Global Britain in demand: UK climate action and international development around COP26 Contents

4Reinforcing policy coherence across UK climate action

Fossil fuel policy

The best thing you can do for us is to cut your emissions […].

H.E. Ms Diann Black-Layne, Lead Negotiator on Climate Change, Alliance of Small Island States135

63.The volume of greenhouse gas emissions has a significant impact on the capacity of LDCs and SIDS to adapt to climate change. On 9 August 2021, the Intergovernmental Panel on Climate Change (IPCC) published its Sixth Assessment report, which the UN Secretary General referred to as a “a code red for humanity” with the alarm bells “deafening” and the evidence “irrefutable”.136

64.In March 2021, the Government introduced its new fossil fuel policy, which mirrors that of its development finance institution, the CDC Group (CDC). Both ban new, direct financial or promotional support for the fossil fuel energy sector137 abroad except for special, albeit controversial circumstances.138 The Government’s exemptions include:139

65.Contributors expressed concerns about the Government’s fossil fuel policy and its impact on the investments made by the Government affiliates CDC, UK Export Finance (UKEF) and the Private Infrastructure Development Group (PIDG).140 Dario Kenner, Lead Analyst on Sustainable Economic Development at the Catholic Agency for Overseas Development (CAFOD), told us that:

ODA, which is precious and has become more so since the aid cuts, really needs to be going to where it is needed, which is into the low-carbon transition, and particularly in low-income countries.141

NGOs stated that the Government’s climate action was incoherent by professing commitment to climate adaptation while introducing a fossil fuel policy with broad exemptions.142

66.We also heard concerns about CDC’s level of transparency in its reporting. Dario Kenner told us that although the level of information provided on CDC’s website had improved “a great deal”, third parties sought more disclosure of data especially in the area of CDC’s work with financial institutions and intermediaries.143 Mr Kenner told us that:

It is important where CDC money is still invested because it could be undermining that same transition that CDC could play a role in being part of. It really matters what is happening with all of the portfolio, not just what is happening in the future.144

67.Contributors told us that despite the official “arms-length” relationship between the Government and CDC, the Government had ample scope to influence the latter’s operations and decisions as its sole shareholder.145 NGOs are seeking greater Government influence on CDC’s operations to reduce the scope for funding fossil fuel energy sector abroad. In the words of the Environmental Rights Action/Friends of the Earth Nigeria:

The undue influence of the CDC over government policies means they will continue to enjoy stupendous patronage from government spending to continue fossil fuel infrastructure financing.146

UK’s response—fossil fuel policy

68.The FCDO told us that the Government’s new fossil fuel policy “determines the UK’s voting position at the boards of Multilateral Development Banks and can be used to influence the investment policies of other development financial institutions (such CDC Group PLC and the Private Infrastructure Development Group) that receive UK government funding.”147

69.The FCDO also stated that it would accelerate the transition to clean energy through the COP26 Energy Transition Council, which would “bring together energy ministers, leaders of multilateral development banks, and heads of expert agencies […] to ensure that for every country considering new power generation, clean power is the most attractive option.”148 Further, the Government would use UK ODA, UK ICF and their expertise to “help the most coal-dependent communities [...] achieve a just transition.”149

70.In July 2020, CDC presented its new Climate Change Strategy, with the aim of further aligning CDC’s measures with the Paris Agreement.150 CDC told us that it had committed over US$1 billion in climate finance since 2017, including for measures to provide renewable energy sources to people in hard-to-reach areas.151 It added that gas could play an important transitionary role where renewable energy sources were not yet a reliable alternative.152 As of 2021, it is committing 30% of its funding to climate finance.153

71.On the exemptions to CDC’s new fossil fuel policy, Colin Buckley, General Counsel and Head of External Affairs at CDC, told us that it would “respect the individual country road maps to net zero” as “developing countries will all have slightly different paths to get to net zero by 2030”.154

72.On the pace of transition, CDC state on their webpage that:

we avoid short-term policy changes. We are a long-term investor who thinks in decades rather than years.155

Colin Buckley told us that the perceived slow pace at aligning with the Paris Agreement of 2015 was due to “investment decisions that were made over a decade ago” and to the “importance of natural gas as a transition power […] in countries that simply do not have the renewable structure yet”.156 Mr Buckley also told us that:

the [CDC’s] strategy does not have any overall time when fossil fuels would cease, because it would depend on the individual country’s Paris path to net zero.157

73.On transparency and availability of data on CDC investments, Dr Amal-Lee Amin, Director of Climate Change, Value Creation Strategies team at the CDC, stated that it was “very much an evolving process.”158

74.We are concerned about the broad list of exemptions in the Government’s new fossil fuel policy as it raises questions about the UK’s credibility as a “force for good” and its commitment to net zero. We therefore urge the Government by 31 October 2022 to drastically scale up its investment in renewable energy abroad and to end all exemptions for direct and indirect investment in fossil fuel projects abroad through CDC and other channels apart from support for clean cooking methods for people living in poverty. The Government should also instruct CDC to publish a full list of its existing investments in coal, oil and gas and how they intend to divest from fossil fuels by 31 October 2022.

