Biden administration should fix international climate aid before throwing more money at it

With all of the coverage around the COP26 in Glasgow, something significant is being left out. Western democracies, led by the Biden administration, are committing to expand climate aid substantially. The purposes are truly noble: The funds aim to reduce atmospheric carbon levels and help vulnerable people adapt to climate change. Nonetheless, before western leaders send off great tranches of new climate aid, can we be confident that this aid works?

The global climate aid system may be obscure, but it’s neither new nor small. The United States and other wealthy countries have been paying into the system for over 30 years, and the current spend is over $80 billion annually. When the World Bank set up the first of these funds over three decades ago, the idea was to pay poorer countries to avoid a high-carbon growth path.

That didn’t work. Poorer countries gladly accepted climate aid for decades but still charged ahead with carbon-intensive economies, toppling forests and churning through fossil fuels. Consequently, climate aid recipients such as China, Russia, and Brazil have polluted more than any donor country other than the United States. 

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India, the largest recipient of climate aid globally, represents how aid isn’t shifting countries towards a greener strategy. India would do well with a renewable-focused energy system: It would save hundreds of thousands of Indian lives, be politically popular, and save tens of billions of dollars annually. Nonetheless, India is competing with China to build the most coal-fired power plants and is one of the world’s worst polluters. India’s strategy appears to be driven by something familiar to Americans and Brits: the politics of coal. 

Beyond local dynamics, there are a couple of reasons why climate aid hasn’t worked well. First, there’s no real market for the best projects. Instead, countries are generally only competing with themselves for the funds.

Second, there are accountability issues. A typical money trail looks like this: Grant money goes from the U.S. and other wealthy countries to one of the global climate funds, such as the Global Environmental Facility, which gives it to another UN agency or development bank, which in turn transfers it to a government. Recipient country bureaucracies are responsible for spending most climate aid, despite their dubious climate credentials and elevated levels of corruption.

It’s unclear what portion of climate aid is misappropriated or wasted because donor governments cannot audit the projects directly. The agencies responsible for oversight and audit are selected by the recipient governments themselves, putting them in a highly compromised position. Internal audits of climate funds have found evidence of mismanagement. In one well-documented example, an energy efficiency project in Moscow didn't achieve results because it was staffed up with relatives, and most of the funds were embezzled or used for unrelated purposes.

There is a much better way to spend this money

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One straightforward way to improve results would be to base funding on a global competition for projects with the highest efficiency and evidence rather than using country quotas. Such an approach would dramatically strengthen incentives for evidence and impact while aligning with what other sectors such as philanthropy have already learned.

Likewise, the Biden administration and other large donor governments should eliminate the conflicts of interest within the current system by transitioning to funding most projects directly rather than through multi-lateral funds. Direct funding would allow the U.S. to reduce fraud and waste by overseeing projects directly, rather than through layers of ‘multi-lateral middlemen.' The most significant climate donors, including the U.S., already have competent aid administrations worldwide who can oversee and audit projects directly.

These straightforward changes would make better use of climate aid and allow us to better protect the most fragile ecosystems and the most vulnerable citizens in the developing world. Climate aid is too important to waste. 

Skye Christensen is an international governance expert with 15 years experience in international development. He worked as the United Nations chief technical advisor in Pakistan’s tribal areas, leading a team of 250 professionals implementing reforms and stabilization efforts, working closely with the national and regional governments in Pakistan on transitional security and governance arrangements, financing, and socio-economic development planning. He also oversaw programming for the United Nations Development Programme, the largest implementers of global climate aid, and worked on the UNDP response to the Global Environmental Facility audit findings. He holds a Masters in Political Science from Uppsala University and a Certification from the Nelson Institution for Environmental Studies at the University of Wisconsin at Madison. Follow him on Twitter @SkyeChr