Donors over-report climate finance, study showsDeveloped nations and multilateral agencies exaggerate the amount of funds they provide to countries such as Nepal as climate finance, it says.
In the aftermath of the 2015 earthquake, the World Bank launched the Earthquake Housing Reconstruction Project to provide support for rebuilding earthquake-resilient infrastructure in the country.
The project’s objective was to replace affected houses with multi-hazard -resistant core housing units in targeted areas and to enhance the government’s capacity to improve long-term disaster resilience, says the World Bank’s website.
Between 2015 and 2017, the World Bank committed $500 million to its Earthquake Housing Reconstruction Project in Nepal.
What is unusual here is that of the total committed budget 86 percent was reported as finance for climate change adaptation. However, the project is primarily related to a response to a geohazard unrelated to climate change.
After isolating the project’s activities and finances, researchers from Prakriti Resources Centre, as part of an international study to assess developed countries’ commitment towards climate finance and its mobilisation, found out that the money allocated for adaptation finance under the project was significantly less than the reported $428 million. It was just $100 million.
The analysis revealed that the project over-reported $328 million as funding support for adaptation and for climate-resilient development in the country.
“The objective of the project was to support the reconstruction process in the aftermath of the earthquake,” said Raju Pandit Chhetri, executive director at the centre, a non-governmental organisation working for sustainable development and environmental justice in Nepal.
“If the project were related to climate change adaptation, then it should have considered the impacts of climate change such as floods, landslides, droughts. But it didn’t.”
This was not the only instance when climate finance has been over-reported by developed countries and multilateral agencies. Developed countries and institutions routinely over-report their funding to developing countries such as Nepal, the report by CARE International found.
Developed countries hugely exaggerated climate adaptation finance meant for poor and climate-vulnerable countries that count on international support in the fight against the climate crisis, said the report.
“The world’s poorest people are not responsible for the climate crisis yet are the hardest hit. Not only have rich nations let countries in the Global South down by failing to deliver enough adaptation finance, but they have tried to give the impression that they are providing more than they do. It is truly embarrassing,” said John Nordbo from CARE Denmark, one of the report’s authors.
“This injustice must be corrected, and a clear plan must be presented to show how they intend to live up to their commitments with real money –and no reporting tricks”.
The report, ‘Climate Adaptation Finance: Fact or Fiction?’, estimates that rich nations and multilateral agencies over-reporting climate change finance have left climate adaptation finance short by over $20 billion.
“This all means that vulnerable people and countries are only receiving a fraction of the adaptation finance they have been promised,” says the report. “And while the burden of adaptation is falling on the world’s poorest communities, the historic responsibility for global emissions resides squarely with the developed nations that are currently failing to deliver on their promises.”
The report assessed 112 projects from 25 donors in six countries—Ethiopia, Ghana, Nepal, the Philippines, Uganda, and Vietnam.
The total budget of the projects assessed amounted to 13 percent of the global adaptation finance reported by developed countries for 2013-17. The analysis revealed that the total adaptation finance reported for these projects by donors was $6.2 billion, and $2.6 billion of this adaptation finance has been overreported. This means that only 58 percent of climate finance the donors reported was actual climate finance.
The report uncovered that a large amount of climate finance has been channeled towards projects that bear no relation to adaptation and that donors exaggerate the adaptation component of their projects, thereby over-reporting the amount they spend on climate adaptation.
According to the findings, Japan over-reported its climate adaptation finance by more than $1.3 billion. Likewise, the World Bank has over-reported by $832 million in total, including $328 million on the Earthquake Housing Reconstruction Project in Nepal alone.
During the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change, developed countries committed to providing $100 billion in climate finance by 2020. The 2015 Paris Agreement also required countries to scale up financial resources to hard-hit countries—evenly split between climate change mitigation and adaptation purposes. Rich nations pledged to mobilise $50 billion in annual adaptation finance by 2020.
The new report has come at a time when world leaders and decision-makers prepare to convene for the Climate Adaptation Summit on January 25.
“Vulnerable people and countries receive only a fraction of the support promised in Paris, as this report reveals,” said Sofia Sprechmann, secretary General of CARE International. “The Climate Adaptation Summit 2021 is an opportunity to remedy climate injustice and a chance to commit to adaptation that is gender transformative.”
Official figures from the Organisation for Economic Co-operation and Development (OECD), an intergovernmental economic organisation, revealed that in 2018 donors committed just $16.8billion in climate finance. However, through its comprehensive assessment, CARE calculated that this figure was, in fact, staggeringly lower, at $9.7 billion.
“The Paris Agreement says the climate finance should be exclusively distinguished from the official development assistance that countries receive. Climate finance should be different and should be in the form of additional support for countries,” said Chhetri, who has been closely following international climate negotiations for years.
“For example, if donor agencies give $100 for infrastructure development, health, education, and other development projects, an additional climate finance should be added to it rather than including climate finance as a sub-category in the project.”
According to Chhetri, author of the Nepal case study of Earthquake Housing Reconstruction Project, the report found that countries and multilateral agencies were claiming a bigger contribution on climate finance even when the projects were not related to climate actions.
“Regular development aid was reported as climate finance. By doing that, the financial assistance was counted as development assistance as well as financial support for climate change adaptation,” said Chhetri. “All of this means, developed countries and these agencies have not provided climate-vulnerable countries the financial support they had pledged and countries like Nepal deserve.”
This is not the first time that a study put the spotlight on developed countries and donors for not fulfilling their climate finance commitments.
Another report by Oxfam International last year said that wealthy nations are giving less money to poorer ones for climate projects than their official statistics showed out.
Oxfam’s Climate Finance Shadow Report 2020 estimates that although donors reported having provided developing countries $59.5 billion of climate finance per year on average in 2017 and 2018, an astonishing 80 percent ($47 billion) of all reported public climate finance was not provided in the form of grants – but mostly as loans, revealed the report.
“The message is clear that the rich nations are not giving us the money they should be giving. They should abide by their commitments and increase climate finance, which is our right,” said Chhetri. “Although official development assistance is not legally-binding and it depends on relations of two countries, climate finance is the first such assistance which countries have pledged in writing to provide. Such money should be provided under the climate adaptation finance heading.”
Nepal is one of the most vulnerable countries in terms of the effects of climate change. As a developing country with limited financial and technological resources, the country looks up to international climate finance to improve its resilience and achieve sustainable development.
Nepal has been accessing adaptation finance from international climate funds such as the Least Developed Countries Fund, Adaptation Fund, and the Climate Investment Fund. The country has also accepted financial assistance from the Green Climate Fund.
“But the government doesn’t keep a track or doesn’t have a mechanism for distinguishing climate finance from development assistance. It doesn’t have any system to find out how much money was received for climate action,” said Chhetri. “Donors may say they have given adaptation finance. But it is the responsibility of the state to separate climate finance from development assistance.”
The Aid Management Platform of the Ministry of Finance does not maintain separate columns for climate-related assistance. As a climate-vulnerable country, where climate-related disasters are already happening, Nepal is likely to lose significant climate funds if it can’t track the amount it is receiving as climate finance, according to Chhetri.
“The government data shows that 350 lives were lost in monsoon-related disasters and 150 are missing this year. Apart from human losses, there were billions of rupees of property loss,” said Chhetri. “If we think all these are somehow related to climate change, then we should strive to secure climate adaptation funds. Otherwise, the Nepal government has to pay from its own coffers like it has done so far.”