Towards a new climate aid strategy

Executive summary

Context:

• His Majesty’s (HM) Government is cutting the United Kingdom’s (UK) International Climate Finance (ICF – a subset of the Official Development Assistance [ODA]) budget to shift financial resources towards defence and security. A reduction in budgets necessitates a reprioritisation of British ICF objectives and programmes.
• If resources permit, and as long as they are used effectively, the use of ODA to deal with climate change’s consequences is worthwhile. Climate change poses a challenge to the UK’s national interests – for example, by threatening suppliers of critical resources and goods.
  
• International commitments are far outpacing available resources. A large proportion of British ICF goes to paying the overheads of international organisations, rather than towards mitigation or adaptation directly.
• In a more volatile world, aid to help other countries deal with climate change’s inevitable impacts is a legitimate tool for furthering wider British interests.

Questions this Report addresses:

• How is UK ICF currently spent and how effective is it in dealing with climate change and its impact?

• What are the limitations of the current approach to British ICF policy?

• Why is a reprioritisation of UK ICF objectives necessary?

• How should HM Government prioritise British ICF spending in the future?

Key findings:

• UK ICF efficacy and value for money appears poor. From April 2011 to March 2024, British ICF spending mitigated just 0.28% of the global carbon dioxide equivalent (CO2e) emissions added to the atmosphere in 2023 alone, at an average cost of around double the current UK carbon price (£79 per tonne of CO2e).
• Among Colombia, India, Indonesia, Pakistan and eastern Africa – countries where much British ICF is dispersed – fossil fuel consumption increased by 4,802 Terawatt hours (TWh), compared to clean energy’s increase by 1,020 TWh over the same period. This shows an energy addition rather than a transition.
• The ICF strategy is too broad, its 29 sub-objectives are too numerous, and reporting on the 169+ programmes is opaque. Programmes suffer from ‘omnicausification’, inflicting inefficiency and poor value for money for taxpayers, while ICF is spent on non-climate objectives.

Recommendations:

To ensure UK ICF is effective, HM Government should:

• Review its ICF spending and priorities to guide reform: ICF spending should be guided by four basic principles. It should be anchored to British national interests; support bilateral initiatives over multilateral and global ones; focus on a 2° Celsius (°C) or more world temperature increase; and improve accountability and transparency.
• Prioritise trading partners and Commonwealth nations for resilience grants: By prioritising countries with trade or historical ties as recipients for ICF spending, the UK can increase the resilience of its supply chains. This would also help to legitimise ICF spending and create value in the eyes of British taxpayers.
• Focus on expanding clean energy supply chains over clean energy deployment: Redirecting ICF spending towards developing clean energy supply chains in recipient countries will improve their economic development, diversify global supply chains and increase capacity for carbon pollution mitigation. This will meet UK national security interests as well as benefitting the recipient countries.
• Leverage private finance to restore and preserve natural carbon sinks: There are numerous examples of effective and well-principled initiatives and programmes which should be continued and replicated where possible. Examples include the Blue Belt Programme, the Tropical Forests Forever Fund and the Blue Forests Initiative.
• Push for greater ICF spending by countries which can afford it: The burden of ICF under the United Nations Framework Convention on Climate Change (UNFCCC) is unevenly distributed. Countries which have become wealthier since the introduction of the Annex programme should be pushed to assume a greater share of global ICF spending.