How Much Climate ODA Is New and Additional?

At the 15th Conference of Parties (COP15) of the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen in 2009, the collected heads of state and representatives noted the “commitment by developed countries is to provide new and additional resources, … approaching USD 30 billion for the period 2010–2012” and that “developed countries commit to a goal of mobilizing jointly USD 100 billion dollars a year by 2020 to address the needs of developing countries.” Subsequent statements and declarations made it fairly clear that all $100 billion was meant to be new and additional –presumably ‘new and additional’ to existing financial transfers to developing countries.  But there is no consensus definition of “new and additional climate finance.” That raises the concern that that such finance might be provided at the cost of existing support for development. The available evidence with regard to official development assistance (ODA) in particular suggests widespread substitution instead of addition, but by how much depends on your preferred definition of ‘additional.’

The Organization for Economic Co-operation and Development (OECD) and UNFCCC both attempt to count up ‘climate finance’ but even they balk at the ‘additional’ part of the calculation: additional to what? Meanwhile, there was no promise made at the COPs that the money would be provided on generous terms, but a significant part of what has been provided has been claimed as aid, or ODA. Is climate assistance eating development assistance?

In the context of ODA, I’m going to define ‘additional’ in two different ways (i) as “providing climate ODA above the level of ODA that could be used as climate finance expressed as a percentage of gross national income (GNI) delivered in 2009,” or (ii) “providing climate ODA above the level of ODA that could be used as climate finance in (real) US dollars delivered in 2009.” The second approach allows countries to claim ‘additionality’ even if they are providing an ever-smaller proportion of their income to finance development and climate, and falling ever-more below the 0.7 ODA-to-GNI target, so I prefer the first measure.

In 2009 total ODA was $130 billion, or 0.31 percent of the GNI of OECD Development Assistant Committee (DAC) donor countries. In 2021, it was 0.33 percent, or $186 billion. But total ODA includes a lot of things that aren’t meant to count as climate finance including administration, debt relief (unless it is a debt for nature swap), and in-donor costs of housing refugees.  Luckily, the DAC produces a measure of country programmable aid (CPA), which excludes these categories, although it also excludes humanitarian spending, some of which can count as climate finance. Add together CPA and humanitarian spending, you get $103 billion of ODA (or about 0.25 percent of DAC donor GNI) in 2009, rising to $143 billion (similarly, about 0.25 percent of DAC donor GNI) in 2021. Under method one, then, there’s effectively no additional finance to be allocated. Under method two, the maximum ‘additional’ finance is about $40 billion.

Calculating ‘total claimed climate ODA’ is a challenge, because multilateral donors don’t report the percentage of their climate finance which could be considered ODA, and bilateral donors don’t report a climate finance percentage out of the ODA they provide to multilateral bodies. But we can make some back-of-the-envelope calculations.

Starting with the easy part, in 2021, $37 billion in bilateral ODA was reported as climate finance. Regarding multilateral development banks (MDBs), they say that in 2021 they provided $47 billion in own-account climate finance of which about 9 percent of total finance was grants—or about $4 billion. An unspecified proportion was low-interest loans for which the grant equivalent would count as ODA, while some of the grants were managed on behalf of bilateral donors and will have already been accounted for in bilateral spend, and capital contributions to MDB market-rate lending operations also count as ODA. Luckily, Oxfam provides an estimate of grant-equivalent multilateral climate finance, if using a tougher standard than used in standard ODA calculations. Their number is $9 billion. Add the two numbers together and you get a low-end estimate of about $46 billion in total climate finance supported by ODA—which is a little more than half of total reported climate finance.

So, ‘additional ODA that could be used for climate finance’ from 2009 to 2021 equals about $0 or about $40 billion per year, depending on your preference between method one and two. ‘Reported additional climate finance supported by ODA’ equals at least $46 billion. None of what is supposedly additional climate finance supported by ODA is in fact additional according to method one and maybe, possibly, it is 90 percent additional under method two. It isn’t hard to guess which calculation will be preferred by whom.

Meanwhile, looking more broadly at all flows, in 2021, Ian Mitchell, Euan Ritchie, and Atousa Tahmasebi analyzed“total development climate finance,” consisting of official aid, multilateral contributions, and less-concessional finance, and estimated that 45 percent of that figure OECD was not ‘new and additional’ under the standard of reflecting higher flows compared to the years before 2009.

As a partisan for method one, I’d argue that the evidence suggests donors are considerably stripping aid finance from development projects to support climate projects. Given the definition of ‘climate projects’ is also ill-defined, this may be less damaging to development prospects than it sounds. But it still points to the fact that wealthy countries are failing on their climate finance pledges and, in trying to cover that up, they’re delivering both less and less effective development assistance. For the sake of climate and development both, properly defining, measuring, and delivering on additional climate finance should be a priority for this year’s COP in Dubai.