Loss and damage

75.We heard that loss and damage159 remained underserved in international climate action—even more so than climate adaptation.160 Contributors called for new and additional funding for loss and damage and for a more ambitious approach to addressing loss and damage.161 Bond and CAN-UK told us that:

The UK has not yet shown the leadership necessary on loss and damage to stand up for those suffering the worst impacts of climate change.162

They added that loss and damage was being subordinated to adaptation despite having an entire Article dedicated to it in the Paris Agreement.163 In their words:

The theme of Adaptation and Resilience ignores loss and damage entirely and uses instead the term “resilience” as a blanket term, ostensibly to include loss and damage without explicit recognition.164

76.H.E. Diann Black-Layne, Lead Negotiator on Climate Change, Alliance of Small Island States, told us that:

The frequency and intensity [of hurricanes] is increasing, and this increase is caused by pollution that is not our fault. […] Ideally, climate justice should kick in and those who are polluting should compensate us. What happens is that they say, “Oh no, go to the World Bank. Borrow this money and then you are going to have to borrow every single time.” That is not sustainable.165

77.At the Climate and Development Ministerial on 31 March 2021, the Government launched the ‘Climate and Development Pathway’, including the commitment to operationalise the Santiago Network for Loss and Damage before COP26.166 While participants of a subsequent Ministerial meeting on 25-26 July 2021 agreed on the need for urgent action, they disagreed on the creation of a separate funding line for loss and damage.167

UK’s response—loss and damage

78.The FCDO told us that the Government would use its COP26 presidency “to increase efforts to avert, minimise and address the challenges arising from loss and damage, including through effective disaster preparedness, risk reduction and response.”168

79.Lord Goldsmith agreed with the premise that those who had done the least were suffering the most from climate change but considered the introduction of a separate finance stream for loss and damage “highly unlikely”.169 He said:

it is a political issue. If countries wanted to step up, they could, but it is hard enough getting countries to step up on existing climate commitments for adaptation.170

80.He added that:

Our approach of pushing very hard for a clear, even split between adaptation and mitigation is, in a sense, probably the most elegant way through what would otherwise be an impasse, by getting countries that may not accept the language of loss and damage, or compensation, to accept the idea that we need to help those frontline countries that are most vulnerable to climate change to prepare, to become more resilient and to adapt to climate change.171

81.We understand the call of many contributors to create a separate funding stream for loss and damage from climate events, such as from sea-level rise, and acknowledge the challenges in accomplishing this at this time. Nonetheless, we urge the Government to ensure the operationalisation and adequate funding of the Santiago Network for Loss and Damage by 31 January 2022 and thus keep the momentum on formulating policies and interventions to tackle loss and damage during its COP presidency. Further, the FCDO should work closely with LDCs and SIDS in developing practical measures to address loss and damage, especially where people are forced to migrate or change livelihoods to reduce risks to their livelihoods and lives.

Leadership and the Climate and Development Ministerial

82.As a “stress multiplier”,172 climate change could increase the number of people living in poverty by an additional 100 million by 2030,173 while covid-19 and its secondary impacts have significantly slowed down the economic and social development of particularly marginalised groups in the Global South.174

83.COP26 is the starting point of a one-year opportunity for the UK to shape the direction of climate action and development in this decade significantly. As COP President, the UK will play an important role in increasing the resilience of climate-vulnerable countries and trust between stakeholders as the Parties seek ambitious commitments on climate action and volume as well as access to climate finance.

84.Contributors told us, however, that the cuts to ODA reduce the scope for the UK to support vulnerable countries to address climate change alongside the impact of the covid-19 pandemic and high levels of public debt.175 We were also told that the aid cuts might damage the trust of climate-vulnerable countries.176 Cecília da Silva Bernardo told us that:

Right now, somehow the UK’s leadership is lacking. […] For example, we did not hear from the UK a strong commitment on continued support and provision of funding to LDCs or to the most vulnerable. We also saw that there was a cut from 0.7% to 0.5% in development assistance from the UK. Those things that happened do not provide us with a good sense of confidence. I believe the UK is in a good position to change the way we are seeing it and really become the leader in this fight.177

85.H.E. Ms Diann Black-Layne, Lead Negotiator for the Alliance of Small Island States (AOSIS), spoke of a “broken trust” of LDCs and SIDS in the credibility of the UK and other donors because of the failure to contribute US$100 billion per year for low- and middle-income countries178—a stark contrast to the billions that were mobilised comparatively quickly in response to addressing covid-19 by higher income countries.179

UK’s response—leadership

86.The FCDO told us that COP26 “is a key demonstration of the government’s vision of a Global Britain, the UK’s diplomatic and international convening power, and the newly formed FCDO.”180 During its COP presidency, the UK could put in place several measures to help deliver its ambition thanks to its diplomatic reach, ODA and membership of high-level multilateral institutions.

