Professor Joseph Stiglitz, a recipient of the Nobel Memorial Prize in economic sciences, said, "What you measure affects what you do. If you do not measure the right thing, you do not do the right thing."
Likewise, monitoring of any project intervention or funding, be it supported by international or local sources, is essential to track progress and results. International climate finance cannot be an exception.
Since international climate finance is intended to spearhead climate change mitigation and adaptation projects in the Least Developed Countries (LDCs) and Small Island Developing States (SIDS), underpinned from different negotiations that took place under the Conference of the Parties (COPs) within the auspices of the United Nations Framework Convention on Climate Change (UNFCCC), it is necessary to determine whether climate transformations are taking place or will take place at project levels in the foreseeable future.
Before delving deeper into the topic, we need to carefully consider that international climate finance is one of the fundamental tenets of global cooperation in climate change to the countries which are historically least responsible for greenhouse gas (GHG) emissions but are the most vulnerable in case of a climate change-induced event.
Climate finance is supposed to make these countries better off in terms of not only enhancing their capacities to adapt to changed climatic conditions but also ensuring transformational changes at the vulnerable community levels of the respective countries. From mitigation perspective, climate finance shall promote projects that minimise or avoid GHG emissions in the true sense compared to the business as usual scenario(s).
The rich nations extend development cooperation to the developing countries and the LDCs, which is ideally tantamount to the official development assistance (ODA) commitment which is 0.7% of a rich nation's gross national income (GNI) per annum.
While nowadays, different facets of sustainability stemming from sustainable development goals, energy, climate policies, etc. are integrated into the ODA projects, international climate finance is unlike the ODA.
Combining climate finance with ODA to only enlarge the pie of ODA to illustrate that ODA target has been met eventually affects the recipient countries. Notably, developed countries have obligations for climate finance too, and this posits the need for reporting climate finance separately from ODA to avoid double counting.
As mentioned in the preceding section, international climate finance shall make a country better off instead of increasing distress of a country grappled with problems. For instance, a country already reeling with huge debt burden and trying to ride out the problem is not in a position to receive further debt on the ground of climate finance.
Contrary to the popular belief that debt instrument is mainly used to channel climate finance to middle-income countries, the recent report titled "Climate finance shadow report 2020" delineates that a significant part of climate finance was leveraged to LDCs and SIDS during 2017-18 using debt and non-grant instruments.
For some poor countries struggling to meet the basic services, i.e., education, health and others, the rising debt burden eats up a considerable revenue of their income generating activities.
On top of this, additional debt as climate finance would perhaps reduce these countries' capacity to spearhead transformative changes. In fact, they may find themselves fighting a losing battle against climate change.
Projects where international climate finance is injected shall additionality have, for example, the projects that otherwise would not be implemented without climate finance. Moreover, if projects promote dirty energy or unsustainable infrastructure and hinge on targets for disbursement of climate finance, the effectiveness of such finance would be dubious for obvious reasons.
Poor countries would not be able to realise the full benefits of such investment as these projects might turn out to be stranded assets soon and conversely, we would have more net GHG emissions released until these projects would retire as stranded assets.
One of the major talking points of international negotiations and different seminars that we ponder on is the lack of new and additional climate finance despite repeated promises from developed countries. Well, agreement on the $100 billion goal was reached during the 2010 climate change conference in Cancun, Mexico, following the 2009 Copenhagen Accord, and the pledge was reiterated in the 21st Conference of the Parties (COP21) in 2015.
Still, reaching that $100 billion target is far from reality. There are also cases where part of ODA contribution is framed as climate finance. The "Climate finance shadow report 2020" unearths that a whopping 25.5% of the ODA fund channelled to the LDCs and the SIDS in 2017-18 has been counted as international climate finance.
Therefore, a substantial amount expected to be spent on essential areas, including health, education and others, is being shifted to fund climate change projects, creating the problem of double counting and violating the pledge to channel additional and new climate finance. To be qualified as climate finance, it shall not be part of any country's ODA commitment.
Finally, under the extraordinary circumstances, the 26th Conference of the Parties (COP26) is postponed to the next year, but all eyes would certainly be on COP26. Among other things, the progress in mobilising $100 billion climate finance by the developed nations would come to the fore again, particularly on the points such as double counting of finance, new and additional funding, grant vs loan debate, etc.
And whatever happens in the negotiation or discussions during the next COP pertaining to climate finance, surely, more than promises would be required from the developed countries about whether new and additional $100 billion finance per annum would be really disbursed to the countries who need this support the most. Along with this, for transparency and the necessity of building trust, the developed countries shall disclose details of the projects that have so far received climate finance, the amount of finance disbursed against each project, and the types of financial instruments that have been used.
They shall, furthermore, substantiate how the fund disbursed under the framework of climate finance is an addition to the ODA commitment. In all earnestness, a consistent process shall segregate when a finance is worth counting as climate finance and when it is not.
The author, a Humboldt Scholar, is an engineer and environmental economist