Germany Has Not Been Meeting International Climate Finance Commitments

Spotlight Activity: Germany Has Not Been Meeting International Climate Finance Commitments

The central financial instrument for multilateral climate finance is the Green Climate Fund (GCF). The Federal Ministry for Economic Cooperation and Development (BMZ) has been contributing to the GCF via strategic input, financial support and human resources. In terms of financial support, Germany has since 2014 pledged to contribute €750 million to the GCF for the Fund’s initial capitalization. Furthermore, Germany is the fifth-largest donor to GCF after the US, Japan, the UK and France. By December 2017, the German government had made payments amounting to €375 million to the Green Climate Fund. In 2018, it intends to contribute €140 million towards the GCF. This leaves an outstanding balance of €235 million. The funds are supposed to be shared equally among mitigation and adaptation to climate change projects and measures in countries most affected by climate change.

Other than the GCF, Germany climate finance also flows through bilateral development cooperation projects. The implementing agencies allow technical cooperation (TC) through Society for International Cooperation (Gesellschaft für internationale Zusammenarbeit, GIZ) and financial cooperation (FC) through the KfW Development Bank. The financial and technical cooperation projects and measures target (i) adaptation to climate change impacts in the agriculture, water and health sectors, (ii) mitigation by promoting renewable energy and energy efficiency and, (iii) protection of forests and biodiversity such as the REDD+ measures.

Germany increased its contribution towards climate finance for bilateral development cooperation projects in 2016 to €3.4 billion in its official budget. About 83% of this amount was expected to come from the Federal Ministry for Economic Cooperation and Development (BMZ). The KfW Development Bank further committed €5.2 billion in the form of development and promotional loans, and equity investments among other financial options from capital market funds. Additionally, there was a further commitment of €1.4 billion from private climate funding involving credits from local banks, investments in structured banks and public-private partnerships. Thus, in 2016 only, the total amount of contribution to climate finance was €10 billion.

Germany also contributes significantly to multilateral climate financing. The BMZ is the largest contributor to the Global Environment Facility (GEF) after Japan and the United States. The BMZ has so far made the largest payments into least developed countries’ Fund, the GEF’s fund for the poorest nations and into the Special Climate Change Fund than any other donor.

However, the total budget for the BMZ is expected to decline for 2019 onwards but would be slightly higher than that of 2017 for 2021 and 2022. There is no guaranteed increase in climate finance regardless of a very high demand for funds which requires higher contributions to replenish the funding program.

Status: Standing Still

Germany is standing still, with no change in either direction. This is because by 2017, there are no exact climate finance figures set for contribution. Besides, the BMZ budget for 2018 does not indicate an increase in climate finance from this source in the medium term. Further, civil society organizations argue that Germany’s contribution towards the $100 billion pledged by the developed countries is too low. Given the climate change consequences and the climate change protection projects that have been initiated in developing countries, Germany’s contribution to the climate finance must be increased. Furthermore, the coalition agreement between the conservative CDU/CSU and social democrat SPD has only positive statements but does not clearly show how climate finance will be increased/doubled.

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Federal Minister of Finance Olaf Scholz

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