They are a key opportunity to build trust and demonstrate the EU’s commitment to ensuring that all countries have the capacity to tackle climate change. On the plus side, this iteration manages to highlight the impacts of the climate crisis, which is a welcome development. 

However, it still falls short on several counts: 

• Firstly, the priorities list existing finance goals that should have been met in 2020. The EU should be calling for all existing goals to be met now, and surpassed as soon as possible . 
• Secondly, the EU promotes publicly-backed private finance as a silver bullet to achieve the climate goals, even though this approach has already proven to be inadequate in achieving the sustainable development goals. 
• Thirdly, there is still a lot to do to ensure that there is more democratic ownership of climate finance strategies so they work for climate vulnerable nations. 

It is not all negative. The EU has integrated human rights into its list of priorities which should be welcomed, although it must ensure that it and its partners follow international agreements, such as the UN Guiding Principles on Business and Human Rights. This is especially relevant since the European Investment Bank uses financial intermediaries to channel its support to the private sector in the global south. 

In this blog, I take a closer look at some of these climate finance elements through the development finance lens.  

Trillions in ‘New and Additional’ climate finance are needed, but how ambitious is the EU being?

Climate impacts are set to continue unless drastic action is taken to tackle climate change. Yet even though conservative estimates state that between US$ 4.5 - 5 trillion is needed annually if the world is to limit global temperature rise to 1.5°C, the existing global climate finance goal of US$100 billion per year will not be met until 2023. In fact it  is not predicted to be surpassed until 2024. 

In this context it is useful to see that the EU “urges all other concerned developed country Parties to contribute to reach the $100 billion mobilisation goal in 2022”. However, if this is the EU’s core climate diplomacy priority on climate finance in 2022 then it is a call to action that comes far too late and is now insufficient, given current global climate finance needs outlined above. 

As such, a clear priority for EU climate diplomacy must be to push all public climate finance providers to start providing trillions to meet the climate action needs of developing countries in the global south. Additionally, climate finance providers need to heed the consistent calls from developing countries for finance to address loss and damages, and for increased adaptation finance. 

It is useful that this list of EU priorities also encourages countries to achieve the COP26 adaptation finance target to at least double global 2019 adaptation finance levels by 2025, and that the EU also intends to lead the way in achieving this target. However, when we look closely the 2019 adaptation finance amounts to US$ 20.1 billion. At this level of ambition, a doubling would amount to $40.2 billion for adaptation finance. This falls far short of the $50bn minimum that a majority of climate vulnerable countries have been calling for. 

Publicly-backed private finance is not the ‘ultimate’ solution

One of the most disappointing plans outlined in the EU's Climate Diplomacy priorities seem to hinge on increased engagement of the private sector and use of publicly-backed private finance as part of climate finance flows. Specifically, the EU plans to “leverage private and public funding for energy projects” to support developing countries to achieve Sustainable Development Goal 7 on ensuring access to affordable, reliable, sustainable and modern energy for all. Plans include using the new EU Global Gateway tool, which is the EU’s recently launched scheme to support infrastructure development around the world. 

These are troubling plans given the risks they could pose to ensuring that high-quality climate finance is provided. Publicly-backed private finance investments risk increasing a country’s national debt levels, which in turn can limit a country’s ability to provide core public services. Additionally, such investment flows are often mired in a lack of transparency and inadequate access to information for local communities. 

Given that the Covid-19 pandemic has reversed positive trends in energy access in global south countries, if the EU wants to support developing countries in the global south it should be promoting and using financing strategies that support transformative change for sustainable development.

EU vested interests must not overshadow the needs of the most vulnerable

It is imperative that developing countries in the global south have democratic country ownership over climate finance strategies in order to develop plans that suit their own specific circumstances and domestic needs, as opposed to the priorities of other economies. This is particularly relevant since the EU and Member States plan to “scale up an active Climate Diplomacy and cooperation with partners in the run up to the COP27”. 

In this context, it is crucial to ensure that policy and investment conditions are not a prerequisite for developing countries accessing financial support. Doing so has the potential to lock developing countries into cycles of economic activities that benefit the investor, irrespective of unplanned shocks e.g. health pandemics. Thus, when engaging in deliberations in 2022 over the global new collective quantified climate finance goal to be agreed under the UNFCCC, it is essential that the EU prioritises the needs of vulnerable communities and countries, instead of  fulfilling short-term investment quotas.  

What role does the EU foresee for International Economic Institutions? 

The list of priorities also highlights the perceived role of Multilateral Development Banks (MDBs) and International Financial Institutions (IFIs) in closing the global climate finance gap, specifically via mobilising private sector finance. As the main EU climate finance arm it is imperative that the European Investment Bank's (EIB) operations do not adversely impact international climate agreements.

However, the EIB, which also sees itself as the EU Climate Bank, and recently launched its development arm called ‘EIB Global’, uses financial intermediaries (e.g. private sector banks and private equity funds), which heavily support local private sector involvement in non-EU projects. These financial intermediaries are often not transparent about their operations, prioritise private sector investments over environmental safeguards, and do not have decarbonisation strategies, amongst other things. 

The EU must go beyond global north definitions of human rights 

Encouragingly, this list of climate diplomacy priorities makes numerous references to human rights and peace, and there will be an “EU Concept for an Integrated Approach on Climate Change and Security”. Whilst this new EU Concept is a useful step, it is imperative that the UN Guiding Principles on Business and Human Rights are followed, to ensure that multilaterally accepted principles of human rights are observed, not global north prescribed understandings of Human Rights. 

What’s missing?

A range of other issues are covered by these priorities, including phase-out of some fossil fuel subsidies, the Glasgow Dialogue on Loss and Damage, adaptation, sustainable finance and much more. 

Despite this, there are several vital elements missing that the EU should prioritise. Specifically, priorities on increasing access to climate finance, transparency of climate finance flows and ensuring that financial intermediaries and the private sector are accountable for their actions. Additionally, there is a lack of detail on the role that climate finance can play in increasing local-level engagement and local-level counter-cyclical opportunities. 

The EU and its allies still have a lot of questions to answer. This list of priorities must form the very minimum of EU Climate Diplomacy in 2022. They cannot be the ultimate level of EU Climate Diplomacy ambition.