Money for “our backyard” but not the Green Climate Fund

Australia PM Scott Morrison

Australian Prime Minister Scott Morrison has announced a new pledge of A$500 million for climate finance for Asian and Pacific countries at the COP26 global climate negotiations in Glasgow. Morrison said this amount increases funds for climate action “invested in our backyard amongst our Pacific Island family.”

Despite this pledge, the Australian government will not reinstate funding for the Green Climate Fund, a global finance mechanism for climate adaptation and mitigation used by most Forum Island Countries.

“Australia’s assistance will support Pacific and Southeast Asian countries to enhance climate resilience for future infrastructure investments, including roads, schools and bridges,” the Prime Minister said. “It will also drive private sector-led climate solutions that support clean technology, jobs and growth across our region.”

The chair of the Pacific Islands Forum, Fiji Prime Minister Voreqe Bainimarama, welcomed Canberra’s commitments on climate finance and net zero by 2050, but pressed his Australian counterpart to commit to new emissions reduction targets for the next decade: “Australia’s pledge is a start. I’ve now urged Scott Morrison to show us a concrete plan to halve emissions by 2030.”

Tracking climate finance

The quantity, predictability and accessibility of climate finance is a central element of negotiations at the 26th Conference of the Parties (COP26) to the UN Framework Convention on Climate Change.

Under the 2015 Paris Agreement on Climate Change, OECD countries were set a target of US$100 billion of climate finance per annum by 2020, mobilised from public and private sources. Last December, however, a UN expert group reported that developed nations have failed to meet this funding commitment, noting that “the $100 billion target therefore needs to be seen as a floor and not as a ceiling.”

The independent expert report to the UN Secretary General also noted: “There have been a number of important shortfalls in the quality and composition of climate finance flows – in the low levels and declining share of grant finance, the underfunding of adaptation, the lack of adequate finance for Least Developed Countries and Small Island Developing States, and obstacles to expeditious access by developing countries to climate finance.”

Former Australian diplomat Howard Bamsey was the executive director of the Green Climate Fund Secretariat in 2017-18. Now a visiting professor at the Australian National University, Bamsey told Islands Business that climate finance was a central pillar of the Paris Agreement and the political deal struck between developed and developing nations in 2015.

“The commitment to $100 billion a year was a really fundamental part of the Agreement, that moved the world from the Kyoto framework to the Paris framework of universal participation,” he said. “Circumstances change, but that remains a keystone of the current architecture of the climate regime. It’s really vital that the developed countries deliver it now. It’s going to remain a very sensitive issue in the negotiations and a very important one.”

One concern for Least Developed Countries and Small Island Developing States is that the US$100 billion annual target is not enough to meet existing needs. The latest Adaptation Gap report of the United Nations Environment Program says that adaptation costs in developing countries could rise to US$140-300 billion per annum by 2030 and US$280-500 billion in 2050.

With many Pacific delegations unable to cross the globe mid-pandemic, Cook Islands Prime Minister Mark Brown is attending COP26 as a Pacific Islands Forum champion. He says that Smaller Island States want more action on climate finance, even at a time when international resources are focussed on COVID response and recovery.

“COVID-19 is not an excuse for developed countries to delay the provision of scaled-up finance for developing countries as required under the Paris Agreement,” says Brown. “The $100 billion target is 0.12% of global GDP. If I compare what I spend in my country on climate mitigation and adaptation measures, it would be close to 5-6% of my own national GDP. We spend far more than what the globe is being asked to provide on a per capita basis.”

Brown added: “We need developed countries to stump up with the money that’s required, in a way that we’ve been asking for many, many years now – not through a loan, because all you’re doing is to add debt to debt-distressed countries, but as grant funding to build resilience and strength.”

At this week’s meeting in Glasgow, OECD governments are supposed to consider a new target for 2025, but there is a danger they will simply bump the 2020 target a few years down the track, without new longer term commitments.

Fatumanava-o-Upolu III Dr. Pa’olelei Luteru is Samoa’s Ambassador to the United Nations and currently heads the Pacific Small Islands Developing States (PSIDS) group in New York.

