Capturing climate related flows outside dedicated funds

Climate Funds Update tracks those monies which flow through dedicated climate change funds – meaning bilateral and multilateral funds and initiatives that have been established specifically to address climate change as a principle objective.

However these dedicated funds represent only part of the overall picture of international public climate finance. There are other international public financial flows that address climate change and it is important to capture these flows. The OECD Development Assistance Committee (OECD DAC), which collects data on all official development assistance (ODA) and other resource flows, has monitored aid targeting the objectives of climate change mitigation through the Creditor Reporting System (CRS) since 1998 using the ‘Rio Marker’ for climate change mitigation[1]. Donor governments report their climate related activities which are marked depending on whether climate change is a ‘principal’ objective (the activity would not have been funded but for that objective), or ‘significant’ objective (the activity has been formulated or adjusted to help meet the objective). In addition the United Nations Environment Programme (UNEP) and the Stockholm Environment Institute (SEI) have compiled information on new commitments of climate financing (including non concessional official flows) provided by bilateral financing institutions (BFIs) such as Agence Française de Développement (AFD), KfW Entwicklungsbank (Development Bank, Germany), Japan International Cooperation Agency (JICA), Nordic Environment Finance Corporation (NEFCO), and the European Investment Bank (EIB), for the years 2008 and 2009[2] (Table 1).

Table 1: Committed BFI climate finance for mitigation and adaptation 2009 ‎‎(USD millions)‎‎ ‎‎(UNEP, 2010)‎‎

While the OECD and UNEP-BFI data cannot be aggregated with the fund monies tracked through the Climate Funds Update given that some of the bilateral and multilateral resources that flow through dedicated climate change funds are reported in the OECD system, it gives an indication of the international public financial flows for climate investments that exist beyond those channeled through dedicated climate change funds[3].

The following information demonstrates the ODA funds committed by OECD donor countries between 2007-2009 to address climate change mitigation (both as a principle or significant objective). For a differentiation between the principle and significant objectives, please refer to www.oecd.org/dac/stats/rioconventions.

Committed Climate Change related ODA ‎‎‎‎‎‎(in USD thousands)‎‎‎‎‎‎

The values reported by the BFIs are generally larger than the respective national values reported by the OECD-DAC. This is due to the inclusion of non-ODA climate financing flows provided by BFIs to developing countries and also due to a different understanding of climate-related project characteristics at the source of project data within development agencies leading to a more accurate classification of projects than under the automated database filtering for the official OECD-DAC statistics. OECD-DAC data can also be larger than individual BFI numbers for a given year (compare German and KFW data in 2008) because of alternative channels existing for a country to disburse climate funding into multilateral funds or by using other implementing institutions.

Some important caveats:

Note that here we only present the funds committed as opposed to actually disbursed. This is because the Rio markers indicate donors’ suggested objectives, and it is difficult to tie the markers to exact financial disbursements. This highlights the need to monitor the disbursement of climate finance more closely to get a better understanding of where and how finance is being spent in developing countries, and to understand how the committed activities translate into action.
The climate change-related marker has only been applicable to mitigation. In December 2009 the DAC members approved the inclusion of a new marker to track adaptation (reporting will start on the new adaptation marker for 2010 flows).
Currently, both categories 'principal’ and ‘significant’ of climate markers are counted towards a country’s climate-related ODA. Thus figures are not an exact quantification of aid contributions to reducing climate change.
Only bilateral climate change flows are reported. Multilateral agencies do not use the marker when they report their flows to the DAC, except the EU institutions and the World Bank.
Climate change related flows cannot be tracked via general budget support, which might become more prominent in the future as climate-related development support continues to move towards programmatic forms.

There is no internationally agreed methodology for tracking the exact share of aid activity expenditure that contributes to climate change mitigation or adaptation. This is particularly true for adaptation given its intricate linkages with development. Absent of such a methodology, the markers allow an approximate quantification of the amount of aid that targets climate change concerns, but not the exact amount of aid specifically directed to helping developing countries mitigate or adapt to climate change.

[1] When developed countries signed the three Rio Conventions in 1992, they agreed to support developing countries in the implementation of these Conventions. Since 1998, the DAC has monitored aid targeting the objectives of the Rio Conventions through its Creditor Reporting System (CRS) and its Rio markers (biodiversity, climate change, and desertification). In 2009, the DAC has also developed a new policy marker to track ODA in support of climate change adaptation. According to the Rio Marker definition on climate change mitigation-related funding, an activity should be classified as climate change-related if ‘it contributes to the objective of stabilisation of greenhouse gas (GHG) concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system by promoting efforts to reduce or limit GHG emissions or to enhance GHG sequestration.’ More information is provided on www.oecd.org/dac/stats/rioconventions.

[2] Download of the 2010 Survey for 2009. Download of the 2009 Survey for 2008

[3] It is likely that most bilateral funds aimed to address mitigation are included in the OECD data, and some of the bilateral contributions to multilateral funds. However, bilateral flows to address adaptation are not yet fully included unless they are seen to serve the objectives of one of the Rio conventions; multilateral ODA agencies are not required to report to OECD and are therefore not included.