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The EU as a region received the lion's share of climate
financing from multilateral development banks (MDBs) in 2020,
followed by Sub-Saharan Africa and South Asia, according to a
report released June 30.
Coordinated by the European Bank for Reconstruction and
Development (EBRD), the 2020 Joint Report on Multilateral
Development Banks' Climate Finance said the high-income
economies of the EU received $26.6 billion out of a total of $66
billion the MDBs doled out, mostly in the form of investment loans,
rather than as grants, bonds, or equity investments.
Funds secured through these means are largely used to mitigate
the present and future impacts of climate change through shifting
energy generation and consumption to low-carbon sources.
Sub-Saharan Africa was the next largest recipient at $9.06 billion,
and South Asia was in third place with $8.03 billion.
"Accelerating the transition to low-carbon and climate-resilient
economies through climate financing. is a key element of the MDBs'
effort to align their activities with the objectives of the 2015
Paris Agreement," the MDBs said in a 30 June announcement,
following the report's release.
The report combined data obtained from African Development Bank,
the Asian Development Bank, the EBRD, the European Investment Bank
(EIB), the Inter-American Development Bank Group, the Islamic
Development Bank, the World Bank Group (WBG), and, for the first
time, the Asian Infrastructure Investment Bank.
A day after the report's release, the EBRB announced that its Board of
Governors has voted to align its activities with the Paris
Agreement, starting with the end of 2022. This would include
shoring up its proportion of green financing to more than 50% by
2025 and intensifying support for where fossil fuel reliance
remains heavy.
The EBRD, which began 30 years ago to help formerly communist
countries adapt to market conditions, said its member countries are
35% more carbon-intensive than the world average, and highly
polluting coal accounts for more than 40% of primary energy supply
in seven EBRD countries.
The ERBD itself provided $3.8 billion in climate financing in
2020, according to the report.
However, it wasn't the leading climate financier. The EIB led
the pack, followed by the World Bank Group.
Most of EIB's total financing of $27.8 billion went towards
high-income economies in the EU region, and about 11% to low- and
middle-income economies. In contrast, nearly 4% of the World
Group's $22 billion in financing was directed to high-income
economies, while the rest went to helping low- and middle-income
economies transition to a low-carbon future.
Financing through debt
Overall, more than half of the $50.4 billion in loans were given
to low- and middle-income economies, rather than as grants or other
forms of financing, which drew criticism from the global nonprofit
Friends of the Earth (FOE).
"We are concerned about the amount of climate finance being
given through debt-based instruments," Luisa Abbot Galvao, FOE
international policy campaigner, told Net-Zero Business Daily in a
1 July email. "Countries shouldn't have to go into further debt to
take climate action, especially those countries that did the least
to contribute to it and are already being the most impacted."
However, $38 billiion in total loans, loan guarantees, equity,
bonds, and other forms of financial assistance were directed to
low- and middle-income economies, according to the report.
A week earlier UN Secretary General António Guterres repeated
his call that 50% of total climate finance should be spent on
building resilience and adaptation, up from 20% now. "We must
ensure that this finance goes to those most in need, particularly
small island developing states and least developed countries,"
Guterres said at the UN Special Thematic
Session on Water and Disasters on 25 June in Brussels.
The report pointed out that small island states received less
than one-eighth of total climate financing, or $8.1 billion, in
2020 for both adaptation and mitigation activities.
Mitigating climate impacts
Most of the MDBs' financing, or $49.9 billion, was directed
towards mitigating climate change effects by shifting toward
practices that release fewer GHGs, such as clean energy generation,
using lower-emitting vehicles, and improving energy efficiency of
buildings and manufacturing processes.
About half of the mitigation financing, or $24.2 billion, was
directed to the EU, with about $5.7 billion going to South Asia,
and roughly $4.3 billion each to Sub-Saharan Africa and the Latin
America and Caribbean regions.
The EU spent most of its mitigation financing on transitioning
its transport sector ($8 billion), investing in renewables ($5
billion) and low carbon-technologies ($3.1 billion), and improving
energy efficiency ($6.7 billion).
South Asia spent more than half of its mitigation financing in
the renewables and transport sectors and to a lesser extent on
water and wastewater systems.
Adapting to floods, storms
The MDBs directed $16.1 billion toward climate adaptation
activities to build resilience to the mounting impacts of climate
change, including worsening droughts and more extreme weather
events, from flooding to rising sea levels.
This included $4.2 billion in financing to shore up existing
energy, transportation, and other infrastructure, and $2.3 billion
for boosting water and wastewater treatment systems to deal with
flooding caused by more frequent storms and sea-level rise.
Under adaptation financing, South Asia received $1.5 billion,
while Sub-Saharan Africa received $1.8 billion to shore up its
energy, transportation, and wastewater infrastructure. The EU
received a similar amount as South Asia, though it spent its money
equally between the water and wastewater sector and the energy,
transport, and other environmental sector.
Environmentalists remain skeptical
Galvao and others in the environmental nonprofit community
remain skeptical of any climate financing claims by the MDBs,
notably the World Bank Group, because they continue to fund fossil
fuel projects.
The MDB report lists the World Bank Group, followed by the
European Investment Bank, as the leading financiers in 2020.
"So while MDBs should get credit for increasing climate finance
to renewables and climate adaptation over the years, their
continued support for fossil fuel projects and for policies that
create an enabling environment for fossil fuel expansion ultimately
undermine and even contradict their climate-positive actions,"
Galvao said.
It's not enough
The funding levels, even when aimed at clean energy and climate
mitigation, fall far short of the amount identified by the
International Energy Agency and the World Bank in a report released in June.
In particular, more investment needs to be directed at the
developing world, the groups said in their report, "Financing Clean
Energy Transitions in Emerging and Developing Economies." Annual
clean energy investment in emerging and developing economies needs
to increase by more than seven times, from less than $150 billion
in recent years to over $1 trillion by 2030, for the world to be on
a path to reach net-zero emissions by 2050.
Posted 01 July 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst