UK aid for combating climate change Contents

Summary

The climate change crisis that the world is facing is huge–in scale, in intensity, in urgency. At the start of the inquiry, we asked: what will be the consequences if the international development community fails to rise to the challenge of climate change? The answers we heard depicted a nightmarish future: drought, flooding, displacement, hunger, disease. The Sustainable Development Goals will be rendered unachievable, and existing development gains will be reversed. There was agreement across the written and oral evidence, in line with the latest climate science, that it will be the least developed countries and the most vulnerable people who will be hit the first and the hardest by climate change–and indeed, many are already suffering devastating impacts. Ultimately, the UK will feel these too. The severity of the situation cannot be overstated.

The fact that climate change poses an existential threat is hardly new information, although as climate science advances, it is becoming apparent that the challenge is more frightening and more urgent than previously thought. The UK has historically shown international leadership in advancing both the climate change and sustainable development agendas, playing an active role both in negotiating the Paris Agreement and in developing and promoting the SDGs. But given what is now known about the pressures and challenges that the international community is facing on climate change, given the risks that climate change poses to disadvantaged and vulnerable populations, and given what remains to be achieved, what strategies and approaches should the UK be adopting in its aid spending to most effectively rise to the challenge?

First, the Government must recognise that climate change is not just one of a number of issues that the UK should address though aid spending. Climate change cuts across everything. The effectiveness of all UK aid spending is dependent on whether the international community rapidly and effectively combats the causes and impacts of climate change.

Given the urgency and scale of the challenge, spending climate finance has to be more than a box-ticking exercise to meet a commitment. Climate finance must be spent strategically, it needs to be spent with urgency, and it has to be transformative. It is therefore highly disconcerting that there does not appear to be an active strategy underpinning the Government’s International Climate Finance spending. The Government should adopt a clear, robust strategy for spending climate finance that is outcome-oriented, time-sensitive, and based on the latest climate science.

At the same time, climate change cannot be addressed only through the climate finance budget. Climate change needs to be recognised as a cross-cutting strategic priority in all the UK’s aid spending and should be comprehensively integrated across all development assistance strategies. This includes DFID’s Economic Development Strategy which, we heard, pays little more than ‘lip service’ to climate change.

The UK’s efforts to combat climate change through aid must be properly resourced. This means maintaining the 2020/21 climate finance spend of £1.76 billion as the new annual minimum spend for climate finance from the UK. This also requires sufficient expertise and staff capacity. We heard some concerning reports of reductions in DFID’s capacity on climate in recent years. DFID should ensure that efforts at efficiency savings do not lead to watered down expertise and ultimately result in ICF being spent less effectively. In order to ensure that ICF is having the greatest possible impact, ICF spending, monitoring and results should be open to scrutiny through increased transparency. The DevTracker website provides an appropriate platform for this.

Climate finance has to be consistent with poverty reduction. Witnesses to the inquiry warned that it is possible to spend aid in a way that addresses climate change, but which does not promote poverty reduction, and vice versa. All UK aid, no matter which department administers it, should be spent in a way that manages trade-offs and is consistent with both these goals. The concepts of ‘climate compatible development’ and ‘climate justice’ provide a helpful framing for guiding ICF spending towards both reducing poverty and addressing climate change. They should be more explicitly incorporated into programme design.

The concept of climate compatible development also involves considering mitigation and adaptation strategies simultaneously. We agree that the UK should not be restrained by the structure of international reporting requirements, which draw a distinction between mitigation and adaptation. In practice, the UK should have a more integrated approach.

We heard compelling evidence that DFID should shift to a more long-term approach in climate programming whereby longer programme cycles are set out from the start, providing certainty and opportunity for strategic planning. This should not preclude ongoing, robust evaluation to ensure the best outcomes. We also heard about a number of successful climate programmes that had been drawn to a close. We would like to see more climate finance being used to scale up successful programmes in order to fully realise the potential benefits of the valuable work in which DFID has invested.

Development assistance and private finance should play complementary roles. UK aid has an important role to play in mobilising more private sector finance towards climate activities and into areas and markets where private capital is needed but would not ordinarily go. The Government should ensure that they are tracking not just the amount of private finance that is mobilised but also whether this is being accessed by those who need it most.

We welcome the fact that DFID is seeking to mainstream climate change to ensure that the whole DFID portfolio is consistent with and supportive of climate resilience and low carbon development. Development programmes that fail to meet this standard will ultimately undermine their own effectiveness. However, this should be done as a matter of good practice in all programming, without the support of the International Climate Finance budget. Failing to integrate climate considerations in this way would be flawed development practice, and DFID should not be tapping into the International Climate Finance budget to subsidise what it should be doing anyway. Instead, the ICF budget should be used more strategically in pursuit of transformative change.

We heard that closer cross-departmental collaboration on ICF spending, and more comprehensive sharing of expertise, is needed. This can be achieved by reforming the management structures that govern the ICF.

Beyond the International Climate Finance budget, the Government should seek to ensure coherence on climate change across all aid spending bodies and departments. All aid should be consistent with reaching net zero emissions and climate resilience and consequently, climate change should be integrated as a priority in all strategies and adopted as a key consideration in all spending decisions. On questioning the Prosperity Fund, we found this approach lacking. In order to support this integration of climate across aid spending, the Government should adopt the model of the International Development (Gender Equality) Act 2014 for climate change, to ensure that all development assistance is screened for a contribution towards a climate resilient, low carbon world.

The only context in which it is acceptable for UK aid to be spent on fossil fuels is if this spend is ultimately in support of a transition away from fossil fuels and as part of a strategy to pursue net zero global emissions by 2050. In each case where ODA is supporting fossil fuels, the Government must be able to (i) demonstrate how that spend supports such a transition to zero emissions, and (ii) outline a plan for how that transition will be achieved and in what timeframe.

Any financial support for fossil fuels that does not meet these criteria - regardless of whether it is ODA or non-ODA - undermines the Government’s International Climate Finance spend. Currently, the support provided to the fossil fuel economy in developing countries by UK Export Finance is damaging the coherence of the Government’s approach to combating climate change.

At the multilateral level, the UK should use its influence with MDBs to champion more strongly a shift away from high-carbon investments and a scaling up of investments that are compatible with a 1.5°C world. The Government should work together and coordinate with other MDB shareholders to amplify pressure. The Government is also well placed to press for improvements to the Green Climate Fund where we recommend that the UK work with the Board to improve efficiency in decision-making and enable better access to finance by lower capacity countries and organisations.

Over the course of our inquiry we heard that there are several important issues that the international community is yet fully to grapple with, and on which UK leadership has, so far, been lacking. In the final section of the report we consider two areas where the UK Government has an opportunity to step-up and progress vital conversations on challenging issues that require solutions: loss and damage and climate migration. The UK should use the Secretary-General’s upcoming Climate Action Summit to advance conversations on these topics, in partnership with developing countries, as part of the UK’s role at the Summit leading on climate resilience.





Published: 8 May 2018