“The US$100 billion annually is not going to be met. It will be at least 2023 before that goal is reached, but even then, we are well, well behind,” Fatumanava-o-Upolu said. “But there is movement – there are Scandinavian countries that have made pledges, look at the EU with $5 billion up to 2027 of additional funding and the engagement of others too.”

Rubbery figures

In the exuberance of selling the Australian pledge, Prime Minister Morrison created a level of confusion about amounts and targets.

In his formal national address to COP26, Morrison stated that the increased finance commitment  is allocated “for our Pacific family and South East Asian partners to $2 billion committed here at COP26.”

The pledge covers all countries across the Asia-Pacific region, not for Australia’s “Pacific partners” alone, as he suggested to journalists at a subsequent press conference. Only A$200 million of the new A$500 million pledge will specifically go to Pacific Island nations, increasing the five-year commitment for the islands’ region to A$700 million.

Beyond this, there is a level of creative accounting. The new COP26 pledge of A$500 million is simply added to an existing pledge made in December 2020, of A$1.5 billion for all Indo-Pacific countries over the next five years. The government says it will double the level of funding, but this is compared to past commitments for 2015-2020, not “$2 billion committed here at COP26.”

Michelle Higelin, Executive Director at ActionAid Australia, said: “The additional $500 million is an important first step, but it definitely falls below the ambition set by other nations. We’ve seen the UK, the US and Canada all double their climate finance pledges into COP26. This is not a doubling of Australia’s climate finance pledge. ActionAid was asking the government to announce a doubling to $3 billion over the period 2020-2025 and this definitely falls short of that.”

Oxfam Australia Chief Executive Lyn Morgain said: “Our contributions to support our neighbours in the Pacific and other hard-hit nations through climate finance are still inadequate. While the increase to $2 billion is welcome, it is effectively only a boost of $500 million from what has already been committed until 2025.”

“For context, New Zealand, a much smaller economy, has committed to quadruple its climate finance to $1.2 billion over four years,” Morgain said. “Australia has the capability and responsibility to provide more support to meet the needs of Pacific Island nations in adapting to the impacts of climate change.”

While welcoming the new pledge, non-government development organisations argue it is nowhere near Australia’s fair share of OECD commitments. In a new report, “Fairer Futures: Financing Global Climate Solutions”, Australian NGOs have called on the Australian government to immediately increase its climate finance to $3 billion over five years, with new contributions to the GCF by 2023 and at least half being public funding for adaptation.

ActionAid’s Michelle Higelin notes that independent researchers have called for even more ambition from Canberra to meet the global target: “The Overseas Development Institute has actually estimated Australia’s fair share at A$4 billion annually, so this pledge is definitely below expectations and fails to respond to the extent and urgency of the climate crisis. What is critical is that any investment made by the Australian government into climate finance aligns with the priorities of the receiving country rather than Australia’s priorities.”

Another problem is that the new climate finance will be drawn from the overseas aid budget, rather than through new and additional funds. For more than a decade, both major political parties in Australia have used the Official Development Assistance (ODA) budget to provide the funds for Australia’s international climate financing obligations. Australia is currently the largest ODA donor to the Pacific islands, but the ODA budget stands at the lowest ratio of Gross National Income – just 0.19% – since 1974. Increased climate funding may mean cuts elsewhere or re-badging existing initiatives as climate-focussed.

Samoa’s UN Ambassador Dr. Pa’olelei Luteru stressed the importance of looking beyond aid budgets as the sole source for climate finance.

“I think it’s important to emphasise that we are looking for new money, not money that you shift from one pocket to the other, because it doesn’t really help us,” he said. “What will happen if you put more money to [climate] finance but that comes out of aid to our countries that has funded basic infrastructure or social sectors like education, health etc, then it’s a no-win situation for us.”

No support for Green Climate Fund

Most Forum Island Countries have already accessed funding from the Green Climate Fund (GCF), the global climate finance mechanism created under the UN Framework Convention for Climate Change. By June this year, GCF funds to Pacific SIDS amounted to US$440 million, combined with US$690 million co-financing.

In recent years, however, Coalition government policy towards the GCF has been marked by ever greater unpredictability. Since 2013, under Prime Ministers Abbott, Turnbull and now Morrison, the Australian government has announced withdrawal, reinstatement and then withdrawal again of financial commitments to the GCF.

