20 Oct 2022, 14:27
Julian Wettengel

Germany increases climate finance to poorer nations to €5.3 billion

Photo of the city of Dakar, Senegal, with rooftops and ocean coast. Image: CLEW/Wettengel.
Senegal is one of the countries receiving climate finance from richer countries. It is also a candidate for one of the Just Energy Transition Partnerships. Image: CLEW/Wettengel.

The German government has said it increased public climate finance for developing and emerging countries to 5.34 billion euros last year, meaning the country is on track towards reaching its target of 6 billion euros by 2025. Together with public and private funds mobilised, German climate finance now totals 8.1 billion euros, the German contribution to the pledge by developed nations to provide 100 billion U.S. dollars annually. However, NGO Oxfam criticised the accounting by richer countries, saying that the true value of their support for climate action is only about one-third of what is being reported. German state secretary Jochen Flasbarth said that the G7 states are also making progress in talks with partner countries on the so-called Just Energy Transition Partnerships (JETP).

 Germany provided a record 5.34 billion euros from the federal budget for climate action in developing and emerging countries in 2021, the ministry for economic cooperation and development (BMZ) said. “Internationally, Germany is one of the largest donors of international climate finance,” said to Jochen Flasbarth, state secretary in the development ministry. “The new figures show that Germany is stepping up its efforts to combat the climate crisis in all parts of the world.” Germany was therefore on track towards reaching its goal to increase climate finance to 6 billion euros per year by 2025, Flasbarth said.

Aside from budget funds, the ministry listed about 2.6 billion euros in public climate finance it had mobilised, as well as 170 million euros from private donors, bringing the total to 8.1 billion euros. This would count as Germany’s contribution to the 100 billion U.S. dollar climate finance pledge of developed countries.

Richer countries had failed to make good on their promise to come up with these funds by 2020. At the UN climate change conference COP15 in Copenhagen in 2009, these countries committed to mobilising 100 billion U.S. dollars from public and private sources per year by 2020 for climate action in developing countries. The money should help poorer countries to reduce their emissions and adapt to the effects of climate change. The goal had been formalised at COP16 in Cancun, and at COP21 in 2015 in Paris, it was reiterated and extended to 2025. Ahead of the COP26 last year, developed countries postponed their pledge to provide 100 billion U.S. dollars per year in climate finance to support developing nations by 2023.

True value of climate finance possibly only third of what is reported – NGO Oxfam

NGOs like Oxfam have criticised for years that the climate finance accounting by richer countries is flawed, saying that the true value of total support could be as low as only a third of what is being reported. Oxfam said that instruments, such as loans, are reported at face value, ignoring repayments and other factors. Funded projects often also have “less climate-focus than reported,” it added.

“Germany tries hard to be very transparent,” Flasbarth countered the criticism during a press briefing, explaining that the calculations are quite complicated. However, this not least was the case because the government wanted to avoid double-counting, the state secretary argued.

Credits which the government-funded development bank KfW hands out, for example, could not be counted in full. Germany only counted the federal budget funds the government made available to the bank, which then obtains funds on the financial markets to make available to partner countries as credits, he explained.

Energy crisis could impact EU countries’ willingness to support

It is far from certain that the upward trend in German climate finance will continue. The European energy crisis is set to push Germany into a recession in 2023, which is likely to put pressure on state coffers, especially when it comes to supporting other countries.

“Of course, every euro can only be spent once,” Flasbarth said. However, the German government would make sure that the funds for economic cooperation will be available. “In any case, it is hard to imagine that we would do less in these times when the different crises are intensifying and the situation in countries is not getting better.”

At the European level, things are also uncertain. Countries are struggling with record inflation driven mostly by the high energy prices, and while Germany is in a comparatively good position due to its strong economy, other governments could be less willing to increase support for developing countries. With a view to the upcoming UN climate change conference COP27 in Egypt, where EU member states negotiate as one block, Flasbarth gave a cautiously positive outlook for the Union’s willingness to support those countries. “The times are not exactly getting easier, but so far the EU has always managed to pull itself together,” Flasbarth said.

Intensive talks on just energy transition partnerships, “ambitious climate cooperation” with COP-host Egypt

The G7 decided to set up more of the  ‘just energy transition partnerships’ (JETP) to help countries move toward a climate-friendly society, the first of which was announced at last year’s COP26 with South Africa. These partnerships aim to move forward the transition through financial as well as technical support and capacity building. Negotiations are ongoing with countries like Senegal, India and Indonesia.

The state secretary said that two G7 partners have taken the lead in each of the negotiations with the recipient countries, and that the U.S. and Germany are leading talks with India. Flasbarth did not say whether any of these negotiations could be finalised by the time of the COP in Sharm El-Sheikh, but emphasised that exchanges are intense. The G7 would not rush any decisions, because the JETPs would have to be seen as a “seal of quality,” he said. “We cannot give support for low ambitions.”

A spokesperson for the development ministry told Clean Energy Wire that “on behalf of the G7, the following countries are holding talks on the preparation of possible JETPs:

Senegal: Germany and France

India: Germany and USA

Indonesia: USA and Japan

Vietnam: UK and EU.”

The spokesperson added that while there were currently no talks regarding another JETP, the G7 states are in “general talks on ambitious climate cooperation” with Egypt.

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