LONDON – Italy helped a retailer open chocolate and gelato stores across Asia.
The United States offered a loan for a coastal hotel expansion in Haiti.
Belgium backed the film “La Tierra Roja,” a love story set in the Argentine rainforest.
And Japan is financing a new coal plant in Bangladesh and an airport expansion in Egypt.
Funding for the five projects totaled $2.6 billion, and all four countries counted their backing as so-called “climate finance” – grants, loans, bonds, equity investments and other contributions meant to help developing nations reduce emissions and adapt to a warming world. Developed nations have pledged to funnel a combined total of $100 billion a year toward this goal, which they affirmed during climate talks in Paris in 2015. The funding helped crown Japan and the United States as two of the top five contributors.
Although a coal plant, a hotel, chocolate stores, a movie and an airport expansion don’t seem like efforts to combat global warming, nothing prevented the governments that funded them from reporting them as such to the United Nations and counting them toward their giving total.
In doing so, they broke no rules. That’s because the pledge came with no official guidelines for what activities count as climate finance. Though some organizations have developed their own standards, the lack of a uniform system of accountability has allowed countries to make up their own. The U.N. Climate Change secretariat told Reuters it is up to the countries themselves to decide whether to impose uniform standards. Developed nations have resisted doing so.
“This is the wild, wild west of finance,” said Mark Joven, Philippines Department of Finance undersecretary, who represents the country at U.N. climate talks. “Essentially, whatever they call climate finance is climate finance.”
The four countries defended their programs as sound. Japanese officials consider the power and airport projects green because they include cleaner technology or sustainable features. A U.S. official said the hotel project counts because it includes stormwater controls and hurricane protection measures. A Belgian government spokesman defended counting the grant for the rain-forest movie as climate finance because the film touches on deforestation, a driver of climate change. An Italian government official said Italy aims to consider climate in all of its financing but did not elaborate on how the chocolate stores met that goal.
Developed nations reported more than 40,000 direct contributions toward the finance target, totaling more than $182 billion, from 2015 to 2020, the last year for which data is available. In an effort to understand how that money is being spent, reporters from Reuters and Big Local News, a journalism program at Stanford University, examined thousands of records that countries submitted to the U.N. to document contributions.
The system’s lack of transparency made it impossible to tell how much money is going to efforts that truly help reduce global warming and its impact.
Countries are not required to report project details. The descriptions they disclose are often vague or non-existent – so much so that in thousands of cases, they don’t even identify the country where the money went. Even receiving countries listed in the reports sometimes couldn’t say how the money was spent.
“You cannot really follow the money, track the money, track the impact,” said Romain Weikmans, a senior research fellow specializing in climate finance at the Finnish Institute of International Affairs.
The problem is not universal. Some countries, such as the United Kingdom, Canada and the Netherlands, do submit detailed reports, and Reuters tallied tens of billions of dollars in spending from at least 33 countries that aligned with stated climate goals. That included investments in renewable energy and projects that build resilience to natural disasters.
But billions in spending is scarcely documented, including that from top funder Japan, which accounts for nearly one-third of the funding pledged to date. Officials from Japan’s foreign ministry, which oversees its climate finance contributions, declined to describe any of the country’s funding decisions in detail. The country has drawn criticism from activists and other nations for including in its total projects that rely on fossil fuels or otherwise increase emissions. Japanese officials have argued that developing nations need fossil fuel projects that rely on cleaner technology while the world transitions to alternative power sources.
Aiming to follow the money, Reuters and Big Local News asked 27 nations for details on funding they reported to the U.N, examined public documents and spoke to NGOs and others involved in reported projects. Reporters also cross-checked U.N. reports against information recorded by other agencies, such as the Organisation for Economic Co-operation and Development (OECD), a group representing mostly wealthy nations.
The review covered about 10% of the total reports to the U.N. It turned up at least $3 billion spent not on solar panels or wind farms but on coal-fired power, airports, crime-fighting or other programs that do little or nothing to ease the effects of climate change. Five climate specialists – including university professors, researchers and government officials focused on climate finance – agreed that the projects Reuters identified have little or no direct connection to climate change.
More than $65 billion was reported so vaguely it is impossible to tell what the money paid for. Some of those records don’t even specify a continent where the money was sent.
And more than $500 million was reported for projects that were later canceled with no funds paid out. Countries are still claiming that funding toward their climate finance pledges.
To be sure, decisions to claim borderline projects as climate finance often don’t reflect a deliberate attempt to mislead, said Gaia Larsen, director of climate finance access at the World Resources Institute, a non-profit research organization that tracks climate finance. But when countries inflate their funding numbers with things like coal-fired power, she said, the result can resemble greenwashing – when companies make exaggerated or misleading claims about their environmental stewardship.
“Intended or not, this can have the effect of padding the numbers,” Larsen said.
