Kept Promises? The Evolution of the EU Financial Contribution to Climate Change

Abstract

The chapter provides an overview of the public climate finance implemented under the UNFCCC by the EU as a whole and its Member States—in the chapter called EUplus—later taken over by SDG 13.a, for the period 2011–2018 (the latest year available). Through the analysis of the UNFCCC Biennial Reports, it is possible not only to highlight the amount allocated to the challenge against climate change, but also to break it down into its two meanings: mitigation and adaptation, as well as to identify the type of channel through which this support has been implemented. In this context, particular attention will be given to the two contribution channels: bilateral and multilateral, highlighting the type of support in different cases. The chapter shows an increase in contributions, especially since 2015, and how support has been increasingly shifted toward adaptation. This could mean that there is an awareness in a delay in achieving the stabilization of GHG emissions in the atmosphere.

1. Introduction

The UNFCCC signed a crucial milestone in the international cooperation with the objective, called “the ultimate objective,” of achieving “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with climate system” (art. 2 of the Convention¹) [1] due to the consideration that the climate change calls for the widest possible cooperation by all countries.

The Convention recognizes the need to cooperate and promote a supportive economic system in order to address a path of sustainable economic growth and development of all Parties, particularly developing country Parties. The Convention is based on the fundamental acknowledgment that the climate is a common resource whose stability is threatened by GHG emissions (precautionary principle) and, at the same time, that all countries have all common but differentiated responsibilities and respective capabilities, social and economic conditions in order to protect the climate system for the benefit of present and future generations.

The differentiated commitment between developed and developing countries is the basis for negotiation between the Parties: how, with what means and with what resources. According to the Convention, developed country Parties shall provide financial resources to assist developing country Parties in the implementation of the Convention (art. 11).

It will take until COP15 in 2009 for developed countries to make a collective economic commitment of USD 30 billion for the period 2010–2012 geared toward both mitigation and adaptation, an amount that could rise to USD 100 billion dollars a year by 2020 to address the needs of developing countries. This funding will come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance (Copenhagen Accord, para. 8) [2].

The Copenhagen Accord is a non-legally binding agreement, but it marks an important turning point. The following year, in fact, during the COP16 in Cancun, the parties confirmed their commitment to the creation of the USD 30 billion fast truck fund by 2012 and then to reach USD 100 billion by 2020, as reported in paragraphs 95 and 98 of the Cancun Agreements, inviting developed country Parties to submit an information document on how the resources would be provided to fulfill the finance commitment [3].

In 2015, the global attention was oriented toward the sustainability and the need to stress the fight against climate change. The role of finance to support climate change has been stressed first with the 2030 Agenda on Sustainable Development Goals (SDGs) [4] and then with the Paris Agreement signed at COP21 [5].

The 2030 Agenda, with its 17 goals and 169 targets, represents a comprehensive and extensive road map for aligning not only developing countries but also developed ones on the path of sustainable development [4], ensuring, simultaneously, human well-being, economic prosperity, and environmental protection. This integrated strategy called “5P” is aimed to promote well-being of the People (p.1); to preserve our natural resources in this Planet (p.2); to eliminate the extreme poverty and to assure Prosperity (p.3) for all, through promotion of Peace (p.4) based on human rights, justice, and rule of law, and through the Partnership (p.5) across nations, sectors, and communities [6, 7]. The 2030 Agenda, in its holistic nature, also focuses on climate change through the SDG 13—Take urgent action to combat climate change and its impacts. In particular, its SDG 13.a—“Implement the commitment undertaken by developed country parties to the UNFCCC to a goal of mobilizing jointly USD 100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible” reinforces the international commitment remarked also by the Paris Agreement.

In fact, the Paris Agreement provides an ambitious opportunity to consolidate the relationship between climate and development [8, 9], but also to stress the global commitment to mobilize climate finance to support countries, especially LDCs (least developed countries) and developing countries, a worldwide step in strengthening SDG 13.a [8, 10].

To ensure information, transparency, and tracking of the climate finance, the developed country Parties shall use the “UNFCCC biennial reporting guidelines for developed country Parties” for the preparation of the finance reporting [11]. The Biennial Reports (BR) show the progress in meeting their 2020 targets and their provision of financial, technology, and capacity building in supporting to developing country Parties.

According to [12], the total public financial support reported by Annex II Parties amounted to USD 45.4 billion in 2017 and USD 51.8 billion in 2018. In this context, as reported by the Secretariat [13], total climate support reached an annual average of USD 48,7 billion in 2017–2018 (fourth Biennial Report—BR4), which represents a 9.9% increase over the previous biennium 2015–2016 on a comparable basis.

Although the data for 2019–2020 are not yet available, it is known that the target was not reached first because it was too ambitious and second because of the pandemic emergency linked to COVID-19, which distracted and restricted available finance [14, 15].

Climate-specific financial support increased by 13% on a comparable basis, to an annual average of USD 36.3 billion, mainly reported through bilateral, regional, and other channels (USD 28.1 billion in 2017 and USD 31.8 billion in 2018, respectively) [12].

