Pre-COP29 analysis: Revealing the injustice in climate finance
At COP29, the spotlight is on climate finance. Yet, setting ambitious targets is only part of the solution. To genuinely tackle the climate crisis, the funding must reach the world’s most vulnerable countries and frontline communities. Despite pledges, current climate finance is far from equitable and there is un urgent need for a fairer approach.
As COP29 approaches in Baku, Azerbaijan, Swedwatch and other civil society organisations join calls by low- and middle-income countries to prioritize a just climate finance goal (officially known as the New Collective Quantified Goal – NCQG), that meets their immense costs of climate action. The UN’s Standing Committee on Finance estimates that low- and middle-income countries alone will need at least $5.8 trillion by 2030 to fulfill their climate goals and adaptation needs, as outlined in their Nationally Determined Contributions.
“Despite minimal carbon footprints, low-income countries face the most severe impacts of record-shattering heat, droughts, floods and storms. Developed countries, with the most historical emissions, must take the lead on increasing grant based public funds to address this injustice. This money should be raised from innovative sources like taxes and levies on big polluting activities such as fossil fuels extraction. Without it, the climate crisis will deepen inequalities in and between countries, leaving the poorest and most vulnerable behind,” says Lubna Hawwa, leading Swedwatch’s work on climate justice.
Climate finance loans exacerbate debt
In 2009, developed nations pledged to mobilize $100 billion annually by 2020 for climate action in low- and middle-income countries, yet the goal was only met in 2022. Furthermore, 70% of the climate finance flows between 2016 and 2022 came as loans rather than grants, with less than a quarter of the loans from multilateral development banks counted as concessional (see figure 1).
“This structure means they have to pay back most of the money with interest, adding to an already heavy debt burden. At the moment, the world’s poorest and most climate-vulnerable countries are spending over twice as much on debt payments to various creditors as they receive in climate funding”, says Lubna Hawwa, referring to an estimate by the International Institute for Environment and Development.
Public climate funding in 2016-2022 divided by instrument
Figure 1: O Loans: $324.9 billion O Grants: $120.7 billion O Equity: $11.1 billion O Other: $3.4 billion
The instrument mix varied by provider type, with multilateral development banks favoring loans, with and the lion’s share being non-concessional, and multilateral climate funds and bilateral providers balancing loans and grants. Source: OECD
A critical funding gap for loss and damage
While the climate finance loans pile up debt, diverting critical funds away from domestic needs, there is a critical shortfall in funding for adaptation efforts. Loss and damage alone are expected to cost low- and middle-income countries up to $580 billion annually by 2030, further stressing their economies.
Areas in the low- and middle-income countries facing unsustainable development — such as resource extraction and economic exploitation with persisting gender and social inequity — bear the greatest risks. Indigenous Peoples and local communities, whose livelihoods often depend on vulnerable sectors like agriculture and fishing, are especially affected.
Inequitable renewable energy investments
An additional aspect of climate finance injustice lies in the distribution of renewable energy investments. While renewable investments are finally outpacing fossil fuels, most remains concentrated in advanced economies and China. Moreover, renewables projects in low- and middle-income countries frequently lack adequate human rights safeguard and fail to provide local communities with affordable energy access or job opportunities, thus deepening inequality rather than addressing it (an issue repeatedly raised by Swedwatch and partners at previous negotiations and which will soon be explored in a forthcoming study).
“This leaves the majority of the global population, without the support they need for a clean and just energy transition. This unequal distribution is not only unjust but threatens the global goal of limiting temperature rise to 1.5 degrees”, says Lubna Hawwa.
Swedwatch will be monitoring the COP29 negotiations closely, with a particular focus on a just climate finance goal. Stay tuned for updates on our social media channels.
The climate funding divide in figures – vulnerable groups left behind
Least Developed Countries (LDCs) and Small Island Developing States (SIDS) are not receiving fair funding, with only 18% and 3% share of the total climate finance in 2022
The 10 most fragile states receive less than 1% of total climate adaptation flows, despite their heightened vulnerability.
Indigenous Peoples’ land tenure and forest management receive less than 11% of international climate finance
Small-scale farmers and rural communities receive just 2% of international public climate finance
Gender-responsive climate initiatives are underfunded, with only 0.01% of global finance supporting projects that address both climate and women’s rights.
Locally-led climate actions remain neglected, receiving less than 10% of climate finance
This structure means low- and middle income-countries have to pay back most of the money with interest, adding to the already heavy debt burden. /Lubna Hawwa, Swedwatch
Swedwatch’s expectations on Sweden and the EU at COP29
As part of CONCORD’s working group on climate and environment justice, Swedwatch has provided input to the Swedish delegations, calling on Sweden and EU to:
1. Finance for the most affected groups and countries.
2. Cut emissions and put an end to fossil fuels.
3. Step up adaptation.
4. Inclusive decision-making and broad participation.
Read the joint statement👇🏼.