When It Comes to Climate and Development, Worry Less about Finance and More about People

In a new note, I suggest there’s little evidence that aid (official development assistance, or ODA) spent on climate mitigation is actually reducing emissions. That’s not to say the finance is wasted: much will have been spent on projects with considerable development impact and some, surely, reduced emissions compared to business as usual. But available data suggests the overall impact on greenhouse gas emissions of nearly $200 billion in ODA tagged as mitigation spending is at the least very hard to spot. Perhaps that should come as little surprise given we know that a lot of projects tagged as helping mitigation goals seem at best distantly related to emissions reductions or are very expensive ways to reduce greenhouse gas output.

This speaks to the larger problem that, absent a global carbon market, it is very difficult to allocate finance to efficiently reduce emissions. And it is why the discussion on climate finance has moved on to simply trying to more-or-less-arbitrarily allocate the total costs of investments related to low-carbon infrastructure across governments and the private sector in rich and poor countries. That leads to calls for multi-trillion-dollar international financing flows that strain credulity. And I think it is a reason to focus more on creating zero-carbon technologies that become the cheapest approach to delivering power, transport, or construction. But, related, it is also a reason to think more about the cross-border movement of people as well as money.

To develop, roll out, and scale new technologies of low-carbon production in rich countries to reduce emissions there (and subsequently reduce costs for developing countries) is going to take a lot of people. We will need solar panel and heat pump installers, construction workers, wind farm and nuclear power plant technicians, the list goes on. But green industrial strategies across the rich world are already running into the issue that there is no one to do all of that work. Renewable power project developers and utilities in the US already rank labor shortages as the biggest challenge they face, and there is going to be a 1.5 million-strong worker shortage in green sectors by 2030 under business as usual. Germany alone needs somewhere in the region of 120,000 additional solar installers by 2026. Migrants can help fill the millions of jobs available, and as they tend to send home thousands in remittances each, that adds up to a multi-billion-dollar development opportunity on top of the impact from reduced emissions.

Financing has a zero-sum element than migration doesn’t. If we’re providing money to reduce emissions there, we’re not spending it on solar panels (or podcast subscriptions, or dog treats) here. That’s why countries are far happier spending their climate finance at home—compare the $3 billion-ish of US international climate finance in 2022 to the $40 billion-ish a year of subsidies for clean energy in the US available under the Inflation Reduction Act. Migration is (usually) mutually beneficial, or positive sum. It is anything other than politically uncontroversial, of course, but neither is foreign assistance. About a third of Americans wanted to see immigration reduced in 2019 compared to about half who said the same about aid. And as firms and policymakers in rich countries increasingly recognize the need for migrants to do the jobs that need doing, migration should (hopefully) become more popular.

That’s why perhaps the bigger plausible international impact on sustainability and the bigger climate-related opportunity for development may involve migration rather than finance.

None of this is to say that developing countries shouldn’t get a *lot* more finance—for mitigation, adaptation, and development all three. The moral and economic case for that is incredibly strong. And we should work out ways to more efficiently convert additional international finance into reduced emissions. It wouldn’t be beyond the talents of global institution builders to construct a system that rewards low-emitting countries for sustaining that status as their economies grow. But sustainable development is about a lot more than development finance, and it is time to pay far more attention to other powerful tools to deliver low-carbon global progress.

That all makes it disappointing to look at how much attention is paid to migration in climate discussions. Search Google News for “COP28” and “finance” and you get more than 13,000 stories. Compare “COP28” and “migration,” where you find about one-sixth that number. Worse, the migration stories are skewed heavily towards the negative: people displaced by worsening climates seeking refuge in places they aren’t wanted. I hope COP29 in Azerbaijan will help shift the focus toward the important positive role for the movement of people in fixing the climate problem.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

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