Making climate money work

Hurricane Sandy cost the United States an estimated US$63 billion in damage

The release of our Corruption Perceptions Index (CPI) in December last year coincided with a significant event in global politics – the UN climate conference in Qatar. While negotiators quibbled over sums and sources of climate money, the index pointed to a worrisome trend. Most of the countries in which these funds are being spent face high levels of perceived public sector corruption.

Proactive investment to protect our future

Climate money is like an immunisation and a life jacket rolled into one – intended to help poorer nations beat climate change (mitigation) whilst readying themselves for its effects (adaptation). In recipient countries adaptation money could swing the difference between cyclone-resistant homes and a fatal storm, or drinking water and drought. By supporting projects to curb emissions in some of our biggest emerging economies, mitigation finance will affect the health and safety of all of us, including generations to come.

Among the top 20 recipients of climate funds are Brazil, China, India and South Africa – home to the lion’s share of carbon offsetting projects. Low-lying states such as the Philippines and Vietnam also figure in this list, both of which require urgent investment in climate change-resilient infrastructure. Major recipients Egypt, Morocco and Turkey could soon be home to a solar power boom. Seventeen of these 20 countries score below 40 on the CPI (100 representing very clean and 1 highly corrupt), indicating a serious corruption problem.

So what does this tell us about where and how to invest in our climate?

Corruption could divert climate finance, which – on numerous levels – we cannot afford to let happen. But we must not allow the prospect of corruption to do the same.

CPI 2012 scores and top 20 climate funds recipients

Data on approved funding levels are in US$ millions. Figures were current as of January 2013. Source: Climate Funds Update. For full CPI scores, click here.

Anti-corruption is cheaper than corruption

Countries in receipt of climate finance need and deserve it, so taking it elsewhere is not an option. Instead we need to use these funds to catalyse the reforms that will ensure that climate investment works in the long-term. Because anti-corruption is cheaper than corruption. Often increased spending is needed up-front to implant accountable policies, systems and personnel that will save a lot more money from being lost further down the line.

Take renewable energy in North Africa, for example. Some estimates suggest that solar power from less than 1 per cent of the Sahara Desert could meet all of Europe’s power needs. A recent study by the International Institute of Applied Systems Analysis showed that under current conditions US$2 trillion would be needed by 2025 for concentrated solar power production in the region. In an economic climate that posed just 5 per cent less risk of corruption and bureaucratic complexity, this figure was projected at US$750 billion. Closing the gap on this 5 per cent margin could be like spending a dollar on a winning lottery ticket.

As for the cost of adapting to climate change, so far only US$1.2 billion has been spent globally. Just one storm – last October’s Hurricane Sandy – cost the United States over 50 times that in damages, at an estimated US$63 billion. This illustrates a worrisome disconnect between pro- and retroactive spending, offering stark proof that we need to better invest in preventing climate damage before it occurs. This doesn’t just mean raising homes above sea level or building coastal defence walls. It also includes building strong institutions and cultures of transparency and accountability, and thus political, financial and administrative safety nets against waste and corrupt abuse.

It’s important to state that corruption, like climate change, does not abide borders or the developed-developing divide. Be it allegations of tax evasion in carbon trade in Germany, fake solar power projects in Spain, or climate influence peddling by oil, gas and coal lobbyists in the US, reports of corruption in a number of industrialised countries have made a case for stronger auditing and accountability at both ends of the climate financing equation.

The time to act is now

These changes are still possible – that’s the good news. Climate finance institutions and systems are young, meaning that installing anti-corruption safeguards need not be complicated. Preventing corruption and fraud in climate finance requires putting secrecy in full view, and trading ambiguity for accountability. This translates to transparent budgets and payrolls, clarity over who makes decisions and why they are made, policies that are receptive to citizen input, and contracting and projects that are independently monitored.

Technical fixes are one thing, the political will to instate them is another. Climate money could be a true game changer. It could finance our transition to green energy, low deforestation and technology to protect us against our increasingly wild climate. It could also strengthen the integrity of our political and financial institutions more broadly.

The key to unlocking these ‘coulds’ lies in governments and companies acting now and decisively to invest in mechanisms that will protect climate finance against possible abuse before it’s too late. This wouldn’t have to cost the earth, but it could help save it.

Resources

Our Climate Governance Integrity Programme is currently operating in nine countries – aimed at ensuring that climate finance works effectively. See how their CPI scores compare with levels of funding below.

Read more about Transparency International’s climate work here. We hope to extend our work to a number of major recipients of climate finance soon.