The coast of Majuro, a coral atoll in the Pacific Ocean, is dotted with concrete walls, boulders and piles of vegetation to stave off storms and rising sea levels. But the barriers haven’t stopped the flooding and erosion that threaten Majuro, which is the capital of the Marshall Islands and home to 27,000 people. The government is fighting back with a new protection programme, funded with more than US$19 million from the World Bank and $25 million from the Green Climate Fund (GCF), a flagship United Nations entity set up in 2010 to help vulnerable nations ward off and adapt to the effects of climate change.

Why Nature joined the Covering Climate Now initiative

The Pacific Resilience Project, as it’s known, is one of a plethora of initiatives around the world, from low-carbon energy systems to drought-resilient agriculture, that require some type of financial assistance if nations stand a chance of avoiding the most dangerous consequences of a warming globe. But funding such projects has been a perennial sticking point at climate meetings. In 2009, at a UN summit in Copenhagen, wealthy countries resisted calls to directly compensate poorer nations that are harmed by their carbon emissions. Instead, they agreed to channel $100 billion a year to these countries to help them deal with climate change. The pledge, usually described as developed nations mobilizing finance for developing ones, aimed to reach this target by 2020; the GCF was set up as one of the ways to distribute the money.

A decade after that Copenhagen summit, arguments still rage over whether the $100-billion goal is close to being met — partly because negotiators never agreed what kind of financing counts. Some estimates include loans and private finance leveraged by public money, for instance, whereas others say only direct grants, a much smaller sum, should be included.

A rethink of these spending targets is coming. This year the GCF, which was pledged an initial $10.3 billion and is running out of money, needs wealthy nations to refill its coffers. And countries are now discussing a new promise to low-income nations, something that they have committed to deciding before 2025.

More broadly, such international financing is only a fraction of the money aimed at climate-related efforts around the world. Groups that track the economics estimate that, all told, more than half a trillion dollars a year is going into climate-related activities. Much of that does not cross borders, but is spent by private investors in wealthy nations on projects such as solar plants. The figures are rising, but researchers say that banks, investors and governments are not spending anywhere near enough money to stem the impacts of climate change — and they continue to fund projects that worsen the problem.

Can the world kick its fossil-fuel addiction fast enough?

The UN’s Intergovernmental Panel on Climate Change (IPCC) says that an annual investment of $2.4 trillion is needed in the energy system alone until 2035 to limit temperature rise to below 1.5 °C from pre-industrial levels. (That is around 2.5% of the world’s economy.) And the effort to tackle climate change goes beyond transforming energy systems: it includes spending on reforestation, coastal-defence systems and many other efforts to cut emissions and adapt to, rising temperatures. Spending on adaptation efforts is particularly low, according to analyses.

“Neither the amount of financial flows nor their direction is sufficient to keep temperatures below 2 °C, let alone 1.5 °C,” says Ottmar Edenhofer, director of the Potsdam Institute for Climate Impact Research in Germany, and a former co-chair of the IPCC’s working group on mitigation of climate change.

Counting climate cash

Estimates of how much climate finance is flowing around the world depend on who is doing the counting. The Climate Policy Initiative (CPI), an international thinktank that publishes annual analyses, says that total climate-related financing was $510 billion to $530 billion in 2017, the latest figures available, up from $360 billion in 2012. The UN’s Framework Convention on Climate Change (UNFCCC), put it at $681 billion in 2016 (see ‘How much climate finance is there? How is is spent’). The framework relies partly on the CPI’s methods, but adds information on energy-efficiency financing, which the CPI excludes because it judges the data to be of insufficient quality. But these bodies readily admit that their reports can give only partial estimates because of numerous data gaps, limited systematic tracking and a lack of agreed accounting definitions. What’s clear from the CPI’s analysis, however, is that the private and public sectors contribute about equally to money flows, and that most of the financing remains in its country of origin.

The fraction of this cash that’s raised by wealthy countries for those less well off is the most politically contentious. Tracking progress towards the $100 billion Copenhagen pledge has been notoriously difficult. The Copenhagen accord spoke of including “a wide variety of sources, public and private, bilateral and multilateral”, but it has been left up to external organizations to come up with their own methodologies.

The most comprehensive effort has been undertaken by the Organisation for Economic Co-operation and Development (OECD), an intergovernmental body made up mostly of rich countries, and the CPI. Its report, released just before the 2015 UN Paris conference, seemed to contain good news: some $62 billion had been mobilized in 2014 for spending on developing countries, of which $45 billion was public finance. But the report caused outrage in some developing countries. India released a rebuttal suggesting that the OECD was a “club of the rich countries” that had reported “inflated” numbers, and that only around $2.2 billion in climate finance had actually been spent, because, the nation argued, only money from dedicated climate funds should count, and not any that might have been transferred from other development or aid budgets. And, last year, the charity Oxfam suggested that public climate-finance flows were closer to $16 billion to $21 billion in 2015–16 — largely because, it argued, only grants, and not loans, should be counted.

Model and manage the changing geopolitics of energy

“The significance of the $100 billion is to prove commitment, and as far as I’m concerned there’s been a lack of commitment by developed countries to addressing climate change, in particular, adaptation,” says Angelique Pouponneau, who has advised the governments of small island states on climate finance at the UN negotiations, and now runs a Seychelles trust fund focusing on climate adaptation and conservation. “I’m just not convinced that we are on track to meet the $100 billion unless we are being very broad in the way that we are defining mobilization of finance. Very broad.”

The OECD’s latest assessment, released last week, put public spending at $56.7 billion in 2017. This in turn leveraged $14.5 billion in private finance, for a total of $71.2 billion . Meanwhile, the UNFCCC calculates that developed countries had already channelled more than $70 billion in climate finance to developing nations in 2016, of which around $56 billion was public money (‘How much is flowing to developing nations?’). The trends are certainly positive, but a definitive answer to whether that $100 billion goal will be met next year seems unlikely. “I think it inevitably will attract attention, and given the lack of definitions, there might be outcries,” says Barbara Buchner, the CPI’s executive director.

Funding the wrong things?

Just as important as the money itself, is where it is being spent. The GCF, for instance, is supposed to fund transformative projects, but critics say that hasn’t always happened. In 2017, it approved a $50-million proposal to update a hydropower facility in Tajikistan that was built during the Soviet era; the mountainous nation relies on hydropower for almost all its electricity. But some activists argued that increasing Tajikistan’s dependence on hydropower wasn’t sensible in a warming world, because there will be less ice and snow to feed the country’s dams. “That money should have been used to diversify energy sources,” says Liane Schalatek, an associate director at the Heinrich Böll Foundation in Washington DC, who has attended GCF board meetings as a ‘civil society observer’ sent by developed nations. Even the GCF’s first executive director, Héla Cheikhrouhou, has said that the fund was not backing game-changing projects. That’s partly because there was political pressure on the fund to approve projects quickly, so institutions dusted off ideas that had been waiting for funding, suggests Joe Thwaites, a climate-finance analyst at the World Resources Institute, an environmental think tank in Washington DC. “I think that’s happening less now,” he says.