Rich countries must end obsession with private climate finance

Rich countries’ obsession with private finance means millions of poor and vulnerable people could be left to face increasingly extreme and erratic climate alone warned Oxfam today as ministers from around the globe meet in Warsaw to discuss how they deliver on their climate finance commitments.

Rich countries promised to deliver $100 billion a year by 2020 to help poor countries reduce their emissions and adapt to a changing climate. However two US-hosted Ministerial Meetings and pre-COP finance discussions during 2013 have focused almost exclusively on the role of private finance in meeting this target.

The invitation for Ministers to attend today’s meeting also highlighted the need for participants to come prepared to present ideas on how to mobilize funds from the private sector.

Winnie Byanyima, Executive Director of Oxfam International said:

“Private finance is not a panacea. It has a role to play, particularly on projects aimed at reducing emissions, but it will not reach the most vulnerable people in the poorest countries who need help to survive in the face of increasingly extreme and erratic weather.”

“Rich country governments must stop using the private sector to side step their own climate finance promises and seize this opportunity to sort out the public funding mess. Murky accounting and a lack of transparency mean the world’s poorest countries have no idea what money will be available and when. The uncertainty makes it impossible for them to take action to protect their populations.

“Rich countries must make it clear what new money they are putting on the table now and how they will deliver the $100 billion a year they promised by 2020. Kicking this issue down the road again could spell disaster for poor communities who need help to adapt to a changing climate and lead to a breakdown in trust that will bury hopes for agreement on a global climate deal in 2015.”

“Tough economic times should not be an excuse for government inaction. A significant chunk of the money needed could be raised through innovative sources such as the forthcoming financial transactions tax in Europe, or fair charges on emissions from international transport.”

Notes to editors

Oxfam’s Briefing ‘Adaptation and the $100 billion commitment’ outlines why private finance cannot be a substitute for public finance.

The report shows that:

• Private finance will not meet the adaptation needs of the poorest and most marginalized people. Globally, an estimated 500 million small farms support around two billion people. Of these, an estimated 90 – 98 per cent produce food for their own consumption or for the consumption of their local community – not for formal markets which attract private sector investment. This means there is little incentive for the private sector to invest in adaptation measures to support the poorest and most marginalized farmers such as the introduction of water conserving farming practices.
• Private finance favors mitigation over adaptation. The private sector is estimated to have contributed almost 62 per cent of global climate finance flows in 2010-11 ($224billion) but all of this money was for emissions reductions.
• Private finance favors richer developing countries over less developed countries. The world’s least developed countries received only 1.9 per cent of global foreign direct investment flows in 2012 and little of this money is focused in areas which are adaptation priorities. For example in 2011 Bangladesh attracted US$1.1 billion of foreign private investment but only US$5.6 million, or 0.5 per cent went to agriculture, a priority area for adaptation.

Oxfam’s Briefing ‘After Fast Start: Climate Finance in 2013 and beyond’ reveals that rich countries claim to have committed $16.3 billion of climate finance in 2013; however their net budget allocations might be closer to $7.6 billion as much of this money could come in the form of loans that will need to be repaid. Most individual countries’ contributions have either plateaued (e.g. the Netherlands) or decreased (e.g. Sweden). This figure is well below even the lowest estimate of what it is going to cost developing countries to adapt to climate change, which ranges from $27 billion to well over $100 billion. By comparison, developed countries spent $55-90 billion a year during 2005–2011 on fossil fuel subsidies.