UK ‘climate aid’ threatens to reverse debt relief wins for developing countries

Date: 28 September 2010

The UK government has come under fire for delivering 75 per cent of its climate finance for developing countries as loans, which WDM warns threatens to reverse decades of hard-fought progress on debt relief.

Rich countries claimed a key success of the Copenhagen Accord was the announcement of $30 billion of new climate finance that would be given over 2010 – 2012 to developing countries. But WDM argues that the UN Adaptation Fund, set up specifically to manage climate finance, has received just one per cent of money committed so far by donors, leaving it with insufficient resources to respond to the urgent need of countries to adapt to climate change.

Pakistan has applied to the UN Fund for financial help so that it can improve drainage systems to help cope with events such as the devastating floods currently ravaging the country.

The campaigners say the UN is struggling to provide assistance to countries like Pakistan because rich countries are channelling finance through the World Bank, which has received 40 per cent of the funds committed by donors so far.

The UK comes in line for particular criticism from the campaigners because so far 90 per cent of the UK’s climate finance pledges have been channelled through the World Bank. The World Bank is also deeply mistrusted by developing countries due to its history of imposing damaging and unpopular policies on governments in return for loans. And research from the Bank Information Centre and Christian Aid shows that World Bank lending to build new climate damaging coal power stations is at a record high. This shows that the World Bank is not encouraging a low carbon energy future for developing countries.

And 75% of the UK’s climate funds will be dispersed as loans, meaning poor countries will have to pay back the costs of coping with the climate damage caused historically by rich nations.

Julian Oram, head of policy and campaigns at the World Development Movement, said:

“The UK risks reversing hard-won successes on debt relief for poor countries by pushing a new wave of climate loans through the World Bank. It is crucial that the government redirects this money as grants through the UN climate fund, which has not been given the money to deliver vital finance to countries like Pakistan, Senegal and Uganda to adapt to changes such as increased flooding and drought.”

The World Development Movement and Jubilee Debt Campaign have recently been asking members of the public to support the UN Adaption Fund by sending a pound coin with a message to Andrew Mitchell, the Secretary of State for International Development. But despite depleted public coffers, DfID are refusing to accept the individual donations and have been returning the money to the campaigners.

Julian Oram continued:

“Although the campaign is in its infancy, the initial public response seems to have struck a nerve. Despite tough times here at home, the UK public clearly don’t want the world’s most vulnerable people to suffer because of new debt created by our government. What’s astonishing is that, at a time of public spending cuts, officials from the Department for International Development are saying no thanks to donations.”

The coalition government has re-committed the UK to spend £1.5 billion out of the aid budget on climate change between 2010 and 2012. It has yet to decide how to allocate money which has not already been spent. Conservative party policy is “as far as possible, to give aid as grants not loans, and will encourage other donors such as the World Bank to give aid for social objectives, whenever possible, as grants.”[i] Liberal Democrat party policy is to “support the UN Adaptation Fund”, to “establish a Leapfrog Fund to facilitate the transfer of green technologies” and that money for adaptation and mitigation in developing countries should “be deposited with the UN.”[ii]

To implement these policies, the coalition needs to:

• Give no more money to the World Bank
• Give significant resources to the UN Adaptation Fund