CALLS FOR CLARITY
The past eight years have been the hottest on record, according to a World Meteorological Organization alert published in January. Historic floods submerged a third of Pakistan and killed at least 1,700 people in 2022. Millions are facing starvation on the Horn of Africa in the worst drought in decades.
Scientists say events like these are more likely and more intense because of Earth’s rapid warming, largely blamed on wealthy countries and the emissions they have released to power their economies. Now, as developing nations seek their own growth, they are under pressure to use more sustainable energy sources. Because many of these nations are in hot, tropical climates, they also bear a disproportionate share of global warming’s effects, such as rising seas, drought and extreme weather.
Wealthy nations have acknowledged their role in the crisis and their responsibility to help other countries with the hefty cost of managing emissions and the effects of climate change. They committed, first in 2009 and again in 2015 under the Paris climate agreement, to a collective goal: $100 billion a year in grants, loans, private sector investments and more by 2020.
More than a decade after the first pledge was made, nations have yet to meet their promise. They fell $16.7 billion short of the $100 billion goal in 2020 and are expected to miss it again when contributions are tallied for 2021 and 2022, according to OECD estimates. There are no penalties for missing the target, aside from criticism from those who say governments are not doing enough to combat global warming.
That failure has helped keep climate finance at the top of the agenda at annual U.N. climate conferences, such as last year’s COP27, held in Sharm el-Sheikh, Egypt.
There, anger and anxiety over the failure of rich nations to meet the funding goal helped developing nations win a key concession: Developed nations agreed to work on setting up a new fund to cover the costs of damage already caused by climate change. Until now, most funding has been focused on reducing emissions or adapting to expected changes.
World leaders acknowledged that damage from climate change is already rapidly outstripping these countries’ abilities to cope and began discussing a new climate finance goal that, all told, could amount to trillions of dollars. At this year’s COP28 in Dubai, they will debate the goal’s size, who should contribute and over what time period, and any rules governing how it is delivered.
Some officials from potential recipient countries say that, before more money starts to flow, clearer definitions of what qualifies as climate finance and more transparency in reporting contributions are needed. More than 100 times since 2012, developing nations or groups acting on their behalf have called for such improvements, according to a Reuters review of U.N. submissions, videos of climate meetings and climate negotiation bulletins.
“If we are telling ourselves we are spending money and investing in our future in a way that we are not, then we are courting disaster,” said Matthew Samuda, a minister in Jamaica’s Ministry of Economic Growth and Job Creation.
‘PEOPLE DESERVE MORE’
Across the globe, donors reported more than $25 billion in funding they claim is linked to renewable energy. At least another $5.6 billion went to projects they claim would help countries prepare for or respond to climate-related disasters. Many of their reports contain too little detail to verify these claims, Reuters found.
Reuters documented billions more that went to projects involving fossil fuels or to other initiatives that have little or nothing to do with reducing emissions or adapting to the impacts of climate change.
When Italian chocolatier Venchi opened dozens of new stores in Japan, China, Indonesia and elsewhere in Asia, it had help from SIMEST, a public-private company that helps Italian companies expand overseas. Italy claimed the $4.7 million equity investment as climate finance.
A SIMEST official said that the agency’s work is not focused on climate change and that it is not involved in Italy’s climate finance reporting. A spokesperson for Italy’s Ministry of Environment and Energy Security, responsible for the country’s U.N. reports, said the project had a climate component but declined to elaborate.
The United States agreed to lend $19.5 million to developers of a Marriott hotel franchise in Cap-Haitien, Haiti. At the time of the agreement in 2019, plans called for improving the Habitation Jouissant with more rooms, an infinity pool, a rooftop restaurant and better gym facilities. The developer, Fatima Group, now says it is redesigning the project, which will become a Courtyard by Marriott property.
The hotel overlooks the sea, but its position on a hillside means it is not threatened by sea level rise or flooding, and it hasn’t suffered any storm damage, said Fatima Group Chairman Fred Béliard. Fatima Group does intend, however, to build “climate-resilient infrastructure,” he said. A U.S. State Department spokesperson said the loan for the hotel counted as climate finance because the project included stormwater control and hurricane protection measures.
A Marriott spokesperson said the company does not get involved in its franchisee’s financing arrangements and had no role in the U.S. decision to count the loan as climate finance.
Belgium backed the film “La Tierra Roja,” about a former rugby player who works for a company clearing forest to make paper in Argentina. He falls in love with an environmental activist who protests the paper-maker’s water-polluting toxic chemicals.
Nicolas Fierens Gevaert, a spokesperson for Belgium’s department of foreign affairs, trade and development said Belgium considered its $8,226 contribution – part of a larger grant for the film – climate finance because the movie touches on deforestation, a driver of climate change.