Climate and Development Ministerial

87.On 31 March 2021, the Government hosted a Climate and Development Ministerial to discuss the challenges and priorities for delivering the Paris Climate Agreement and meeting the SDGs.181 The meeting brought together ministers of 35 countries and representatives of international finance institutions to produce practical actions regarding adaptation, access to finance, the volume and quality of finance and debt.182

88.Bond and CAN UK told us that the Ministerial had failed to address loss and damage directly.183 Further, the International Committee of the Red Cross highlighted a distinct lack of mentioning conflict and fragility in the Chair’s summary and the small number of participants from conflict-affected countries.184

UK’s response—Climate and Development Ministerial

89.The FCDO told us that the Climate and Development Ministerial had been a “key step in demonstrating that the UK Presidency and wider donor community is listening to and actively working to address the concerns of climate vulnerable countries”.185

90.Overall, we consider the Ministerial a notable step in making the UK a “force for good” and increasing the Government’s credibility as climate leader. We therefore agree with contributors that delivering on the issues raised at the Ministerial would help the Government build trust and momentum on decisive issues during its presidency.186

91.We welcome the Government holding a Climate and Development Ministerial meeting in March 2021 to capture the concerns of climate-vulnerable countries in the run-up to COP26. We recommend that the FCDO hosts a Climate and Development Ministerial with climate-vulnerable countries every year starting in 2022 to follow up on the measures listed in the “Climate & Development Pathway” of March 2021 and to keep the momentum gained from that first Climate and Development Ministerial.

Climate and Development Minister

92.In 2019, our predecessor Committee heard that DFID had been “hollowed out in terms of expertise”.187 Two years later, the FCDO’s largest thematic network consists of climate, energy and environment attachés and advisors.188 Alongside the FCDO, the Government also created the “Climate and Environment Directorate (CED)” with around 100 members of staff within the new Department who are all engaged in COP26.189

93.The FCDO has taken a number of encouraging steps to address the impact of climate change in vulnerable countries such as the “Race to Resilience” campaign, the Adaptation Action Coalition, backing the Least Developed Countries Initiative for Effective Adaptation and Resilience (LIFE-AR) and signing up to the “Principles for Locally-Led Adaptation”. Furthermore, the FCDO has introduced a rule requiring all new FCDO programming to align with the Paris Agreement “to ensure that no environmental harm is done.”190

94.Having heard of the challenges vulnerable countries and communities face and the measures taken by the Government, we would see value in the introduction of a Climate and Development Minister in the FCDO with a focus on adaptation and resilience.

95.Tackling climate change and biodiversity loss as the Government’s “number one international priority” will inevitably involve international development. We are concerned that the Integrated Review does not include explicit initiatives building the capacity of FCDO’s network to maximise the synergies between departments dealing with development, climate, energy and the environment.

96.A failure to anchor climate change in development and to ensure greater policy coherence in Whitehall will increase the scope for maladaptation, the negative consequences of poorly designed Nature-based Solutions and wasteful spending of the reduced ODA. By introducing a Climate and Development Minister, the UK would demonstrate that it is putting its words into action and implementing its Integrated Review and the concept of Global Britain in a coherent manner.

97.We believe that climate and development are closely intertwined. The Integrated Review prioritises climate change “in 2021 and beyond” and suggests using UK ODA to increase the Government’s impact as a “force for good”. We therefore recommend the introduction of a Climate and Development Minister at the FCDO with a focus on adaptation and resilience to ensure alignment between the FCDO’s climate and development strategies during COP26 and beyond.

