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Foreign Aid for Capacity Building to Address Climate Change

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Aid Effectiveness for Environmental Sustainability

Abstract

Chapter 2 focuses on the effectiveness of foreign aid regarding capacity building in the least developed countries, those most vulnerable to climate change and with the most pressing need to respond and adapt. It addresses an important point: that as countries try to roll out climate aid quickly, bilateral aid—which is easier for donors and recipients to control—is likely to expand much more than multilateral aid, as historical patterns with other aid programmes suggest. The chapter concludes that in the case of foreign aid targeted to tackle climate change (including capacity building), it will be a slow and difficult process to apply the lessons that have been learned from other foreign aid experiences, especially due to the need for tailoring aid to individual countries’ settings and due to the challenges to donor countries being able to make credible, long-term aid commitments. Both of these aspects are essential to build the necessary systems to invest in climate change mitigation and adaptation in the least developed countries.

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Notes

  1. 1.

    The OECD’s DAC is a forum for selected OECD member states to discuss issues surrounding aid, development, and poverty reduction in developing countries. There are 24 members of DAC, including the European Union, which acts as a full member of the committee.

  2. 2.

    OECD/ODA database.

  3. 3.

    On one hand, the rise and fall in the aid to agriculture during this period followed broadly the same pattern as that in total aid to all sectors; on the other hand, it reflects that fact that the emphasis of worldwide development strategy shifted from the narrow concepts of food security, in terms of adequate and stable food supplies, to broader human and social development. In 2007–8, total annual average aid commitments to agriculture amounted to US$7.2 billion; the largest donors (among DAC members) were the United States, Japan, and France. The largest recipients are primarily sub-Saharan Africa and South and Central Asia. For statistics, see OECD (2010b).

  4. 4.

    The decline is considered a consequence of the ‘Helsinki package’, an agreement that came into force in 1992 and prohibits (with some exceptions) the provision of tied-aid loans to high-income countries (based on World Bank per capita income) and for commercially viable projects.

  5. 5.

    CPA excludes non-programmable items such as humanitarian aid, debt relief, and in-donor costs like administration costs and refugees in donor countries. Over the past five years, CPA has corresponded to roughly half of DAC donors’ gross bilateral ODA. For more details on CPA, see www.oecd.org/dac/cpa

  6. 6.

    This three-part definition is based on United Nations (2006).

  7. 7.

    Climate change mitigation-related aid is defined as activities that contribute ‘to the objective of stabilization of greenhouse gas (GHG) concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system by promoting efforts to reduce or limit GHG emissions or to enhance GHG sequestration’. Climate change adaptation-related aid is defined as activities that aim ‘to reduce the vulnerability of human or natural systems to the impacts of climate change and climate-related risks, by maintaining or increasing adaptive capacity and resilience’. See OECD (2010c). In detail, mitigation activities include those that contribute to ‘(i) the mitigation of climate change by limiting anthropogenic emissions of GHGs, including gases regulated by the Montreal Protocol; or (ii) the protection and/or enhancement of GHG sinks and reservoirs; or (iii) the integration of climate change concerns with the recipient countries’ development objectives through institution building, capacity development, strengthening the regulatory and policy framework, or research; or (iv) developing countries’ efforts to meet their obligations under the Convention’. The third category is directly related to capacity building, while the others may also implicate capacity-building. See OECD (2012).

  8. 8.

    Buchner et al. (2011b) find that bilateral institutions are distributing US$24 billion per year, while multilateral agencies distribute US$15 billion.

  9. 9.

    In addition, see a study by Neuhoff et al. (2009) on financing options for NAMAs.

  10. 10.

    In addition to Radelet (2006) see also Tsikata (1998); Clemens et al. (2004); Riddell (2008); Rajan and Subramanian (2008); Doucouliagos and Paldam (2009); and Krasner (2011).

  11. 11.

    Some examples include Hadjimichael et al. (1995); Hansen and Tarp (2000); Lensink and White (2001); Dalgaard et al. (2004); Clemens et al. (2004); Doucouliagos and Paldam (2008); Clemens et al. (2012); and Clausen and Schürenberg-Frosch (2012).

  12. 12.

    In the non-technical literature, see Collier (2008) and Sachs (2006).

  13. 13.

    In the 2005 Paris Declaration on Aid Effectiveness, developed and developing country governments pledged joint supports to five key commitments to improve aid effectiveness.

  14. 14.

    On the UN-REDD Programme, see www.un-redd.org/

  15. 15.

    On Voluntary REDD+Database, see www.reddplusdatabase.org/

  16. 16.

    On civil liberties, see Isham et al. (1997).

  17. 17.

    For example, see Keohane and Victor (2011) on how competition and fragmentation can lead to more effective climate change coordination and policies.

  18. 18.

    See above, and also Ganapati and Liu (2009).

  19. 19.

    For a formal model that points to similar conclusions see Bayer and Urpelainen (2013).

  20. 20.

    For example, see Nakhooda et al. (2005).

  21. 21.

    For an articulation, see Victor (2011).

  22. 22.

    African Adaptation Programme available at www.undp-aap.org/about-us

  23. 23.

    While such data are not collected, a rough order of magnitude calculation is possible. In a typical year, a typical country will spend at least about 2–3% of GDP on infrastructure investments that are plausibly sensitive to changes in climate—for example, roads, river diversions, agriculture, etc. Many countries spend more. World GDP is about US$70 trillion, suggesting that climate-sensitive investments total about US$200 billion. While there is no comprehensive source of information on adaptation funding, total cash transfers per year under the ‘Adaptation Fund’ have been around US$30 million per year for the last two years (see Financial Status of the Adaptation Fund Trust Fund as of 31 December 2011). The Adaptation Fund is managed by the Global Environment Facility and oversees spending of the 2 % tax that is levied on CDM transactions (see Adaptation Fund official website at www.adaptation-fund.org). This funding source—so far the only credible multilateral adaptation programme created under the UNFCCC—is thus 0.02 % of total world spending on infrastructure. Of course, the Adaptation Fund focuses its disbursements on the least developed countries (LCDs), and looking just at that subset of countries (which has more than 12 % of the world population but accounts for less than 1 % of world GDP ) the fractions are still miniscule: 0.4 %. By contrast, the net ODA disbursement to these countries, together with the net debt relief, has continued to increase and reached a record level of US$40 billion in 2009, the equivalent of about 8 % of their GDP (see ‘The Least Developed Countries Report’ 2012 at www.unctad.org/en/pages/PublicationArchive.aspx?publicationid=188)

  24. 24.

    On the likely effects, see for example Cayan et al. (2012).

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Acknowledgements

I am grateful for assistance from Linda Wong, Fang Rong, and especially Yongfu Huang at UNU-WIDER.

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  1. School of Global Policy and Strategy, UC San Diego, San Diego, CA, USA

    David Victor

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  1. NDRC People’s Republic of China, Beijing, China

    Yongfu Huang

  2. Basque Centre for Climate Change (BC3), Leioa, Spain

    Unai Pascual

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Victor, D. (2018). Foreign Aid for Capacity Building to Address Climate Change. In: Huang, Y., Pascual, U. (eds) Aid Effectiveness for Environmental Sustainability. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-5379-5_2

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