Development Initiatives

Transparency of Climate Financing Under Threat: Additionality to Follow?

Written by: Daniel Coppard

The December UN climate change summit in Copenhagen was almost universally considered a flop. Billed as the successor to the expiring Kyoto Protocol, the international community failed to agree on any binding targets and commitments. Participants left with just one concession: The Copenhagen Accord that committed 25 countries to “Scaled up, new and additional, predictable and adequate funding” for mitigation and adaptation efforts in the most vulnerable developing countries. But even this was a side event, to which the 193 members attending feebly agreed to take note.

However, according to Development Today, the ability to monitor this new climate funding is seriously under threat. As the UN High-Level Task Force on Climate Change Financing, established to explore climate finance options, met in London last week for the first time, DT reported that both the United States and the United Kingdom (the latter co-chairing the task force), opposed discussion in the OECD/DAC on common rules for measuring climate aid. Sources are not given so this must be considered currently as unconfirmed. If true, such reluctance to agree common rules squarely counters the principles of the International Aid Transparency Initiative (to which the UK is a signatory) and represents a major blow against transparency associated with climate related flows.

Why is this important? Additionality is at the heart of the climate finance tussle, and goes beyond volumes of dollars. Developing countries, supported by a burgeoning consensus among CSOs, argue that financing to assist managing the affects of climate change is a compensatory obligation on the part of the developed world, and so should be additional to aid. There is also concern that without such a clause, development assistance might otherwise be diverted from other areas. Such concerns may be even more legitimate as the shortfall on aid commitmentsmade in 2005 becomes all the more apparent and, facing increased budget constraints, donors start looking for other ways to boost aid volumes.

In face of such a compelling argument, donors have been evasive and reluctant to formally commit to calls for specific additionality measures. Rhetoric, however, has been strong. Gordon Brown, for example, in his address to the Copenhagen summit argued for the need to “commit, therefore, to additionality in our support, so that we do not ever force a choice between meeting the needs of the planet and meeting our Millennium Development Goals.” But with climate financing on the agenda of the OECD-DAC meeting in May, crunch time is approaching, forcing donors to show their hand.

Measuring additionality is intrinsically difficult. ‘Additional to what?’ is an obvious question. If donors haven’t met their current aid commitments how does one separate out climate financing? The Copenhagen Accord failed to specify any baseline year (nor how it might be calculated) from which the pledged $10 billion a year between 2010-2012 (rising to $100bn a year by 2020) would be additional. Norway has arbitrarily chosen 2008. Sweden and Denmark, using a baseline of 0.7% ODA/GNI, argue that since they are already achieving such aid levels, everything on top of this qualifies for any additionality requirement. And how much is new? It’s probable that, like many commitments of this nature, at least a proportion of the pledge has already been programmed. How much exactly is unknown as many donors have failed to indicate how their commitments will be budgeted.

It is also difficult to separate out adaptation activities from development more generally, so how can one measure what is new and additional to that already being done? Many areas: disaster risk reduction, agriculture, irrigation, social protection etc., clearly overlap – an argument used by Finland to reject additionality outright.

All these arguments call for the need to be able separate out climate activities from development. It may be difficult, but it’s far from impossible, and shouldn’t be used as a technical argument for a completely separate set of systems. It must be based on a common set of clear rules for reporting consistency and the establishment of baselines. The UK has committed, for example, to restricting its aid budget contributions to climate financing to no more than 10 percent. But without discussion and agreement of a common set of reporting criteria, against which the UK is allegedly opposed, it will be impossible to assess what activities do, and not qualify as climate financing. 

The definition of ODA since 1969 has been a major success, and similar definitions for climate financing are now urgently needed. The OECD-DAC has already made headway with its revised mitigation and new adaptation ‘Rio markers’, launched December last year. But they are only general markers, indicating if projects have a ‘principal’ or ‘significant’ climate objective. There is urgent need for international agreement on how such financing can count as new or additional, and the criteria by which such projects should be identified. The OECD-DAC are up to the job. Donors should be supporting, not undermining such initiatives.