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Tuesday, November 8, 2022

Australia a laggard on climate finance. Will it promise more at COP27, support a Loss and damage facility?

According to a recent Carbon Brief analysis, Australia gave just 38% of its fair share climate finance and fell short by US$1.7bn. Other assessments have been equally critical.

In Falling Short: Australia's role in funding fairer climate action in a Warming World - by Action Aid, Oxfam Australia and other NGOs on Australia's climate finance, found that Australia’s international climate funding is currently just a tenth of our international fair share. 

Australia’s fair share of international commitments is AUD$4 billion per year; however, our average contributions sit at only AUD$400 million per year over the period 2020-2025 says the report. 

If Australia wants to support our Pacific neigbours and host the UN Climate Conference COP31 in 2026, climate finance is an area it needs to step up.


Climate Finance is one of the big issues being negotiated at Sharm El-Sheikh. And it has many dimensions, including the importance of adaptation finance, and establishing a Loss and Damage finance facility.

Back in 2009 at Copenhagen US$100 billion per year was promised to be raised by developed countries for developing countries to start from 2020. 

Who is responsible for the $100bn clmate finance target being missed? Australia is not the only developed country to shirk responsibility.

  • The US is $32 billion short of its "fair share", based on historical emissions. 
  • Canada gave 37% of its fair share and was US$3.3bn short.
  • The UK gave 76% of its fair share, falling short by $1.4bn.

If Australia is to host COP31 in 2026 it will need to lift its climate finance game to a level which is at least our fair share. The Climate Action Tracker, according to its 2 August assessment, rates Australia's climate finance as "critically insufficient." Definitely room for improvement. 

Will Australia step up at COP27?

Money games: Loan funding vs Grant funding

In contrast, Germany, France and Japan each gave billions of dollars of climate finance more than their fair share of the total.

But climate finance is more complicated. Many of the countries 'in surplus' provide most of their finance as loans, rather than grants. This adds to the indebtedness of developing countries. 

Nearly all of Australia's climate finance is in grant funding, which does not increase developing country debt levels.

Oxfam reported in October 2022 that Reporting international climate finance remains flawed, and profoundly unfair.

Oxfam estimates between just $21-24.5 billion as the “true value” of climate finance provided in 2020, against a reported figure of $68.3 billion in public finance that rich countries said was provided (alongside mobilized private finance bringing the total to $83.3 billion). The global climate finance target is supposed to be $100 billion a year.

“Rich country contributions not only continue to fall miserably below their promised goal but are also very misleading in often counting the wrong things in the wrong way. They’re overstating their own generosity by painting a rosy picture that obscures how much is really going to poor countries,” said Nafkote Dabi, Oxfam International Climate Policy Lead.

Loss and Damage Finance Facility a key issue on the Agenda

The Climate Council has an explainer on climate finance and Loss and Damage finance.

Loss and damage funding refers to finance that directly addresses unavoidable climate change catastrophes that developing countries are particularly vulnerable to. For instance, the money needed to rebuild homes and hospitals after a disaster; or provide shelter, food and emergency cash transfers after a cyclone; or preparing for the slow building catastrophes from sea level rise inundating villages and towns. Loss and damage finance also addresses compensation for non-economic losses such as to cultural life, traditional knowledge, health and wellbeing.

Loss and damage disproportionately affects vulnerable groups – those on the front lines of the crisis, who have contributed the least to climate change and are least equipped to respond. Increasingly, many communities are experiencing climate impacts that are impossible to adapt to, leading to permanent loss and damage. For example, those in the Pacific who face the growing risk of being forced to flee or abandon their homes due to rising sea levels and destructive storms. Or in Pakistan’s recent flooding event, where much of the destruction exceeded the limits of many families’ and communities’ ability to adapt. These “losses and damages” occur when climate impacts cannot be avoided, either due to reaching the climate tipping point of irreversible impacts or due to lack of resources to adapt. 

