The Distorting Effects of Bilateral Climate Finance for Mitigation on ODA

Donors may object that their support for mitigation also contributes to development. However, the geographical and sectoral allocation of ODA-related climate finance for mitigation is very different from the rest of ODA. A majority of ODA-related climate finance for mitigation is targeted to middle-income countries, only small shares of these resources are allocated to low-income and most vulnerable countries. One could therefore wonder how these allocation decisions relate to donors’ commitment to the core values underpinning ODA.

Should climate change mitigation not count as ODA and with the hypothesis of a constant effort of bilateral providers, these last ones could reallocate approximately 20 % of ODA to countries with lower income and greater vulnerabilities. Mitigation projects could then be funded through alternative sources, such as national climate budgets, export and other trade finance or the private sector, without exhausting aid budgets on global public goods.