A pledge to fight climate change is sending money to strange places
Wealthy nations have acknowledged their role in the crisis and their responsibility to help other countries with the hefty cost of managing emissions and the effects of climate change. They committed, first in 2009 and again in 2015 under the Paris climate agreement, to a collective goal: $100 billion a year in grants, loans, private sector investments and more by 2020.
More than a decade after the first pledge was made, nations have yet to meet their promise. They fell $16.7 billion short of the $100 billion goal in 2020 and are expected to miss it again when contributions are tallied for 2021 and 2022, according to OECD estimates. There are no penalties for missing the target, aside from criticism from those who say governments are not doing enough to combat global warming.
That failure has helped keep climate finance at the top of the agenda at annual U.N. climate conferences, such as last year’s COP27, held in Sharm el-Sheikh, Egypt.
There, anger and anxiety over the failure of rich nations to meet the funding goal helped developing nations win a key concession: Developed nations agreed to work on setting up a new fund to cover the costs of damage already caused by climate change. Until now, most funding has been focused on reducing emissions or adapting to expected changes.
“If we are telling ourselves we are spending money and investing in our future in a way that we are not, then we are courting disaster.”
World leaders acknowledged that damage from climate change is already rapidly outstripping these countries’ abilities to cope and began discussing a new climate finance goal that, all told, could amount to trillions of dollars. At this year’s COP28 in Dubai, they will debate the goal’s size, who should contribute and over what time period, and any rules governing how it is delivered.
Some officials from potential recipient countries say that, before more money starts to flow, clearer definitions of what qualifies as climate finance and more transparency in reporting contributions are needed. More than 100 times since 2012, developing nations or groups acting on their behalf have called for such improvements, according to a Reuters review of U.N. submissions, videos of climate meetings and climate negotiation bulletins.
"If we are telling ourselves we are spending money and investing in our future in a way that we are not, then we are courting disaster," said Matthew Samuda, a minister in Jamaica's Ministry of Economic Growth and Job Creation.
‘People deserve more’
Across the globe, donors reported more than $25 billion in funding they claim is linked to renewable energy. At least another $5.6 billion went to projects they claim would help countries prepare for or respond to climate-related disasters. Many of their reports contain too little detail to verify these claims, Reuters found.
Reuters documented billions more that went to projects involving fossil fuels or to other initiatives that have little or nothing to do with reducing emissions or adapting to the impacts of climate change.
When Italian chocolatier Venchi opened dozens of new stores in Japan, China, Indonesia and elsewhere in Asia, it had help from SIMEST, a public-private company that helps Italian companies expand overseas. Italy claimed the $4.7 million equity investment as climate finance.
A SIMEST official said that the agency’s work is not focused on climate change and that it is not involved in Italy's climate finance reporting. A spokesperson for Italy's Ministry of Environment and Energy Security, responsible for the country's U.N. reports, said the project had a climate component but declined to elaborate.
The United States agreed to lend $19.5 million to developers of a Marriott hotel franchise in Cap-Haitien, Haiti. At the time of the agreement in 2019, plans called for improving the Habitation Jouissant with more rooms, an infinity pool, a rooftop restaurant and better gym facilities. The developer, Fatima Group, now says it is redesigning the project, which will become a Courtyard by Marriott property.
The hotel overlooks the sea, but its position on a hillside means it is not threatened by sea level rise or flooding, and it hasn’t suffered any storm damage, said Fatima Group Chairman Fred Béliard. Fatima Group does intend, however, to build “climate-resilient infrastructure,” he said. A U.S. State Department spokesperson said the loan for the hotel counted as climate finance because the project included stormwater control and hurricane protection measures.
A Marriott spokesperson said the company does not get involved in its franchisee’s financing arrangements and had no role in the U.S. decision to count the loan as climate finance.
Belgium backed the film “La Tierra Roja,” about a former rugby player who works for a company clearing forest to make paper in Argentina. He falls in love with an environmental activist who protests the paper-maker’s water-polluting toxic chemicals.
Nicolas Fierens Gevaert, a spokesperson for Belgium’s department of foreign affairs, trade and development said Belgium considered its $8,226 contribution – part of a larger grant for the film – climate finance because the movie touches on deforestation, a driver of climate change.
Some countries count projects that never happened toward climate finance goals. France reported a $118.1 million loan to a Chinese bank for environmental initiatives, as well as loans totaling $267.5 million for upgrades to a metro system in Mexico and $107.6 million for port improvements in Kenya. Each project was subsequently canceled with no funds paid out, according to the French Development Agency. Similarly, the U.S. reported $7 million in insurance coverage for a hydropower project in South Africa that never happened.
Recipients of U.S. climate finance
The U.S. reported $9.5 billion in grants, loans and other contributions to developing countries from 2015 to 2020.
Source: Reuters analysis of climate finance data nations reported to the U.N.
French and U.S. officials involved in U.N. reporting told Reuters they document funding in the year it is committed and do not revisit the reports to correct them. No rules require them to do so.
The biggest player of all in climate finance is Japan. It has lent at least $9 billion for projects that will continue reliance on fossil fuels, according to the Reuters review. At least some of those projects increase emissions rather than reduce them, including a new 1,200-megawatt coal-fired power plant that Japanese companies are building on Matarbari, an island on Bangladesh’s southeast coast. Japan has lent Bangladesh at least $2.4 billion in climate finance for the plant, expected to come online in 2024.
Sources of Bangladesh’s climate finance
Wealthy nations reported $9 billion in loans, grants and other contributions to Bangladesh from 2015 to 2020 as part of their pledge to help developing countries reduce emissions and manage the effects of climate change. That includes $2.4 billion in lending from Japan to build a new coal-fired power plant.
Source: Reuters analysis of climate finance data nations reported to the U.N.
When Japan helped Bangladesh plan the Matarbari project more than a decade ago, Bangladesh’s power system had a daily power shortfall of 2,000 megawatts, more than one-third of its demand. That led to long, frequent power failures that spurred protests and hindered economic growth. The new plant will help eliminate ongoing power shortages, which result in planned power cuts, said Mohammad Hossain, head of Power Cell, a division of Bangladesh’s energy ministry.
The plant will add 6.8 million tons of CO2 to the atmosphere every year, according to documents from the Japan International Cooperation Agency (JICA), which helped plan and finance the project. That’s more than the city of San Francisco reported in emissions for all of 2019.
Japan considers Matarbari a climate change project because it uses Japanese technology that generates more energy with less coal, resulting in lower emissions than conventional power, said Sachiko Takeda, a JICA spokesperson. JICA documents describing the project say Matarbari will emit about 400,000 tons per year less in CO2 equivalent emissions than a typical plant of its size.
Japan’s foreign ministry, not JICA, is responsible for reporting climate finance to the U.N., Takeda said.
Japan conducts emission-reduction calculations for projects, and a foreign ministry team assesses projects before deciding to report them to the U.N. as climate finance, said Hiroshi Onuma, principal deputy director of the climate change division at Japan’s Ministry of Foreign Affairs. He declined to explain why Japan would count a coal plant as a climate project.
Funding large projects such as Matarbari helped Japan stake a claim as the top funder of climate finance. It reported $59 billion in grants, loans and equity investments from 2015 through 2020 and an intention to continue similar funding levels through 2025. That is $14 billion more than Germany, the next-highest funder, reported over the same period.
“This commitment stands out as a sizable amount among other developed countries,” Japan’s Ministry of Foreign Affairs said in a June 2021 press release. “Japan will continue to lead the global effort to tackle climate change.”
Source: Reuters