There is an urgent need for funding to help address escalating loss and damage from climate change. Addressing loss and damage requires financial support beyond developed nations’ current commitments to support emissions reductions and adaptation in developing countries. Vulnerable countries hope that COP27 will finally see the establishment of a dedicated loss and damage finance facility under the UNFCCC.

At the agenda discussion on Sunday, as chair of the Umbrtella Negotiating Group, Australia supported Loss and Damage going onto the agenda to discuss “funding arrangements responding to loss and damage associated with the adverse effects of climate change,” 

First battle won. 

But this does not ensure an outcome at the end of this COP. Developing nations are already hurting from the ravagges of climate fuelled extreme weather events. They have waited 30 years for Loss and Damage.

Greenpeace Asia Pacific spokeperson Shiva Gounden, Pacific advisor at Greenpeace Australia Pacific, welcomed Australia’s support of loss and damage as a COP27 agenda item, but said the time for talk is over.

“The time for talking shops is over if Australia wants to strengthen its Pacific family and earn a COP with Pacific nations in 2026.

“The Australian government has made a first step in meeting the moment on the urgent and critical issue of loss and damage, but it must back this up by walking the talk and moving the issue beyond mere discussions at COP27.

“We can no longer kick the can down the road on loss and damage funding to compensate countries suffering the worst climate impacts but contributing the least to the climate crisis.

“Loss and damage is not an abstraction, it is a manifestation of the climate injustice faced by Pacific Island nations.

“Australia must act in good faith for its Pacific neighbours on the frontline of the climate crisis by moving beyond loss and damage talks, and supporting the establishment of a dedicated loss and damage finance facility at COP27.

“It’s time for the Australian government to step up and walk the talk on loss and damage at COP27. This climate compensation is no longer simply important, urgent, and necessary. It is critical, immediate, and fundamental to the survival of Pacific Island nations.”

The European Parliament has already passed a resolution calling for the establishment of a loss and damage finance facility at COP27.

Climate Action Network International in the ECOnews bulletin for 7 November said:

Now let’s talk about that agenda item. Developed countries: everyone saw your old tactics in the meeting rooms in the final 36 hours before the beginning of COP27, trying to weaken the final decision and delay (again) action on providing meaningful loss and damage finance. ECO also took note of your relentless efforts to exclude liability and compensation from the agenda item. That too is quite familiar.

So yes, funding arrangements for Loss and Damage are now on the agenda, but the risk is real that we end up with an empty shell once again. The parameters adopted yesterday do not meet the demands of developing countries or the needs of the most vulnerable.

And while the agenda calls for a decision no later than 2024, that doesn’t mean you can relax and sit back. It is absolutely crucial to get a decision by the end of this COP on the establishment of a financial mechanism for loss and damage already laying out core framing parameters for such a new facility. The relevant functions, governance, and modalities for disbursing such finance can be fine-tuned, no later than and ideally well before the end of 2024, so that the facility starts delivering shortly thereafter.

There are many options for additional finance, starting with looking at the worst polluters via a climate damages tax or a windfall tax on the outrageous profits that fossil fuel companies are hauling in this year.

As a reminder: ECO will not be celebrating an agenda item, as it represents only an incremental step in the right direction. We are still demanding a truly ambitious decision for frontline communities that meets the requirements of climate justice and equity. Postponing such a decision once again would be an insult to the people and communities who are already suffering the worst climate impacts, even though they are not responsible for them. So, in case it wasn’t clear, Parties, get your work done over the next two weeks here in Sharm el-Sheikh. The entire world – and ECO – will be watching you.

Euronews.Green highlights that new analysis from Global Justice Now points out that the Big 5 oil companies (including BP and Shell) announced over $170 billion in profits in 2022. “To put this into perspective, that is more than the $116 billion a year that loss and damage are estimated to cost the global south, to date.”

Australia's climate finance not up to scratch

The report - Falling Short: Australia's role in funding fairer climate action in a Warming World - by Action Aid, Oxfam Australia and others on Australia climate finance found that Australia’s international climate funding is currently just a tenth of our international fair share. 

