China and wealthy petrostates including Saudi Arabia and UAE are among countries receiving large sums of climate finance, according to an analysis.
The Guardian and Carbon Brief analysed previously unreported submissions to the UN, along with data from the Organisation for Economic Cooperation and Development (OECD), that show how billions of dollars of public money is being committed to the fight against global heating.
The investigation found a broadly functioning system that shifts capital from rich polluters to vulnerable nations, helping them clean their economies and adapt to a hotter world.
But it also found that because the distribution of the largest part of the funds had no central oversight and was entirely at the discretion of individual countries, it was subject to political interests and not always directed where it was most needed.
Although official data is not extensive enough to trace all the recipients of climate finance, the Guardian analysis found that about a fifth of the funding in 2021 and 2022 went to the world’s 44 poorest countries, known as the least developed countries (LDCs). Much of that was in the form of loans, rather than grants.
Some LDCs received more than two-thirds of their climate finance in the form of loans, whose repayment terms can push governments further into debt traps. The share of loans rose to 95% or more in the cases of Bangladesh and Angola.
Most of the world’s developed countries provide finance to support climate action in developing ones, bilaterally and through multilateral organisations such as development banks. At a UN summit in Copenhagen in 2009, rich countries promised to mobilise $100bn (£76bn) a year by 2020 in recognition of their greater responsibility for climate breakdown and ability to fund solutions.
But the analysis of the most recent submissions, covering more than 20,000 global projects during 2021 and 2022 – the year in which the Copenhagen target was belatedly met, found that vast sums were going to petrostates, as well as to China, the world’s second-largest economy.
UAE, a fossil fuel exporter with a GDP per capita on a par with France and Canada, received more than $1bn in loans from Japan that were logged as climate finance. The projects include $625m for an offshore electricity transmission project in Abu Dhabi and $452m for a waste incinerator in Dubai.
Saudi Arabia, which is one of the top 10 carbon emitters thanks to its giant oilfields and majority-ownership of Aramco, received about $328m in Japanese loans, including $250m to its electricity company and $78m for a solar farm.
Six countries in the Balkans that hope to join the EU received more than $3.5bn in climate finance. The bulk of the money went to Serbia, which on a per capita basis received 10 times more money than the LDCs.
European recipients of climate finance included an EU member state, Romania, which received an $8m grant from the US for an engineering study to build a small modular nuclear reactor.
Joe Thwaites, a climate finance advocate at the Natural Resources Defense Council, said overall flows of climate finance were increasing but “not enough” was getting to the poorest and most vulnerable communities, with debt-distressed countries needing more grants and concessional loans.
“This is not charity,” he said. “It is a strategic investment that addresses the root causes of many of the crises we see daily: cost of living, supply chain disruptions, natural disasters, forced migration and conflict.”
Over the two years under consideration, about $33bn was committed to the LDCs, which include Haiti, Mali, Niger, Sierra Leone, South Sudan and Yemen.
A much larger sum of money – about $98bn – went to developing countries, a broader group that includes lower middle-income countries such as India and upper middle-income countries such as China. Another $32bn could not be classified. India was the single largest recipient of finance over the reporting period, receiving about $14bn, while China received $3bn, mostly from multilateral banks.
The analysis suggests the underrepresentation of the LDCs reflects their smaller population size, but the makeup of the developing country group is a growing source of tension at climate negotiations.
China’s economy, for instance, has boomed since the UN classified it as developing in the 1990s, and its emissions have surpassed European levels on a per capita basis. China is thought to be a significant provider of finance to foreign climate projects but has resisted efforts to formally count its contributions. The UN’s development categories have not changed since they were drawn up in 1992.
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“That allows countries such as Israel, Korea, Qatar, Singapore and UAE – all of which have become wealthy nations with large carbon footprints over the last 30 years – to shirk their international responsibilities,” said Sarah Colenbrander, climate director at the Overseas Development Institute. “It is absurd that such nations remain in the same category as countries like Togo, Tonga and Tanzania.”
Some of the world’s poorest countries receive more than two-thirds of their climate finance in the form of loans, despite warnings that many cannot afford the terms and interest repayments.
“The hidden story of climate finance is not in the volume of commitments, but in their forms,” said Ritu Bharadwaj, climate finance director at the International Institute for Environment and Development.
“Climate finance is increasing the financial burden on poorer nations. Even if the money donated is a concessional loan, those loans do also come with conditions which might benefit the lender more than the recipient.”
Data from the World Bank shows that over the same period, LDCs have together repaid almost $91.3bn in external debts – three times their climate finance budgets. Over the past decade, repayments of external debts of the poorest nations have trebled, from $14.3bn in 2012 to $46.5bn in 2022.
“Conventional thinking is that taking on more debt isn’t bad if it is being used to fund growth-enhancing expenditure,” said Shakira Mustapha, a finance expert at the Centre for Disaster Protection. “My concern is whether countries are just taking on new debt to repay old debt and we are just kicking the can down the road.”
The foreign ministries of China, Japan, Saudi Arabia and UAE did not respond to a request for comment.
Methodology
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The Guardian and Carbon Brief analysis on climate finance includes the bilateral and multilateral public funding that developed nations have committed for climate projects in developing countries. The analysis excludes other types of funding that contribute to the $100bn target for climate projects such as private donations and export credits.
Data for the multilateral funding comes from the OECD. The bilateral funding comes from the Biennial Transparency Report each country submits to the UN framework convention on climate change. Due to the lag in official reporting, the most recent figures go up only to 2022.
As only annex II countries (23 industrialised nations and the EU) are responsible for contributing to the $100bn target, the analysis of the bilateral files was restricted to these nations. Likewise, using OECD methodology, we calculated the share of multilateral climate finance which is attributable to this group.
We also calculated the shares of multilateral finance that can be attributed to individual donor countries, based on shareholdings in multilateral development banks and cumulative contributions to multilateral climate funds. This is based on a methodology that has been used by analysts at the World Resources Institute and ODI.
The analysis classified the recipients of the bilateral projects using the UN country classification. But many projects remain unclassified because the recipients are not specified, are reported as “multi-country”, or are part of a group of countries for which the funding cannot be disaggregated.
These projects have not been included when calculating the amount of finance that individual developing countries received, but they are included in the total figures.
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A spokesperson for UN Climate Change said: “The inequities revealed in climate finance flows highlight why a shift in the global financial system is urgently needed. Treating climate finance as charity has held back the progress the world needs, as has treating it purely as a cost and ignoring the massive human and economic dividends it pays.”
The original $100bn target is being replaced this year with a new target for developed countries to provide $300bn a year by 2035, with a wider goal of mobilising $1.3tn a year. Last week, the heads of the two most recent UN climate summits published a report that explored ways of sustainably raising the cash that included taxes on fossil fuels and climate-resilient debt clauses. It also called for an expansion of concessional and grant-based climate finance.
“Climate finance must be accessible, affordable, and fair,” the UN Climate Change spokesperson said. “The fact that many of the world’s lowest-income countries face barriers and still rely on high-interest loans for climate finance underscores the urgency of reform.”
