Rich countries do business with climate change in poor countries

First made in 2009, the commitment was reaffirmed in the 2015 Paris climate agreement. Between 2015 and 2020, some $353 billion was paid, including $189 billion in direct country-to-country payments, which were the focus of the analysis. from Reuters.

More than half of that direct financing – about 54% – came in the form of loans rather than grants, a fact that bothers some representatives of indebted developing countries like Ecuador, who say they should not have to take on more mortgages to resolve problems caused largely by the developed world.

Countries in the “global south are experiencing a new wave of debt caused by climate finance,” said Andrés Mogro, Ecuador’s former national director for climate change adaptation.

At the same time, according to several analysts, rich countries are exaggerating their contributions to the $100 billion pledge, because some of their climate finance returns home through loan repayments, interest and labor contracts.

“The benefits to donor countries disproportionately overshadow the primary goal of supporting climate action in developing countries,” said Ritu Bharadwaj, senior researcher on climate governance and finance at the International Institute for Environment and Development. a UK think tank.

Rich countries defend climate finance

Representatives of the main agencies that manage climate finance for Japan, Germany, France and the United States – the four countries that contribute the most funds of this type to the UN – said that they take into account each country’s debt when deciding whether to grant loans or grants, adding that they give priority to grants to the poorest countries.

About 83% of climate finance for lower-income countries was provided in the form of grants, according to the Reuters study. But those countries also received, on average, less than half as much funding as higher-income countries, which received mostly loans.

“A combination of loans and grants ensures that public funds from donors can be directed to the countries that need them most, while economically stronger countries can benefit from better than market lending conditions,” said Heike Henn, director of Climate, Energy and Environment at the German Federal Ministry for Economic Cooperation and Development.

Germany has provided $45 billion in climate finance, 52% of it in loans.

The French Development Agency (AFD) offers developing countries low interest rates that would normally only be available to the richest countries on the open market, explained Atika Ben Maid, deputy director of AFD’s Climate and Nature Division. . Around 90% of the $28 billion provided by France was granted in the form of loans, the highest percentage of all countries.

A US State Department spokesperson said the loans are “appropriate and cost-effective” for income-producing projects. Grants typically go to other types of projects in “low-income, climate-vulnerable communities.” The United States provided $9.5 billion in climate finance, 31% of it borrowed.

“It should also be emphasized that the climate finance provisions of the Paris Agreement are not based on ‘repairing’ the damage caused by historic emissions,” the spokesperson said, when asked about charging interest at market rates and other financial rewards. contradicts the spirit of the climate finance program.

little concrete

The Paris Agreement does not openly establish that developed countries must offset historical emissions. It refers to the principles of “climate justice” and “equity” and points out the “common but differentiated responsibilities and capacities” of countries to address climate change. It makes clear that developed countries are expected to provide climate finance.

Many interpret the text to mean that rich countries have a responsibility to help solve climate-related problems that they played a disproportionate role in creating, said Rachel Kyte, a professor of climate policy at Oxford University who was sent World Bank special program for climate change in 2014 and 2015.