Australia’s fair share of international commitments is AUD$4 billion per year; however, our average contributions sit at only AUD$400 million per year over the period 2020-2025. 

Key recommendations for Australia (and I include them all in full):

1. Australia should support effective and equitable global climate solutions by:

  • Immediately increasing its climate finance contributions in the current financing period by $1 billion, bringing Australia’s climate finance to $3 billion for 2020-2025.
  • Committing to provide $4 billion in climate finance annually by 2025, which is Australia’s fair share of the USD 100 billion goal.
  • Ensuring that all climate finance is in addition to the aid budget.

2. Australia should recognise and respond to the climate-related loss and damage being experienced by low-income countries, including by:

  • Unequivocally supporting the proposal from Pacific Islands nations, and 124 other lowincome countries, for a standalone finance arm to address loss and damage in the United Nations Framework Convention on Climate Change (UNFCCC);
  • Making an initial contribution to loss and damage financing, above and beyond existing climate finance commitments made at COP27, accounting for this amount separately from adaptation finance and making it available as grants accessible to the most vulnerable communities; and
  • Clearly articulating that loss and damage finance should be negotiated in the post-2025 global finance goal, as a separate element to either adaptation or mitigation.

3. Australia should develop an international climate finance strategy to guide the expansion and delivery of its climate funding. The strategy should be underpinned by the principles of:

  • Enhancing ambition;
  • Rebalancing power;
  • Centring affected communities;
  • Addressing intersectional inequalities; and
  • Improving accountability, transparency and quality.

In 2021 Australian NGOs published the Fairer Futures: Financing Global Climate Solutions report on 20 October 2021. 

This report called for the Scaling up Australia’s contributions to global climate finance in three stages to 2030: including:

  • Immediately double Australia’s current climate finance to $3 billion over 2020-2025; 
  • by 2023, shape regional and global climate responses by committing an additional $700 – $990 million to the Green Climate Fund; 
  • by 2030, scale up Australia’s climate finance to meet its fair share of $12 billion annually. 

(See Climate Citizen, 13 Sep 2021, Australian climate finance falling far short of our fair share, getting worse)

Australia and the Green Climate Fund

In 2018 Prime Minister Morrison unilaterally decided to withdraw Australia from the Green Climate Fund while being interviewed on radio by Alan Jones. Australia made its final contribution to the fund in 2019

Under the Abbott government, Australia decided to support the fund, committing A$200 million in 2014 and co-chairing its board for much of its early stages.

This is a fund that Australia helped establish and had a position on the board to ensure transparency and accountability processes were put in place. 

The Climate Action Tracker rates Australia’s climate finance, as of 2 August 2022, as “critically insufficient” as its contributions are very low compared to its fair share. 

The “Critically insufficient” rating indicates that Australia’s climate finance contributions have been low and are not in line with any interpretation of a fair approach to meeting the 1.5°C limit. To receive a better rating, Australia needs to stop funding fossil fuel overseas and increase the level of its international climate finance. The Federal Government withdrew from the Green Climate Fund in 2019, and declined to put funds into its replenishment, and the situation has not changed.

Australia’s climate finance is not sufficient to improve the fair share target rating, and the CAT rates Australia’s overall fair share contribution as “Insufficient”.

International NGO Climate Analytics suggest there are good reasons for the Australian government to rejoin this fund in a July 2022 briefing note -  Rejoining the Green Climate Fund is an easy win for the new Australian Government’s climate and foreign policy agendas.

Australia left this multilateral institution in 2019. Its newly elected government could stand to gain on multiple fronts by reengaging to deliver on both its climate and foreign policy objectives. Australia needs a strategy which combines multilateral and bilateral approaches to climate finance.

Australia's Labor Government has still made no commitment to rejoin the Green Climate Fund and contribute to multilateral climate finance as part of its fair share under the Paris Agreement.

If Australia wants to host COP31 in 2026, climate finance is an area it needs to step up.

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