Dear COP Negotiators from the Global South: Please Be More Cynical About Your Counterparts from the Global North

This year’s COP climate conference is up and staggering in Baku, Azerbaijan. Top of the agenda is agreeing on a new goal for climate finance, with sustained calls for a considerable scale-up from the current figure. My plea to negotiators from the Global South, and in particular those from the world’s poorest countries: You have said your priority is development and adaptation. Regarding mitigation, you think rich countries should lead, and largely pay to fix a problem that they largely created. But a bigger climate finance promise won’t help with any of that unless it is wrapped around with commitments to existing development finance. And, under business as usual, it will make things positively worse.

Imagine the COP agrees to step up from the current $100 billion target, perhaps even tripling it. While campaigners carp that we need trillions, the corks fly and the balloons drop. And then rich country delegations go home and try to figure out how to deliver on their commitments. Immediately, they run into the problem that there doesn’t in fact appear to be any new money to meet international financing commitments. Indeed, if anything, aid budgets are being reduced. And the US election result suggests the country will go from not pulling its weight to simply not pulling anything.

Not to worry, the negotiators might think—it isn’t as if the current $100 billion goal was reached using new money; the accounting tricks to designate existing aid flows as “climate finance” were legion. They can badge pretty much anything as climate finance if they try hard enough: investments in gelato stores or movies about love blossoming in the South American rainforest, for example. Even if they actually want to focus on projects that (at least) deliver development, they can find an excuse to tag projects as “climate mitigation” doing municipal transparency in Gaza or teaching reform at higher education institutions. And then they get to count “mobilized private finance”: it isn’t just the investment the government puts into the gelato store, it’s the money that the gelato store owners put in, too! Even if they likely would have invested regardless! It’s like money for nothing—in that it is nothing, counted as money!

But the relief is short-lived. With a $100 billion goal, the fudging and obfuscation and generous labeling can go a very long way. It gets harder with a larger goal. One answer would be to double down on the private sector “mobilization,” real or imagined. But at least if the government finance really is meant to make a project happen that wouldn’t happen otherwise, that gets expensive. For example, in the poorest countries, it is taking one dollar of public finance to mobilize 37 cents of private finance. Or, looking at private finance to governments, the cost of guarantees to make that lending sustainable is far higher for the poorest countries. So, if rich countries want to increase mobilization ratios to make less finance look like more finance, they will have to move their efforts to the richest developing countries. 

In addition, a bigger climate finance goal is going to increase the pressure to take existing international finance and shift it to climate. And to the extent that not everything can be labeled as climate finance, that means less for development finance. Given priorities for international finance expressed by the Global South, this is bad news. But for Northern negotiators, it is simply delivering on their promise.

Tightening up definitions as part of the negotiations in Baku could make these problems even worse. If the goal specifies grant equivalent using the official development assistance (ODA) framework, that will only encourage lending to relatively richer countries and ensure more aid is diverted away from development. More closely defining what kinds of activities can count under climate finance alongside a bigger goal would have a similar impact.

Put it this way: if politicians from the North can divert grant assistance from a school feeding program in Liberia (GNP per capita: $1,700) and use the money to provide a guarantee for a home-country multinational to build a power plant in Malaysia (GNI per capita: $36,120) that probably would have been built anyway, all while getting plaudits from the international community and hugs from constituent climate campaigners on the behalf of future generations, the school feeding program doesn’t stand a chance.

If a larger climate finance goal isn’t going to be positively harmful to the prospects of the world’s poorest countries, it is going to have to come with measurable commitments to those countries about existing support. Language that might help includes:

• Commitments that all mitigation money (or only with specific exceptions) should be new, additional, and not counted as ODA, where new and additional is carefully defined against an agreed baseline.
• Guarantees on total country programmable ODA volumes to low- and lower-middle-income countries. 
• Specific proposals on how money is to be delivered—for mitigation a capital increase at multilateral development banks is a plausible approach that would divert a comparatively limited amount of existing finance.

If not, for the world’s poorest countries, no target really might be better than a bad target—and at the moment, such guarantees don’t appear in the negotiating text.

Be careful what you wish for. The problem with Midas’ request was that everything turned to gold. The problem for the world’s poorest countries is more likely to be that the (far too) little gold they currently get turns into tons of ashes. That’s how the reverse alchemy of climate finance has worked so far, and it would only get worse with a larger, but still ill-defined, goal.