Some countries count projects that never happened toward climate finance goals. France reported a $118.1 million loan to a Chinese bank for environmental initiatives, as well as loans totaling $267.5 million for upgrades to a metro system in Mexico and $107.6 million for port improvements in Kenya. Each project was subsequently canceled with no funds paid out, according to the French Development Agency. Similarly, the U.S. reported $7 million in insurance coverage for a hydropower project in South Africa that never happened.
French and U.S. officials involved in U.N. reporting told Reuters they document funding in the year it is committed and do not revisit the reports to correct them. No rules require them to do so.
The biggest player of all in climate finance is Japan. It has lent at least $9 billion for projects that will continue reliance on fossil fuels, according to the Reuters review. At least some of those projects increase emissions rather than reduce them, including a new 1,200-megawatt coal-fired power plant that Japanese companies are building on Matarbari, an island on Bangladesh’s southeast coast. Japan has lent Bangladesh at least $2.4 billion in c
When Japan helped Bangladesh plan the Matarbari project more than a decade ago, Bangladesh’s power system had a daily power shortfall of 2,000 megawatts, more than one-third of its demand. That led to long, frequent power failures that spurred protests and hindered economic growth. The new plant will help eliminate ongoing power shortages, which result in planned power cuts, said Mohammad Hossain, head of Power Cell, a division of Bangladesh’s energy ministry.
The plant will add 6.8 million tons of CO2 to the atmosphere every year, according to documents from the Japan International Cooperation Agency (JICA), which helped plan and finance the project. That’s more than the city of San Francisco reported in emissions for all of 2019.
Japan considers Matarbari a climate change project because it uses Japanese technology that generates more energy with less coal, resulting in lower emissions than conventional power, said Sachiko Takeda, a JICA spokesperson. JICA documents describing the project say Matarbari will emit about 400,000 tons per year less in CO2 equivalent emissions than a typical plant of its size.
Japan’s foreign ministry, not JICA, is responsible for reporting climate finance to the U.N., Takeda said.
Japan conducts emission-reduction calculations for projects, and a foreign ministry team assesses projects before deciding to report them to the U.N. as climate finance, said Hiroshi Onuma, principal deputy director of the climate change division at Japan’s Ministry of Foreign Affairs. He declined to explain why Japan would count a coal plant as a climate project.
Funding large projects such as Matarbari helped Japan stake a claim as the top funder of climate finance. It reported $59 billion in grants, loans and equity investments from 2015 through 2020 and an intention to continue similar funding levels through 2025. That is $14 billion more than Germany, the next-highest funder, reported over the same period.
“This commitment stands out as a sizable amount among other developed countries,” Japan’s Ministry of Foreign Affairs said in a June 2021 press release. “Japan will continue to lead the global effort to tackle climate change.”
Iqbal Kabir, a Bangladeshi official working at the intersection of climate change and health issues, questions the wisdom of spending billions of dollars on projects that could worsen global warming while people in Bangladesh are suffering from the effects of sea-level rise.
Sea level rise and storm surges have allowed sea water from the Bay of Bengal to infiltrate drinking water sources. Government officials and scientists have linked consuming salt water to high blood pressure. Women who drink and bathe in it have higher rates of uterine infections, and public health officials suspect it is affecting fertility.
Kabir’s team, the Climate Change and Health Promotion Unit in Bangladesh’s Ministry of Health and Family Welfare, had hoped to partner this year with a gynecological society to study the effects of salt water contamination on women’s fertility. But they couldn’t get the $200,000 to $1 million Kabir said they needed.
“People deserve more,” Kabir said. “They are spending it on other projects, depriving the issues like women’s health, children’s health and salinity intrusion.”
Japanese government officials declined to explain their reasoning for funding specific projects.
In addition to financing the Bangladeshi coal plant, Japan reported loans for coal projects totaling at least another $3.6 billion, one in Vietnam and two in Indonesia, and $3 billion for projects that rely on natural gas, the Reuters review found.
After a chorus of criticism from developed countries, Japan joined G7 pledges in 2021 and 2022 to end international funding for new, unabated fossil fuel projects. Japan’s Ministry of Foreign Affairs and the Ministry of Economy, Trade and Industry reiterated the country’s G7 commitment to stop funding for fossil fuels, without providing further detail.
Despite joining the G7 promise, Japan continues to claim continued financing for Matarbari as part of its climate finance pledge. And debate continues about the need for a clearer definition of what qualifies for climate finance.
LIVES AT RISK
The U.N. Climate Change secretariat, where countries submit their reports, told Reuters its role is to impartially support countries in climate negotiations and implementing climate agreements. It does not have a role in designing or imposing rules, a spokesperson said. That process is driven by countries themselves.
Climate negotiators from wealthy countries that oppose stricter rules told Reuters that more restrictions on how funds are spent could limit developing nations’ autonomy in tackling climate change, restrict the flow of money, and hinder the flexibility needed to keep pace with the fast-evolving crisis and the technologies needed to solve it.
