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Categories: In The News

by Pieter Terpstra


Categories: In The News

by Pieter Terpstra


A Look at the New OECD Data

The OECD is a consortium of 34 wealthy countries. Among other joint initiatives, it provides a platform to monitor and share statistics on aid flows and climate finance contributed by its members. Most OECD members report both their climate finance expenditures and commitments using the “Rio Markers” (see text box), and the OECD secretariat periodically makes these numbers public. OECD members’ climate finance contributions represent a significant portion of the collective $100 billion commitment, so the numbers reported by the OECD give a good indication of developments in the climate finance field.

What Are the Rio Markers?
In 2010, the OECD added two markers for adaptation and mitigation to what it calls the “Rio markers”. Using these markers, donors indicate whether adaptation and/or mitigation is a “primary focus” or a “significant focus” of a project. For instance, projects that were designed specifically to address adaptation are marked as having a primary adaptation focus. When adaptation is a “significant” focus, the project contains adaptation activities, but it is not the primary goal. In fact, projects with significant focus on adaptation might have only a very small adaptation component.

As a result, the Rio markers estimate the number of climate-relevant projects quite well, but may not provide an accurate estimate of finance spent on climate-related activities. The discussion is ongoing regarding how much of these projects “count” as adaptation or mitigation funding. This makes it difficult to estimate how much money actually went to adaptation or mitigation.

Surprisingly, new OECD numbers show that while adaptation expenditures in 2011 remained the same as in 2010, expenditures for mitigation activities decreased. Plus, the total commitment for climate finance decreased from $23 billion in 2010 to $17 billion in 2011.

While a “commitment” refers to the total amount of money a country will spend on an adaptation/mitigation project over a multi-year period—which is reported at the beginning of a project—an “expenditure” refers to the amount a country spends in a particular year on adaptation/mitigation activities. In January 2013, the OECD updated its data for 2011. It is difficult, of course, to predict or analyze trends based on only two years of data (the only data that’s currently available on OECD climate finance commitments). But given developed nations’ agreement to scale up climate finance significantly by 2020, this decrease is surprising—and could be concerning

A Dip in Climate Finance Commitments

Given the level of climate finance developed countries committed to provide by 2020, one would expect to see expenditures and commitments rising year to year. But the most recent OECD data paints a different picture:

  • Total official development assistance (ODA) commitments decreased 9 percent, from $163 billion in 2010 to $149 billion in 2011.
  • Total commitments for adaptation-related projects decreased 12 percent, from $8.5 billion in 2010 to $7.5 billion in 2011.
  • At around $4.6 billion, expenditures for adaptation-related projects remained about the same in 2010 as in 2011.
  • Commitments for mitigation decreased 31 percent, from $18.6 billion in 2010 to $12.8 billion in 2011.
  • Expenditures for mitigation-related projects decreased by 11 percent, from $8.9 billion in 2010 to $7.9 billion in 2011.

There were large fluctuations amongst individual donors, with Germany, the EU, and Canada increasing their commitments and expenditures significantly. Others, such as Japan, France, Spain, and the United Kingdom, decreased theirs. The overall result is a decrease in commitments and, to a lesser degree, a reduction in expenditures. The question is, are these decreases problematic?

Tracking Climate Finance Is Exceedingly Difficult

The short answer is that it’s difficult to say, due to the limited data and complex nature of tracking and reporting climate finance. For one, commitment data always fluctuates more than expenditure data, as the OECD reports multi-annual commitments at the start of a project while expenditure is reported per year during the course of the project. It is possible that donors over-committed after the 2009 UNFCCC meeting in Copenhagen, which leads to a lower commitment in the years after.

Furthermore, tracking climate finance itself is a complicated process, so we may not be getting a completely accurate picture. For example, not all donors report using the Rio markers, and are left out of the overall picture. Private sector finance used for adaptation or mitigation projects is not reported to the OECD.

Bilateral donors and multilateral donors who receive bilateral support both report to the OECD, so there is some double-counting of climate finance. Plus, in many cases, the cost of entire development projects is counted towards climate finance even if only one piece of those projects is climate-relevant. These factors mean that actual climate commitments and expenditures by OECD donors could be lower rather than higher.

The Bottom Line

A drop in adaptation and mitigation commitments from one year to another is not alarming, but it would be problematic if this situation becomes a year-to-year trend. In the long run, reduced commitments will lead to reduced expenditures. The current drop in commitment raises the question as to whether developed countries will be able to live up to their promise to deliver $100 billion in climate finance by 2020.

This coming April, the OECD is set to release an update of the ODA data. The update will include preliminary figures for 2012 and will indicate whether climate finance commitments and expenditures increased or further decreased in 2012.

Without sufficient support from OECD donors, developing countries will not be able to mitigate or adapt to climate change’s most dangerous impacts. If developed countries want to live up to their promises, they will have to step up their climate finance commitments in the coming years.

**Note: In this blog, the overall figures used for “climate finance” are lower than if the figures mentioned for adaptation and mitigation were added together. This is because one project can have both an adaptation and a mitigation focus. Furthermore, the amounts mentioned in this blog are all in constant 2010 U.S. dollars.

This article originally appeared in the WRI Insights 20/03/2013

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