The data shown in Figure 1 are realized by the Secretariat on the base of Biennial Report (BR) that collects the public finance data, even if the climate finance should be referred to public, private, and alternative sources of financing. In particular, as required by the Paris Agreement mobilizing climate finance should involve a wide variety of sources.

Figure 1.

Total climate finance contributions, in 2011–2019 as reported in biennial reports. Source: [13].

The chapter aims to illustrate the evolution of the financial commitment of the EUplus, considered as the entire EU with its 28 Member States, including the United Kingdom, through the analysis of the fourth Biennial Report, which covers the period 2011–2018.

2. The role of European climate finance

Like the other Parties to the Convention, the EU Member States have committed themselves to contribute to the fight against climate change not only by reducing their own emissions, but also by supporting developing countries with financial contributions. However, in addition to the commitment of the individual Member States, there is also the contribution directly from the European budget.

The contributions to climate finance, communicated as referred to the Biennial Report (Common Tabular Formats TRF), are classified into:

• core general: this refers to amounts intended to support multilateral institutions, where, however, it is not possible to identify the specific climate allocation, including contributions to the functioning of the institutions;

• climate-specific: refers to amounts earmarked for climate support, which may be linked to adaptation, mitigation, or cross-cutting projects.

According to the relevant international organizations (OECD [16], IPCC [17]), the definitions are:

• climate change mitigation is defined as an activity that contributes to the objective of stabilization of greenhouse gas (GHG) concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system by promoting efforts to reduce or limit GHG emissions or to enhance GHG sequestration;

• climate change adaptation is defined as an activity that intends to reduce the vulnerability of human or natural systems to the impacts of climate change and climate-related risks, by maintaining or increasing adaptive capacity and resilience.

As shown in Figure 2, the EUplus, as defined above, contribution to the functioning of the institutions (core general) has progressively decreased from just over 47% in 2011–2012 (BR1) to 22% in 2017–2018 (BR4), in favor of a progressive growth of the climate-specific contribution. In truth, if only the EU contribution was considered, almost entirely was for climate, with the only exception is in the 2-year period 2015–2016 (BR3), where, however, the core general was only 0.01%.

Figure 2.

EUplus total public contribution: core general vs. climate-specific. Source: elaboration on [18].

Looking at the types of climate action (Figure 3), investments are mainly oriented toward mitigation, whose amount decreased from 58% in the first 2-year period to 41% in 2017–2018, followed by adaptation, whose amount has remained almost constant over time (around 17–21%), while the relevance of investments classified as cross-cutting increased from 16% in 2011–2012 to 24%.

Figure 3.

EUplus: climate-specific breakdown in 2011–2018 as reported in biennial reports. Source: elaboration on [18].

Even if the contribution to climate finance could be realized by both multilateral channel and bilateral channel, the amount of the bilateral channel is significantly more relevant, as shown in Figure 4.

Figure 4.

EUplus climate-specific finance: type of channel for contribution in 2011–2018. Source: elaboration on [18].

2.1 Contributions through bilateral channel

With an overall increase in climate-specific contributions of 179% between the 2-year period 2011–2012 and 2017–2018, the percentage becomes more comparable in the 2-year comparison 2015–2016 and 2017–2018 where the increase is 10%.

This is consistent with the allocation of contributions to climate-specific precisely because since 2015 there has been a new and strong drive in the commitment to combat climate change.

The BR analysis shows that EUplus appears to operate predominantly through bilateral channels, which, after peaking at 91% in the 2015–2016, lost ground in the following biennium, dropping to 76%.

In terms of support, bilateral contributions have gradually become more oriented toward mitigation and adaptation. In fact, a comparison of the data reported in the four biennial reports (Figure 5) shows a gradual increase in contributions with a clear attribution of support (mitigation, adaptation, and cross-cutting) while the item “other” becomes residual. At the same time, there is a reorientation of contributions with a greater focus on adaptation than on mitigation.

Figure 5.

Climate-specific finance of EUplus: bilateral contribution by type of support. Source: Elaboration on [18].

Besides the observation that the focus on adaptation is growing, a detailed analysis per Member States shows that there is a certain homogeneity of orientation, with some exception among most Member States. For example, Denmark, Luxembourg, the Netherlands, Sweden, and the United Kingdom have oriented their contribution toward activities supporting both mitigation and adaptation. In contrast, countries such as Belgium, Estonia, Finland, Ireland, and Spain have favored cross-cutting actions (Table 1).

Table 1.

Climate-specific finance of EU and Member States: bilateral contribution by type of support.

Note: The breakdown for type of support is based on BR4 data, while the arrows show the trend respect to the BR3.

Source: elaboration on [18].

The overall amount of bilateral public climate contribution in 2014 was around 12 BIL USD, mitigation aid accounted for 62%, while adaptation was around 16%. In 2018, the total amount increased at 19 BIL USD with mitigation at 48% and adaptation and cross-cutting at 27% each (Figure 6).

Figure 6.

Climate finance of EUplus: the evolution of type support from 2014 to 2018 in bilateral contribution (USD, billion). Source: elaboration on [18].

