Written evidence submitted jointly by the Department for International Development; the Department for Business, Energy and Industrial Strategy; and the Department for Environment, Food & Rural Affairs
UK aid for combating climate change
Questions:
Summary
- Overarching Narrative: -
Climate change is a global challenge that affects us all. No country is projected to be spared from the impacts of increased temperature volatility, and we are already facing serious challenges to the natural environment, to food production, and to water resources. Without concerted global action to limit and manage the impact of climate change, we could see reversals in the huge gains in global poverty reduction which the UK has helped achieve over the last several decades. The 2015 Aid Strategy affirmed the UK commitment to supporting climate change mitigation and adaptation.
Domestically and internationally the UK is a leader on climate change. We have decarbonised more quickly than any other country in the G20, drawing on the depth and breadth of UK knowledge and expertise and creating new economic opportunities. Since 1990 the UK economy has grown by two thirds while emissions have fallen by over forty per cent, and UK businesses are helping to make the global low carbon transition a reality.
Internationally we played a pivotal role in securing the landmark Paris Agreement in 2015 that agreed to limit the global average temperature increase to well below 2 degrees above pre-industrial levels, and to pursue efforts to limit it to 1.5 degrees. Developed countries also committed to mobilise, by 2020, $100bn per year in climate finance to developing countries, from both public and private sources.
As part of this $100bn commitment, the UK pledged to provide at least £5.8bn of International Climate Finance (ICF) between 2016 and 2020 (all from the aid budget), and we are honouring that commitment. This places us amongst the world’s leading providers of climate finance. We have also made a joint commitment with Germany and Norway to provide $5 billion to tackle deforestation, which accounts for almost one fifth of global greenhouse gas emissions and is a major cause of biodiversity loss.
Action on climate change today helps reduce costs tomorrow. Every £1 invested well in reducing climate risk saves more than £3 (and up to £50) in avoided disaster impacts.[1] Similarly, every pound spent cutting carbon dioxide pays for itself between five- and twenty-fold by offsetting the future costs of climate change.
How can the UK play an active role in leading the world on this issue?
We are already leading the way, both domestically and internationally and are committed to continue this role.
Domestically, the UK was the first country in the world to introduce legally binding emission reduction targets when it passed the 2008 Climate Change Act. The central pillar of the Act was the target to reduce emissions by at least 80% by 2050, relative to 1990 levels, with independent challenge of performance against carbon budgets provided by the Committee on Climate Change. The Act was widely hailed as ground-breaking, and continues to advance climate action domestically in the UK. It also provides a functional framework for other countries looking to enshrine their climate targets in law.
We have demonstrated that bold action on climate change and strong environmental stewardship are priority issues for this Government through the publication of the Clean Growth Strategy, and 25 Year Environment Plan, and through the Clean Growth Grand Challenge at the heart of our Industrial Strategy. We recognise that the global response to climate change will transform many sectors of the economy, and using the full depth and breadth of UK expertise in finance, research, science, engineering and services we want to maximise the opportunities at home and abroad.
Internationally, the UK played a leadership role in securing the 2015 Paris Agreement, ratified it in November 2016 and have since been a vocal, progressive voice in the subsequent negotiations, working hard to ensure these unlock ambitious action globally. By engaging constructively in political coalitions such as the High Ambition Coalition and the Cartagena Dialogue – groupings of countries (both developed and developing) who have found common ground in pushing for a more ambitious global agreement on climate – and using our strong diplomatic networks, we have promoted bold international targets and reinforced multilateral agreements. Our credentials in international negotiations have been strengthened because of the strong stance, bold action, and clear progress we have made at home.
We have also spearheaded important global initiatives. For example, working with Canada, we established the Powering Past Coal Alliance in 2017 – a voluntary coalition of Governments, businesses and other organisations committed to ending the use of unabated coal power within a timeframe compatible with the Paris Agreement. Since its launch in November 2017, the Alliance has so far attracted 74 members.
In response to the commitment at Paris to mobilise $100bn a year from 2020, the UK has ringfenced £5.8bn of climate finance between 2016/17 – 2020/21, an increase on the £3.87 billion already provided by the UK over 2011/12 – 2015/16. This funding is for activity that directly targets climate change and is reported under international rules. Considerably more UK ODA contributes indirectly to helping developing countries and people anticipate and cope with climate change.
Between 2011/12 and 2017/18, ICF programmes have supported 47 million people to cope with the effects of climate change; provided 17 million people with improved access to clean energy; reduced or avoided 10.4 million tonnes of greenhouse gas emissions; installed 590 MW of clean energy capacity; and mobilised £3.3 billion public and £910 million private finance for climate change purposes in developing countries.
The New Climate Economy report[2] noted the high levels of investment that will be required in coming years to meet climate and development objectives, making an estimate of around $90 trillion up to 2030. Much of this will need to come from private sources, and UK financial expertise can play a key role in mobilising this green finance investment need. We have co-chaired the G20 Green Finance Study Group, and placed clean growth at the heart of our Industrial Strategy. The City of London has already benefited from our leadership. In total, there are currently 78 green bonds listed in London that have raised over US$24.5 billion in aggregate terms across seven currencies.
