UK aid cuts threaten climate leadership role of COP26 president

Cuts to the overseas aid budget risk not only undermining the UK’s reputation for progressive development action, but also the chances of the UK presidency delivering a successful outcome to COP26. Sustainable development must be climate resilient: a lower aid spend is in real terms a blow to climate finance and ambition.

Andrew Norton's picture
Insight by 
Andrew Norton
Andrew Norton was director of IIED from 2015-2022
30 March 2021
UN climate change conference (COP26)
A series of pages related to IIED's activities at the 2021 UNFCCC climate change summit in Glasgow
Man speaking in front of a wall that reads "UN Climate Change Conference UK 2020"

MP Alok Sharma is the president of the 26th UN Climate Change Conference of the Parties (COP26) (Photo: Bank of England via Flickr, CC BY-NC-ND 2.0)

While the goals of development work cannot ignore the need for climate resilience, the funding streams are less indivisibly linked. The principle that climate funding should be ‘new and additional’ (PDF) – as well as predictable and adequate – was established more than a decade ago at the COP15 UN climate talks.

But recent analysis shows that much of the development finance counted by donor countries as climate finance does not meet these criteria, which means the figures given by donor nations warrant much closer analysis.

UK climate ambition: hero to zero?

To date, the UK has one of the best records for meeting the COP15 criteria for climate funding. In providing US$6.1 billion of additional finance in 2018 as against its 2009 level, the UK ranks second in the world for ‘additionality’.

This is partly why this year’s reduction in aid budget is so disturbing. It throws into question the prime minister’s commitment of September 2019 that the UK will provide at least $11.6bn of climate finance between 2021/22 to 2025/26

If development finance is being reduced, the amount that can reasonably be counted as ‘new and additional’ is also reduced.

As the Conservative MP chairing the UK parliament’s select committee on environment has pointed out, delivering the finance that vulnerable countries need to build resilience to climate change and other threats (such as the current pandemic) is fundamental to building the trust needed for a strong outcome at COP26. The UK will be hosting this critical global climate conference in Glasgow in November. 

The aid cuts undermine the UK’s ability to ask other countries to step up, as well as reducing the resources available for climate action in poorer countries.

A false economy

Beneath questions around categories of finance, there is a blunt human truth. It makes no sense to design specific projects to help countries build resilience to the harms of climate change if basic services in those countries, such as health and education, are collapsing.

In countries where the provision of the most basic services relies on aid, development funding must remain constant if new and additional adaptation and resilience finance is to have a fighting chance at beneficial impact.

Low risk carries its own risk

While vital, constancy alone isn’t enough: aid must take risks, including funding experimentation.

Only by testing and proving effective new approaches can we make the case for climate-vulnerable states like the least developed countries (LDCs) to commit their limited domestic budget to interventions and attract both private investors and the international climate funds.

Bilateral (country-to-country) funders like the UK are more able to take risk than their multilateral counterparts, such as the World Bank or Green Climate Fund, whose daunting application criteria and comparative reliance on loans can alienate understandably risk averse and often under-resourced LDC ministries of finance.   

But the last decade has seen aid become more risk averse, preferring to buy results than engage in experimentation and support institutional and policy reform.

Bilateral cuts: global impact

Given the efficacy of country-to country funding, it is also of great concern – from the point of view of an effective global climate finance effort – to see clear signals emerge that bilateral assistance will bear the brunt of the UK’s aid cuts. 

Early March’s announcement of a huge reduction in humanitarian aid to Yemen was swiftly followed by leaks revealing that equally vast cuts are on the table for  African and Caribbean countries. The mooted loss of more than 50% of the total bilateral aid budget is hard to contemplate.

Set up for success

Bilateral assistance’s ability take risk – especially when it supports experimentation and national institutional reform – means this type of funding is well suited to support countries build the policies and systems which they need to deal with the escalating threats and damage wrought by the climate emergency. 

A good example of this is the LDC Initiative for Effective Adaptation and Resilience (LIFE-AR) programme. In LIFE-AR, funding from bilateral donors is supporting LDCs to build a vision, systems and mechanisms that allow for effective support to reach communities at the frontline of the climate crisis. 

The front-runner countries in the LIFE-AR initiative – Bhutan, Burkina Faso, Ethiopia, the Gambia, Malawi, Tanzania and Uganda – all undertake to get 70% of funding to the local level, where really effective climate adaptation takes place.

In contrast, multilateral climate finance has struggled to get ‘money where it matters’. Our analysis of 2016 figures showed that less than 10% of funding that international climate funds commit to help developing countries tackle climate change is directed at the local level.

We have not yet seen the type of reform that is needed to put a dent in this figure.

Not too late to show leadership

Aside from the huge drop in humanitarian assistance to Yemen, further bilateral aid programme figures are not yet public. So there is still hope.

The UK government and the COP presidency deserve great credit for organising the imminent ministerial summit on Climate and Development, to which IIED will be making recommendations. This event is well timed to put the case for ramping up climate finance to vulnerable countries in front of the G7 in June.  

To maintain the justified reputation the UK has built for progressive action on climate finance two actions will be essential:

  • Maintain climate and development finance volumes to the LDCs, with a strong emphasis on adaptation and resilience, and
  • Prioritise reinstatement of the 0.7% of GNI target for development assistance – by the September Spending Review at the latest, to give a clear signal of forward commitment before COP26 opens.

There are other actions to take without delay. UK government representatives in developing countries should seek to build stronger, more consistent relationships with their hosts, based on a deeper understanding of local priorities and context.

Alongside this, the UK can use the smaller, flexible budgets still available to work with developing countries to build their climate vision, strengthen the enabling environment and be bold in testing new approaches for effective climate interventions.

This work will pave the way for scaling up success stories, attracting funding from multilateral sources as well as private investors, and ultimately delivering better climate protections where they are most needed.