaptation finance decreased by 14% in 2021, cross-cutting finance, supporting both adaptation and mitigation efforts, increased from $6 billion in 2020 to $11.2 billion in 2021.
Private Climate Finance: Private climate finance mobilized reached $14.4 billion in 2021, constituting 16% of the total.
Sector-wise Distribution: Between 2016 and 2021, the highest climate finance investments were in energy, transport and storage, agriculture, forestry, fishing, water supply, and sanitation.
Loans Dominance: Loans dominated climate finance from developed countries, representing over two-thirds of the total, amounting to $49.6 billion, while grants were under 30% at $20.1 billion, and equity investments remained marginal.

Challenges and Concerns

The report raises concerns about the dominance of loans over more affordable sources of finance, particularly affecting low-income countries. The quality of finance and the debt burden on developing nations are persistent issues.

Uncertain Achievement of the $100 Billion Goal

Although a joint statement from Canada and Germany suggests that the $100 billion goal was met in 2022, the OECD report emphasizes the lack of verified data supporting this claim. The issue of finance quality, with a large portion being market rate loans, remains a challenge.

OECD’s Recommendations

The OECD recommends focusing on increasing private finance mobilization and scaling up adaptation finance. However, building trust remains a crucial factor, given the repeated failure of developed countries to fulfill their promises. The $100 billion target is deemed non-negotiated and non-reflective of the actual needs of developing countries, requiring a reevaluation of global climate finance strategies.

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