What role can international development play in combating climate change?
Adopted in September 2015, the Sustainable Development Goals (SDGs) reaffirm that sustainability is at the heart of development. It is clear that unchecked climate change would reduce economic growth, reverse development gains and push millions more people into poverty, increase the risk of migration and conflict, and disproportionately affect women.
Through our international climate finance, we work hard to support and increase the capacity of developing countries’ own governments, civil society groups and the private sector, coordinating effort in a way that increases efficiency and effectiveness.
A few examples of work supported through the ICF are:
Does the UK give sufficient priority to climate-related issues within its ODA portfolio?
Tackling climate change and achieving sustainable development are two sides of the same coin – one cannot be achieved without the other. No country will be unaffected by climate change and developing countries will be hit hard; for the most part, they are under-prepared.
The UK clearly recognises the importance of climate change in meeting its international development goals. Tackling climate change is an explicit objective in DFID’s Single Departmental Plan. The 2017 UK Economic Development Strategy recognised climate change as the biggest global threat to sustained economic development. DFID’s Humanitarian Policy recognises the need to invest more in resilience and preparedness to respond, including using insurance and other risk-based finance to better manage risks, and deliver longer-term solutions to protracted crises.
In the Prime Minister’s recent speech on boosting investment in Africa she set out a new vision for how the UK will create a more prosperous and secure world, with international development at its heart. This is part of a new Africa Strategy that also seeks a step change on climate in the African continent.
The UK’s ring-fenced ICF commitment is delivered through DFID, BEIS and Defra, using a range of channels: dedicated climate investments, bilateral programmes and contributions to multilateral climate change funds. BEIS and DEFRA centrally manage and spend their ICF allocation on climate programmes. DFID uses a variety of investments across a strong network of country offices, and we are increasingly integrating climate finance within our wider development programming to make it climate-smart.
Although much of our development programming is not specifically targeted at tackling climate change and we do not score or report it internationally as climate finance (under the international definition) it will also contribute to building climate resilience. For example, strong economic growth and more diverse economies will better enable countries to adapt and cope with changes.
What will the consequences be if the international development community fails to act?
Failure to act will have serious consequences both domestically and internationally. The impact of climate change is already having a disproportionate impact on the world’s poorest communities. Without concerted global action to limit the extent of climate change and anticipate and manage its impact, we risk seeing reversals to global poverty reduction.
We are on a path to dangerous levels of climate change which are beyond our collective capability to manage, with ever more frequent and costly disasters, huge stresses on water and food, and disruption to global supply chains. The WHO has identified climate change as the biggest health risk in the 21st Century. According to World Bank estimates, an additional 100 million people are at risk of being pushed into extreme poverty by 2034, and 720 million people by 2050. The UN estimates the costs in developing countries of adapting to climate change may be US$ 140-300 billion per annum by 2030, and US$ 280-500bn by 2050[3].
Without support from the international development community, developing countries may become locked into high carbon pathways, low-carbon technologies could remain costly, nascent markets could fail and temperature trajectories will likely diverge from the “well below 2°C above pre-industrial levels” agreed at Paris in December 2015,
Poorer communities are disproportionately dependent on forests. Natural resources contribute 90% of the GDP of the poor and 1.6 billion people rely on forest resources for part of their livelihoods. Without urgent action, the world could soon reach a tipping point beyond which drastic change to our eco-systems is irreversible. If we do not support countries in managing these forests sustainably, we risk losing globally important habitats and biodiversity.
Tackling climate change is also an investment in our future security and national interest. The 2015 Strategic Defence and Security Review concluded that the impacts of climate change will exacerbate instability, conflict and migration in many countries – with an increased severity and magnitude of natural disasters destabilising economies, supply chains and our trading partners of the future.
How effective are the climate-focused multilateral agencies to which the UK contributes?
Multilateral Development Banks (MDBs) have a cornerstone role, both in helping to shift financing and investments into ‘green’ investment and contributing to the $100bn Paris target. They provide nearly five times as much in development disbursements than UK ODA every year (c.£65bn in 2016) and have teams in 140 countries. Through market borrowing, each £1 we put in delivers between £2 and £3 of spending in poorer countries and more than £7 of leveraged private sector investment.
As a Board Member and major contributor to several multi-lateral agencies helping to tackle climate change, the UK uses its influence and expertise to drive ambition, both on the quality of their investments and in leveraging financial flows from private sources. The Climate Investment Funds (CIFs) and the Global Environment Facility were assessed during the UK’s Multilateral Development Review (MDR) as having good strengths to deliver as well as good match with UK objectives.
There have been some significant results. Since 2008 the CIFs have built a portfolio of over 300 investments in 72 developing countries. These have delivered tangible outcomes, for example contributing to over 3 gigawatts of new renewable energy capacity. The CIFs’ financing in Morocco of the first full scale Concentrated Solar Power stations drove down technology costs by 35%, establishing the market and crowding in the private sector.
