President Joe Biden isn’t pledging nearly as much money to help developing countries grapple with climate change as he is promising to boost domestic efforts to curb emissions.
The gulf between Biden’s domestic commitments and his promises abroad has many environmentalists saying the White House’s first international climate finance plan, unveiled on April 22 during Biden’s climate summit, is underwhelming.
In the plan, Biden commits to double U.S. climate finance to developing countries by 2024 and to triple funding to help poorer nations adapt to climate damages, compared with funding levels during the Obama administration.
However, that doubling of overseas climate funding has already been achieved by countries in Europe and by China in the last four years while the Trump administration sat on the sidelines of global climate finance discussions, said Joe Thwaites, an associate in the World Resources Institute’s Sustainable Finance Center.
Biden’s plan also doesn’t fully close the door on financing for fossil fuels overseas, instead simply encouraging agencies to scale back investments in “carbon intensive” fossil fuel projects in favor of clean energy. The United Kingdom, meanwhile, has already pledged to end all overseas fossil fuel financing.
In addition, Biden’s plan skips directives to one of the U.S. government’s most prominent funders of fossil fuels overseas, the Export-Import Bank.
“It’s one tiny step when we need 10 leaps forward,” said Kate DeAngelis, a senior international policy analyst at Friends of the Earth. “If we don’t see a lot more action to follow up on this, especially announcements from these other agencies, then I think it’s going to be barely different than business as usual.”
DeAngelis said she wants to see concrete commitments to exit fossil fuels from the Ex-Im Bank and development entities such as the U.S. Trade and Development Agency and the Millennium Challenge Corporation.
Currently, Biden’s plan focuses mainly on the U.S. International Development Finance Corporation, which has set a goal to shift its portfolio to net-zero emissions by 2040. Beginning in the next fiscal year, the DFC will ensure one-third of its new investments are climate-focused, the agency said.
The DFC, formerly the Overseas Private Investment Corporation until 2019, has already been scaling up renewable energy investments. During the Obama administration, its renewable energy investments reached more than $1 billion on average per year, DeAngelis said, adding she expects that amount to continue to increase under Biden.
Ultimately, multilateral development banks such as the DFC and others find themselves in a similar situation as big U.S. corporate banks at which renewable energy investments make better business sense than fossil fuel investments, said Steven Rothstein, managing director of Ceres Accelerator for Sustainable Capital Markets.
Rothstein cited figures showing major oil companies wrote off more than $100 billion in stranded costs in the first nine months of 2020, pipelines and drilling equipment they weren’t going to use anymore.
Environmentalists want to see the DFC, the only U.S. entity that has set a net-zero financing commitment thus far, move even faster, too.
The net-zero financing commitments set by the DFC and major banks are “not fast enough for Ceres, but we appreciate what they’re doing,” Rothstein said. The next step is for major banks and multilateral organizations to set interim 2030 goals to begin to demonstrate how their portfolios will reduce emissions in the nearer term, he added.
Overall, environmentalists say it is vital for the U.S. to ramp up international climate finance more significantly because it serves as a marker for the seriousness of the U.S. commitment to reengaging in the Paris climate agreement.
Developing nations are looking for the U.S., the wealthiest country in the world and the most significant historical emitter, to pony up funds to help them address damages from climate change, including more severe weather that can devastate the smaller budgets of poorer countries.
Thwaites said that developing nations have increasingly been calling for richer countries to increase the funding they offer to help countries adapt to climate change, reaching a 50-50 split with investments to curb emissions.
Even with the tripling of adaptation finance the Biden administration is promising, it would reach just about a quarter of total U.S. overseas climate finance, Thwaites added.
Efforts to increase overseas climate finance will undoubtedly raise the alarm among Republican lawmakers, who are already slamming the scope of domestic climate funding in Biden’s infrastructure plan.
Democratic lawmakers, however, are asking for more. In his fiscal 2022 budget request, Biden is proposing $1.2 billion for the Green Climate Fund, a United Nations entity funded by more prosperous countries, to help poorer nations grapple with climate change.
Meanwhile, top Democrats on the Senate Foreign Relations Committee, led by Chairman Bob Menendez of New Jersey and Sen. Chris Murphy of Connecticut, unveiled international climate legislation on April 15 that calls for $4 billion for the Green Climate Fund in fiscal 2022.