135 Q16 [Diann Black-Layne]

136 UN News, IPCC report: ‘Code red’ for human driven global heating, warns UN chief, 9 August 2021

137 The fossil fuel energy sector overseas is defined as “the extraction, production, transportation, refining and marketing of crude oil, natural gas or thermal coal, as well as any fossil-fuel fired power plants.”. See: Gov.uk, Aligning UK international support for the clean energy transition, p.4, 31 March 2021

138 CDC Group, Our fossil fuel policy, pp. 4–5, 12 December 2020; Gov.uk, Aligning UK international support for the clean energy transition, pp. 6–7, 31 March 2021

140 Bond & CAN-UK (CDC0045), CAFOD (CDC0039), ODI (CDC0035)

141 Q79 [Dario Kenner]

142 Bond & CAN-UK (CDC0045), CAFOD (CDC0039), Global Justice Now (CDC0049), E3G (CDC0027), Tearfund (CDC0031)

143 Q96 [Dario Kenner]

144 Q87 [Dario Kenner]

145 Bond and Climate Action Network UK (CAN-UK) (CDC0045), Friends of the Earth England, Wales and Northern Ireland (CDC0042), Global Justice Now (CDC0049), Tearfund (CDC0031)

146 Environmental Rights Action/Friends of the Earth Nigeria (CDC0021)

147 Foreign, Commonwealth and Development Office (CDC0016)

148 Foreign, Commonwealth & Development Office (Annex A) (CDC0052)

149 Foreign, Commonwealth & Development Office (Annex A) (CDC0052)

150 CDC Group, Climate Change Strategy, accessed 26 October 2021

151 CDC Group (CDC0053);

152 CDC Group (CDC0053); CDC Group, Annual Review 2020: Rising to the Challenge, p.22, 6 July 2021

153 CDC Group, Annual Review 2020: Rising to the Challenge, p.22, 6 July 2021

154 International Development Committee, Oral evidence: The Philosophy and Culture of Aid, Question 71, 9 March 2021

155 CDC Group, Our corporate governance, accessed 26 October 2021

156 International Development Committee, Oral evidence: The Philosophy and Culture of Aid, Question 71, 9 March 2021

157 International Development Committee, Oral evidence: The Philosophy and Culture of Aid, Question 72, 9 March 2021

158 Q95 [Dr Amal-Lee Amin]

159 As with climate finance, there is no official definition of loss and damage. In line with our predecessor Committee, we understand it as “the impacts of climate change that cannot be avoided through mitigation or adaptation.” See: International Development Committee, UK aid for combating climate change (HC 1432), Paragraph 158, 8 May 2019

160 Q58 [Catherine Pettengell], Q76 [Nick Mabey]

161 Bond and Climate Action Network UK (CAN-UK) (CDC0045), CARE International UK (CDC0029), Practical Action (CDC0040), Quakers in Britain (CDC0004)

162 Bond and Climate Action Network UK (CAN-UK) (CDC0045)

163 Bond and Climate Action Network UK (CAN-UK) (CDC0045)

164 Bond and Climate Action Network UK (CAN-UK) (CDC0045)

165 Q16 [Diann Black-Layne]

166 UK COP26, Climate and Development Pathway, accessed 26 October 2021

167 UK COP26, July Ministerial Chairs Summary, 5 August 2021

168 Foreign, Commonwealth and Development Office (CDC0016)

169 Q125 [Lord Goldsmith]

170 Q125 [Lord Goldsmith]

171 Q126 [Lord Goldsmith]

172 Institute of Development Studies (CDC0015)

174 United Nations News, Global economy projected to show fastest growth in 50 years, 15 September 2021

175 Bond and Climate Action Network UK (CAN-UK) (CDC0045), Christian Aid (CDC0047), E3G (Third Generation Environmentalism) (CDC0027), International Institute for Environment and Development (IIED) (CDC0048), WaterAid (CDC0023)

176 Bond and Climate Action Network UK (CAN-UK) (CDC0045), Christian Aid (CDC0047), Institute of Development Studies (CDC0015), E3G (Third Generation Environmentalism) (CDC0027), Tearfund (CDC0031), Fairtrade Foundation (CDC0034), WaterAid (CDC0023)

177 Q24 [Cecilia da Silva Bernardo]

178 Q24 [Diann Black-Layne]

179 Q41 [Gebru Jember]

180 Foreign, Commonwealth & Development Office (Annex A) (CDC0052)

182 Foreign, Commonwealth & Development Office (Annex A) (CDC0052)

183 Bond and Climate Action Network UK (CAN-UK) (CDC0045)

184 International Committee of the Red Cross (CDC0024)

185 Foreign, Commonwealth and Development Office (CDC0016)

186 BRC/CDC0028

187 International Development Committee, UK aid for combating climate change (HC 1432), Paragraph 39, 8 May 2019

188 Foreign, Commonwealth and Development Office (CDC0016)

189 Foreign, Commonwealth and Development Office (CDC0016)

190 Foreign, Commonwealth and Development Office (CDC0016)




Published: 26 October 2021 Site information    Accessibility statement