2.2 Contributions through multilateral channel

The contribution through multilateral channel is composed of three items:

• contribution to multilateral climate change funds: the Global Environment Facility; the Least Developed Countries Fund; the Special Climate Change Fund; Adaptation Fund, Green Climate Fund; UNFCCC Trust Fund for Supplementary Activity, and Other multilateral climate change funds;

• contribution to multilateral financial institutions, including regional development banks: mainly related to the six major Multilateral Development Banks (MDBs)—World Bank, International Finance Corporation, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, and Inter-American Development Bank;

• contribution to specialized United Nations bodies.

As shown in Figure 7, EUplus contribution to the multilateral channel grew almost three times in the last 2 years compared with the previous 2-year period: 63% are committed contributions and only 37% disbursed contributions. The most relevant part is linked to the multilateral financial institutions, followed by the funds.

Figure 7.

Climate finance of EUplus: multilateral contribution in BR3 vs. BR4. Source: elaboration on [18].

A detailed analysis by multilateral channel is given below.

2.2.1 Contribution to multilateral climate change funds

The contribution to multilateral climate change funds constitutes 23% of the contributions under the multilateral channel, mainly provided in cross-cutting activities. As reported in Figure 8, a comparison between 2015–2016 and 2017–2018 shows an increase in “cross-cutting” support, which has essentially replaced the “other” category, followed by an increase in both “mitigation” and “adaptation” support.

Figure 8.

Climate finance of EUplus: climate change funds by type of support. Source: elaboration on [18].

Looking at the evolution of contributions to climate change funds in the last two BR, Figure 9, there is a progressive growth of the Green Climate Fund, which absorbed 68% of resources in 2017–2018, mainly used in cross-cutting activities (77%) and mitigation (23%) (Table 2).

Figure 9.

Climate finance of EUplus: multilateral climate change funds (BR3 vs. BR4). Source: elaboration on [18].

Table 2.

Multilateral climate change fund: weight and contribution by type of support.

Note: The breakdown for type of support is based on BR4 data, while the arrows show the trend respect to the BR3.

Source: elaboration on [18].

2.2.2 Contribution to multilateral financial institutions

The contribution to multilateral financial institutions, including regional development banks, constitutes over 74% of the contributions under the multilateral channel, even for the multilateral financial institutions the support is earmarked to “cross-cutting” activities (Figure 10).

Figure 10.

Climate finance of EUplus: multilateral financial institution (BR3 vs. BR4). Source: elaboration on [18].

Looking at the evolution of contributions to financial institutions in the last two BR, there is a progressive decrease of World Bank allocation whose amount passed from 43% to 11%, while the item “other” has increased by both the member fees paid for participation in certain institutions and the participation in projects promoted by regional development banks (e.g., EIB, Latin America Development Bank) or research institutions (e.g., IRENA, IEA, OECD) (Table 3).

Table 3.

Multilateral financial institutions: weight and contribution by type of support.

Note: The breakdown for type of support is based on BR4 data, while the arrows show the trend respect to the BR3.

Source: elaboration on [18].

2.2.3 Contribution to specialized United Nations bodies

Finally, in the third multilateral channel relates to the specialized United Nations bodies, the prevailing type of support is “cross-cutting,” both because the contributions to the United Nations are collected on sustainability issues (e.g., UNICEF, FAO, IPCC, WMO), and because of the broad structure of the activities in which these bodies operate (Table 4).

Table 4.

Multilateral financial institutions: weight and contribution by type of support.

Note: The breakdown for type of support is based on BR4 data, while the arrows show the trend respect to the BR3.

Source: elaboration on [18].

3. Conclusion

The analysis of Biennial Report data gives the possibility to get a picture of public climate finance mobilized for climate actions from EUplus. Measuring and accounting the financial flows allocated to the action against the climate change. This picture is undoubtedly partial but, however, allows making the point on changing attention of Member States and the EU to climate change.

The analysis of the Biennial Reports showed that since 2015, the push to tackle climate change through financial support in developing countries has gained momentum. The analysis also shows an increasing focus on adaptation-oriented actions, which has thus surpassed contributions to mitigation, a sign of a shift in awareness of the delay we are operating in.

While overall in EUplus mitigation used to absorb 57% of public climate finance, this percentage has dropped to 41% in the last BR in favor of a lower increase in adaptation.

In overall terms, the boost from major international commitments in 2015 led to an increase in EUplus contributions of +63% in 3BR compared with the previous pre-Paris BR (BR2) and + 10% in BR4.

Looking at the type of contribution, the bilateral part constitutes the main item, although in a detailed analysis by individual Member States, the breakdown may not be confirmed.

However, these considerations on the allocation of contributions could be challenged by the BR5 data covering the 2-year period 2019–2020. The new BR will not only give an account of whether or not the global target has been reached, but will also illustrate the impact that the COVID-19 pandemic and the subsequent health emergency have caused both in terms of the volume of investments themselves and in terms of the type of support.

The updated data will be available no later than December 31, 2022 [19], together with the annual greenhouse gas inventory for year 2020 as the first biennial transparency report (BTR1), or at the latest by December 31, 2024, if submitted as a stand-alone report.

At that time we will know whether the promises have been kept or not.