Gabriela Blatter, Switzerland’s principal policy adviser for international environment finance, said developed nations aren’t resisting a definition so they can claim “anything under the sun” as climate finance. Rather, she said, they want to stay true to the Paris Agreement, which aims to respect the right of each country to set its own course in fighting the effects of climate change.
No consensus exists on what a definition should include, she said. Natural gas is a primary topic of disagreement.
Excluding financing for gas would be inconceivable to some developing nations. Those with large gas resources or an existing reliance on gas argue that it has a role in the transition to greener economies because it emits the least carbon of all fossil fuels.
Ghana, for example, would not accept any definition of climate finance that disallowed spending on gas projects, said climate finance negotiator Antwi-Boasiako Amoah, director of climate vulnerability and adaptation at Ghana’s Environmental Protection Agency.
A 2022 national energy plan describes gas as key to powering Ghana’s growing economy and achieving universal access to electricity while transitioning to cleaner sources such as nuclear energy.
“We need a lot of reliable energy to be able to grow our economies,” Amoah said. “If this is what is going to help us develop sustainability, by also offsetting some of the impact, why not?”
Government officials from small island states highly vulnerable to violent storms and rising sea levels argue that fossil fuel initiatives should never count toward climate finance goals. Such projects lock in infrastructure that will pump out emissions for decades, critics say, making temperature goals difficult to reach.
“The very lives of our people are at risk,” said Francine Baron, chief executive of the Climate Resilience Execution Agency for Dominica. Hurricane Maria devastated the Caribbean island state in 2017, killing at least 31 people and damaging 90% of the housing stock.
Developed countries largely agree that gas should not be funded, or only in limited circumstances. Some have explicit rules against reporting fossil fuel projects under climate finance.
Yet Japan has supported allowing gas during a transition period. A 2020 environment ministry document named gas as a transitional fuel “in response to the needs of partner countries.” Japan’s most recent policy statement does not mention gas specifically but says the country will support various energy sources and technologies “in line with the idea that a realistic transition is essential.”
In an interview with Reuters reporters covering G7 meetings in April, Yasutoshi Nishimura, Japanese minister of economy, trade and industry, said that every country has its own economic and energy needs, so there are “diverse paths” to eliminating reliance on carbon while ensuring a stable energy supply. Japan’s ministries declined requests from Reuters to further explain its climate finance policies.
‘THE MOTIVATION IS WRONG’
Some climate finance is going to projects primarily focused on economic expansion, and that is not the intention of the funding agreement, said Wayne King, director of climate change for the Cook Islands. That results in less money going to efforts that truly help the climate.
Take Japan’s lending for a new terminal and related facilities at the Borg El Arab airport in Egypt. The project’s short-term goal of 1.5 million additional passengers would increase outbound flight emissions by about 50% over 2013 levels, according to an analysis conducted for Reuters by the International Council on Clean Transportation, a non-profit research organization.
The project is important to the Egyptian economy, said Mohamed Nasr, director of climate, environment and sustainable development in Egypt’s Ministry of Foreign Affairs. “People have to fly,” he said.
Nasr said he couldn’t comment specifically on the airport expansion or Japan’s decision to count it as climate finance. In general, he said there should be rules to ensure that countries claim only the relevant portion of a project’s funding as climate finance – not the entire budget.
Japanese development documents call Borg El Arab an “Eco Airport” and note the planned terminal building’s energy-saving solar panels, high-efficiency air conditioning and LED light bulbs. At least $28 million was budgeted for construction that incorporated such features. But JICA planned to spend another $40 million on costs unrelated to climate, including a new car park, roads and consulting services. JICA and Japan’s foreign ministry declined to provide detail on how the money ultimately was spent.
The airport project was one of at least three Japanese-financed airport expansions counted as climate finance. The loans totaled more than $776.3 million.
Economic projects such as these – meant to attract more people and investment to a region – historically drew financing from international development funds. Critics say labeling them as climate finance amounts to a shell game.
“Basically, that’s a development project,” King said. “You can’t count it, because the motivation is wrong.”
Some developed nations say new reporting rules due to take effect in 2024 will enhance transparency and make improper reporting more obvious. However, the new rules still will not require developed nations to submit details about the individual projects they back.
In some cases, even recipient governments say they don’t know what has become of climate-finance funds purportedly spent on their turf. Fazle Rabbi Sadeque Ahmed, a climate finance negotiator who has represented Bangladesh at U.N. climate talks, said he has no idea what wealthy nations like Japan and the U.S. are funding in his country.
“Really, I don’t know,” he said. “If it is not disclosed properly, how could we?” – Reuters
Nations who pledged to fight climate change are sending money to strange places
Source: Bantay Radio
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