After Tony Abbott slashed aid and climate funding in 2014, the new government led by Malcolm Turnbull made an initial contribution of A$200 million to the GCF and Australian diplomat Ewen McDonald served as co-chair of the GCF Board. However after Turnbull was replaced by Morrison as Liberal Party leader in August 2018, this policy was upended. In October 2018, Morrison announced his intention to stop funding the GCF and Australia made its final contribution in December that year. Morrison’s decision paralleled the policy of the Trump administration, which refused to complete full payment of commitments to the GCF made by the Obama administration.

In a 2019 policy speech, Morrison declared that sovereign nations need to eschew an “unaccountable internationalist bureaucracy” and the world needs to avoid “negative globalism that coercively seeks to impose a mandate from an often ill-defined borderless global community.”

This wariness of multilateral agencies was clear at the last face-to-face Forum leaders meeting in Tuvalu in 2019. In Funafuti, the Australian Prime Minister told Islands Business that his government wouldn’t commit any further funding to the GCF: “This isn’t cheques that we’re sending off to some remote fund in Geneva to spend who knows where. We stopped that practice.” (The GCF Secretariat is actually located in Songdo, Korea).

Speaking to journalists this week in Glasgow, Morrison brandished “The Australian Way” climate policy, again reaffirming that climate funding to “our backyard” would be controlled by Canberra rather than allocated through a global funding mechanism.

“We’re not putting this through other worldwide institutions or other groups like this.” Morrison said. “We’re doing this direct, because we want to make sure that the climate finance investments that Australians are making are being invested in our backyard amongst our Pacific Island family and amongst our South East Asian partners and friends. We want to cut out all the red tape and get rid of all the bureaucracy and make sure that this funding is going to work directly within our region.”

This decision clashes with the repeated call from Pacific leaders for more contributions to the Green Climate Fund. For many years, Pacific leaders have railed against the delays and bureaucracy involved in the GCF, and have sought to develop locally controlled institutions such as the new regional Pacific Resilience Facility. But while there are a variety of experiences with the GCF, multilateral mechanisms are still attractive to many Smaller Island States, which face capacity constraints as they deal with multiple donors. As reported in Islands Business in August, former RMI President Hilda Heine believes that multilateral funds like GCF still need support, alongside bilateral grants.

“I continue to support the Green Climate Fund because it’s a big pot of money that has one set of requirements, rather than have multiple funds that we need to write grants to,” Dr. Heine said. “One of the challenges we have is that our grants office only has one or two people. When you have multiple requirements for grant writing, it makes it very difficult for our people. That was one of the good things about the Green Climate Fund: we know what the requirements are and it’s easier to follow.”

Howard Bamsey, former executive director of the GCF Secretariat, argues that having a seat at the table may have assisted Australia to leverage funding for its neighbours from other wealthier developed nations.

“In the first financing phase of the GCF, Australia pledged $200 million and Australia became a champion for the Pacific,” Bamsey said. “As a result, something like $600 million went to the Pacific from the GCF. The amount of funding that Australia originally committed would suggest that Australian membership of the GCF Board was effective in leveraging even more resources for the Pacific.”

While recognising the challenges and delays of accessing resources, Bamsey said: “You could argue that, in the past, Australia’s investment had a very good leverage rate with the GCF. If you’re working with a multilateral system, it’s not just your funding that’s available for decisions, but you can influence all funding allocations.”

Higher ambition needed

As global negotiations continue this week at COP26, the debate over climate finance is connected to key debates over emissions targets and finalising the “rule book” to implement the Paris Agreement. Australia’s climate finance pledge comes even as it refuses to increase its targets for 2030, in order to appease the mining lobby in Australia.

Some Pacific delegates at COP26 acknowledge the structural importance of fossil fuels in the Australian economy and the challenges of the just transition for Australian workers in coal communities. As Samoan diplomat Fatumanava-o-Upolu Pa’olelei Luteru notes diplomatically: “We have to be understanding and realistic, although they’re not very understanding of our situation.”

But island leaders still seek more ambition from the largest member of the Pacific Islands Forum, as temperatures threaten to soar past 1.5 degrees Celsius above pre-industrial levels. As the Samoan diplomat stressed: “1.5 degrees is a red line for us – we do not see that as negotiable.”