Climate finance: Is Britain being taken for a ride?

By Germana Canzi, Senior International Analyst

In the last few days, the press has focused on the UK's contribution to climate finance, particularly relative to other countries.

Some articles suggest that Britain is paying way beyond its dues: indeed for The Times, we ‘lavish’ money on the poor, and have ‘pledged far more than any other country to international climate funds’.

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Image: UNFCCC

Under the UN climate convention, rich countries have committed to help poorer ones constrain their carbon emissions and prepare for climate impacts.

Indeed, on signing the 1992 convention on behalf of Britain, then Prime Minister, Sir John Major, observed: ‘All of us will have to meet the cost of commitments undertaken to tackle our common global problems. The developing countries will need the help of the developed world.’

The fact that the funding by rich countries is still not reaching the $100 billion a year pledged in 1992 is something that is inevitably coming up at the negotiations in Paris.

Climate finance will help poor countries to fulfill their unilateral pledges on reducing carbon emissions (INDCs, as they’re known) – pledges that will reduce climate damages to Britain in future. And without it, there can be no global climate deal, because the poor nations to whom Britain and others pledged funds will not sign, on the basis of broken promises.

Is the UK being taken for a ride, making efforts on climate change that go far beyond those of other countries?

The UK is contributing to these funds, which fulfills its pledges to the international community. Both as the country that led the Industrial Revolution, with the coal burning and the wealth creation that have come with it, and as the fourth richest country in the world, Britain arguably has more moral responsibility than most.

But it is far from alone. The UK is in fact just one of 14 countries to have pledged money to the the Climate Investment Funds (CIFs), which have been the focus of some media attention. Most importantly, the CIF is just one of many funding instruments out there: there are many other climate finance funds that the UK does not currently contribute to, such as the Adaptation Fund.

It is also worth noting that Germany’s overall annual climate finance contribution – even considering its larger economy – is considerably higher than the UK’s.

What is UK taxpayer money funding?

Carbon Brief recently produced a guide to where UK climate finance money goes. We have also done some of our own digging, to find real life examples – and we found plenty of very good ones. Here are a just a couple.

The UK’s International Climate Fund is helping African countries such as Ethiopia to tackle climate change and boost clean energy.

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Solar energy in Ethiopia. Image: Bread for the World, Creative Commons licence

In Ethiopia, only 25% of the country’s 94 million are connected to the national electricity grid, while its fast growing economy needs to ramp up its electricity output. The country has now put in place one of the most ambitious “green economy” plans in the developing world - the Climate Resilient Green Economy Strategy, with targets to attain middle-income economic status and zero carbon growth by 2025. UK government funded CDKN is among the organisations helping to make this happen.

UK money is also helping to spur private sector innovation and employment in developing countries – which are the real long term solutions to poverty. As Justine Greening recently pointed out, these efforts to make countries go green are in Britain’s national interest, and they can also reduce the need for people to migrate across the world.

For example, a key solution to reducing poverty in parts of Africa is to improve irrigation to improve crop yields, food security and nutrition. In countries such as Kenya (and most of Africa), agriculture is also key to the economy, with 70% of jobs in rural areas depending on that sector.

A project involving UK aid funding to a UK registered company, FuturePump Ltd, is trying to avoid the expansion of diesel powered water irrigation pumps as these can lead to a considerable increase in CO2 emissions but can also be unaffordable for many farmers, unable to use the pumps as often as needed for irrigation because of the high cost of the fuel. 

The company is helping to spread the use of efficient solar irrigation pumps. These have a higher upfront cost but will then be cheaper to run, reducing the need to buy and transport diesel. In addition, as many farmers are not able to access bank loans, FuturePump Ltd is promoting a new, innovative financing programme which it says has the potential to transform the agricultural sector in Kenya (and could be replicated in other countries). 

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A solar-powered irrigation system in Kenya. Image: FuturePump Ltd

The bigger picture

Also, it is important to put the figures for climate finance into context. A report launched here in Paris found that rich countries spend 40 times as much ($80 billion a year) money subsidising fossil fuel production as they contribute to the Green Climate Fund ($2 billion a year). 

There is scope for having a broad debate on climate finance, such as the role of the private vs the public sector and what kind of projects, what kind of technologies should be supported this way. Indeed, those debates are happening, not least here in Paris.

Another question is what should be counted as climate finance, and whether money is additional or not to the aid budget. For example, the UNFCCC Secretariat has compiled a list and timeline of climate funding announcements since January 2015, which shows a large number of pledges in recent months.

But some are worried about the fact that there is no internationally agreed accounting methodology for climate finance, so it can be really hard to understand the meaning of these figures.

Nevertheless, a few central conclusions emerge. Climate finance is down-payment on a global deal; the money has been promised; Britain is not paying noticeably above the odds; and at least some of the money is making a real difference in poorer countries.