Why Everyone Exaggerates “Climate Finance”

November 8, 2024

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Editor's Note

This commentary was published at Brookings on November 7, 2024. Read it here.

The upcoming annual UN conference on climate change, COP29, is informally dubbed a “climate COP”. Countries are aiming to set a finance goal, and also frameworks to manage market mechanisms (under Article 6 of the Paris Accord). But instead of just worrying about the quantity of finance, in a new Commentary titled “Why everyone exaggerates climate finance”, Rahul Tongia writes we must also worry about the quality of the finance. Too much is labeled climate finance.

Donors like to treat all funding as “climate finance”, even when it’s a market loan for a solar power plant (which is no longer climate action per se but simply business as usual, and cheap) while developing regions are asking for trillions in “climate finance” when much of it isn’t incrementally decarbonizing, but, rather, infrastructure buildout (independent of green) or business-as-usual green.

This isn’t just an abstract possibility for future finance, it has already happened. There was a pledge by the rich at COP15 in 2009 to help developing regions with $100 billion of annual climate support by 2020. While this has been reached a bit later than targetted, much of the support is a loan, often at market rates, and often for things like building a solar farm or a metro. This commentary explores these issues, and finds the good news that true additive climate finance requirements are lower than headline numbers.

Read the commentary here.

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