Executive Summary and Recommendations
We are approaching the halfway point of the crucial decade for climate action and Pacific communities are enduring some of the world’s worst climate impacts, despite contributing the least to the climate crisis. From devastating storms, droughts and floods to the existential threat of rising sea levels, global heating is threatening lives, livelihoods and cultures across the region.
The decisions we make now will determine if the world is successful in limiting global heating to 1.5°C, and the extent of the climate devastation for Pacific communities on the frontlines of the crisis.
Climate finance to low-income countries is the cornerstone of effective global action on climate change. Without adequate climate finance, the gap between the costs of climate impacts for low-income countries and the availability of funding to support adaptation, mitigation and loss and damage responses will continue to grow. The real world impacts of these funding gaps are less resilient communities, rising gender inequality, spiralling debt as countries battle to recover from climate disaster after climate disaster, and the locking in of further climate damage because governments lack the means to transition their economies away from fossil fuels.
In 2009, wealthy nations, including Australia and New Zealand, committed to providing USD 100 billion annually in climate finance to low-income countries from 2020 to 2025. After missing the target in the first two years, it was met in 2022, with the help of generous accounting methods. However, since 2009, the cost of addressing climate change for low-income countries has skyrocketed – from billions to trillions per year, due to global climate inaction and rising emissions.
The United Nations Climate Change Conference (COP29) in Baku, Azerbaijan in November this year will be critical in ensuring vulnerable countries and communities have access to the climate finance they so desperately need. Governments will come together in Baku to finalise negotiations for the post-2025 climate finance goal: the New Collective Quantified Goal on Climate Finance (NCQG). Agreeing an ambitious and inclusive new target for climate finance could not be more critical for communities across the Pacific, and for the global climate ambition needed to limit global heating to 1.5°C.
This report brings together the voices, experiences and demands of civil society from across the Pacific region, including Australia and New Zealand. It has been endorsed by the Pacific Islands Climate Action Network and 55 organisations and networks across seven countries, including Australia and New Zealand. The report presents a comprehensive vision for a new climate finance goal that delivers for the most vulnerable communities, and that sets the world on track to scale up climate action, phase out fossil fuels and transition to a cleaner, greener and more just future for all.
Lessons from the first climate finance goal
The shortcomings in the delivery of the USD 100 billion goal have had dire consequences for Pacific Island nations and other low-income countries. To ensure that the NCQG rises to the challenge, governments should reflect on the lessons learned and chart a new path forward.
1. Inadequate and delayed funding: Climate finance contributions fell short of the USD 100 billion target for the first two years of the goal. Wealthy countries claimed to meet the target for the first time in 2022. However, 70 per cent of this finance was delivered as loans and counted at face value rather than grant equivalent, which has led to a significant overestimation of climate finance delivery.
2. Adaptation is underfunded: Adaptation has been chronically underfunded. If continued, the shortfall in adaptation finance will lead to a funding gap as high as USD 366 billion per year. The quality of adaptation finance has also been called into question, which is undermining efforts to address the root causes of vulnerability and foster climate resilience.
3. Exclusion of marginalised groups: Less than 10 per cent of climate finance reaches local initiatives, just 2.9 per cent identifies gender equality as a principal objective,1 and only 2.4 per cent supports child-responsive activities.2 Women also experience exclusion from climate change decision-making. More inclusive and transformative funding is needed to ensure marginalised groups are resourced to drive climate solutions in their communities.
4. Debt spiral exacerbation: Inadequate climate finance and the heavy reliance on loans is increasing debt distress in low-income countries and diverting funds from critical public services, which women and other marginalised groups rely on. While Australia and New Zealand have a good record of prioritising grant-based finance for the Pacific region, the low level of climate funding to the Pacific compared with needs is forcing countries to take out loans to pay for reconstruction and recovery from climate disasters.
5. Lack of private finance accountability: Wealthy countries have suggested that using public finance to “mobilise” private finance is key to increasing climate finance. However, private climate finance has not been mobilised at scale and the delivery of this finance remains opaque. Private finance favours mitigation projects in middle-income countries – where profits can be made – over adaptation efforts in vulnerable regions, making it less accessible for Pacific countries.
6. Overestimation of contributions: Current reporting practices enable the double-counting of aid funding and an overestimation of climate finance. Greater accountability is needed to ensure wealthy governments are accountable to their commitments and obligations and are not just reclassifying aid funding as climate finance.
7. The missing billions for loss and damage: The USD 100 billion goal did not include finance for loss and damage. Yet, global climate inaction has accelerated climate impacts, and led to escalating losses and damage, with costs estimated at upwards of USD 400 billion a year. Low-income countries urgently need new and additional climate finance to rebuild and recover from loss and damage in the wake of climate disasters.
Seizing the moment: Recommendations from civil society
For Pacific communities on the frontlines of the climate crisis, the failure of wealthy countries to meet their climate finance promises is measured in homes damaged, livelihoods lost, and rapidly rising seas. COP29 presents a critical opportunity to rebuild trust and re-imagine our collective futures. To achieve the climate action that the world so desperately needs, Australia and New Zealand and other wealthy countries should provide leadership for climate finance ambition.
Australia and New Zealand: Step up to act in solidarity
Australia and New Zealand’s climate finance contributions are falling short of need. Australia’s commitment to provide AUD 3 billion over 2020-2025 is well short of its estimated fair share of the USD 100 billion goal, which is AUD 4 billion per year. Likewise, New Zealand’s commitment of NZD 325 million annually is well below its estimated fair share of between NZD 558 million and NZD 953 million per year. Both countries have redirected substantial portions of their climate finance from existing aid budgets, undermining climate and development action across the region.
To continue to build genuine and respectful partnerships across the Pacific region, and to foster trust in global negotiations, Australia and New Zealand should step up their support for global climate solutions.
The Australian Government should:
- Take immediate steps to achieve its fair share of the USD 100 billion climate finance goal, estimated at AUD 4 billion annually, and commit an initial AUD 100 million in new and additional finance to the the global Fund for Responding to Loss and Damage.
- Ensure that all climate funding is delivered in the form of grants not loans and is additional to Australia’s aid obligations.
The New Zealand government should:
- Commit to providing a fair share of global climate finance, in the form of public grants and in addition to other aid funding.
- Commit new and additional finance to the global Fund for Responding to Loss and Damage.
Both countries should announce new post-2025 climate finance commitments that align with their fair share of the NCQG once it is agreed. Action to meet climate finance obligations should be matched by domestic climate ambition that is aligned with the realisation of a 1.5°C pathway, including a scaling up of emissions reduction and a rapid phase out of fossil fuels.