The Green Climate Fund (GCF) has been established more recently and was too new to be assessed during the MDR. It is the main dedicated multilateral vehicle for supporting the Paris Agreement and contributing to the $100bn climate finance goal. It has funding of $10.3bn (initial pledges), of which the UK is contributing £720m. The GCF uses a range of financial instruments to deliver funding to mitigation and adaptation projects.
The UK is working hard, with others, to shape the GCF into a fully effective organisation. We are using our position on the Board to play a leading role in driving forward organisation-wide reforms and improvements. These include adopting better decision-making processes, improving the efficiency of its Board, ensuring a robust focus on results, targeting resources appropriately, and improving how the Fund engages with private sector partners. There is still some way to go for it to deliver its full potential, and it is important that it does so, as its performance is fundamental to the success of our international climate objectives.
How effective is the Government’s bilateral ODA spend on combating climate change?
The UK has developed a set of key performance indicators (KPIs) to help capture the results achieved by and measure the effectiveness of UK ICF. Aggregated results for a number of the indicators are then published annually. The most recent results can be found here: https://www.gov.uk/guidance/international-climate-finance#our-results
All ICF projects are subject to continuous monitoring during the project cycle and use monitoring data and other information sources to assess the relevance, efficiency, effectiveness, impact and sustainability of interventions, producing actionable learning for performance improvements.
Is the Government using the right delivery partners for its bilateral ODA spend on combating climate change?
Consistent with previous ICAI recommendations the Government uses a wide range of delivery partners depending on the project design and objectives. They include multilateral organisations, NGOs and civil society, private sector suppliers, and support to private and public agencies, including other donor governments. The capabilities of these suppliers are assessed at the Business Case design stage, and thorough due diligence is carried out before funds are transferred.
The selection of delivery partners is an important element of our continuous improvement to our procurement processes and capabilities. DFID is working with BEIS and Defra, sharing the findings of DFID’s Supplier Review and helping to develop consistent approaches and standards in ODA procurement across government.
Is it focused on the right countries?
Through multilaterals we are focused on ensuring the right terms for our investment in MICs. This means recognising that in many cases countries can fund most of the domestic action required; that we must avoid over-subsidising global public goods or distorting markets, and achieve strong impact and good value for money. Bilaterally our work in MICs has a clear focus on overcoming market barriers that will unlock private finance, supporting the greening of their investments both at home and abroad and demonstrating impact - with the ultimate aim of shifting these countries from being recipients to donors of climate finance.
Does the government strike the right balance between adaptation and mitigation in its ODA spending?
The UK decided to split its ICF portfolio roughly evenly between adaptation and mitigation. This recognised that both elements are important, that globally adaptation finance tends to be lower than spend on mitigation, and private flows have tended to be concentrated on mitigation.
HMG’s efforts use the comparative advantages of the respective ICF spending Departments, therefore:
How can development actors best harness technology to combat climate change?
A number of Government documents note the potential of technology and the efforts being made to realise them. DFID’s Digital Strategy’s notes: ‘Digital technologies offer an unprecedented opportunity to revolutionise the global development system, change lives, transform entire economies, stimulate growth and, ultimately, end reliance on aid.’ For example, satellite data is being used to trigger digital insurance payments before the worst effects of drought are felt by those who are most vulnerable. Funding has supported new technology on using solar fridges and is looking at how to develop better methods for cooking in poorer countries.
The UK’s Industrial Strategy highlights the huge potential for technology to support the transition to clean growth, and the UK is at the forefront of much of this development. We have world-leading capabilities in areas including electric vehicle manufacture, offshore wind, smart energy systems, sustainable construction, precision agriculture and green finance. Since 2012, the UK has provided £70 million to help develop and deploy Carbon Capture, Usage and Storage (CCUS) technologies as part of our £2.5bn Clean Growth Strategy.
Since 2008 the UK has also provided over £1 billion to drive the deployment of technologies that address the climate challenge through the multi-donor Clean Technology Fund run by the World Bank. This has helped kick-start the renewable energy transition in many developing countries and is now supporting the next generation of technologies in energy storage and electric mobility.
Technology can also be used to aid adaptation and resilience. The Drought and Flood Mitigation Service (DFMS), funded by a £4.3m grant from BEIS’ Global Challenges Research Fund and delivered by the UK Space Agency, will provide the people of Uganda with practical information that will help them become more resilient to the impacts of climate change on agriculture and their livelihoods.
Frontier Technology Livestreaming (FTL) is helping DFID to explore how 3D printing, the internet of things, drones and other emerging technologies can impact development challenges, including climate change, shared on the Frontier Tech Medium Publication. Examples include electric vehicles for mini-grid viability in Kenya, electric motorcycle taxis in Rwanda, smart solar batteries in rural clinics in Zimbabwe, and cleaner cookstoves in Nepal.
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[1] See: K4D, ‘Cost effectiveness of disaster risk reduction and adaptation to climate change’
[2] The Global Commission on the Economy and Climate: ‘The New Climate Economy Report’ (2014)
[3] These are sensitive to assumptions regarding future GHG emissions and temperatures: UNEP (2016) “The Adaptation Finance Gap Report 2016”, United Nations Environment Programme (UNEP), Nairobi, Kenya.