August 2024 ODAReform.org Newsletter
Dear Friends,
I hope that those of you who share the Northern Hemisphere with us are having a good Summer and are enjoying an opportunity to get away for some much-needed rest and relaxation. And for those in the Southern Hemisphere, I hope that all is going well with you too.
I wanted to bring you up to date with a few recent developments in our campaign to throw light upon the abuses being perpetrated in the counting of ODA and build a coalition for change.
Oxfam: Climate Finance Short-Changed
I was very pleased to have co-authored the Climate Finance Update report recently released by Oxfam. Here are links to the Press Release[1] and to the more substantive “Methodology Note”[2].
The UNFCCC has already placed a copy of this report on its own website as a resource and this Report is likely to be highly influential in forthcoming discussions and negotiations as we approach the UK Climate Change Conference (COP 29) in Baku in November this year.
The Oxfam report was a response to a recent OECD study, “Climate Finance Provided and Mobilised by Developed Countries in 2013-2022”[3], which found that the commitment that developed countries made back in 2009 “of mobilizing jointly US$ 100 billion a year by 2020 to address the needs of developing countries” was finally met in 2022. However, Oxfam, using a robust methodology, concludes that the “true value” of climate finance provided by rich countries in 2022 was only between $28 billion and $35 billion. The huge difference arises mainly from the fact that while the OECD counted the full face-value of loans, the Oxfam report scores only the grant equivalents of climate-related loans, in order to show the real financial effort being made by donors in extending these loans.
ODAReform.org Report on “The US$ 100 Billion Climate Finance Goal and Official Development Assistance: Lessons for Future Funding Commitments”
To complement the Oxfam analysis of the OECD’s report, we have just published our own article here which focuses on the problems associated with the $ 100 billion target and how to avoid these in future.
We also highlight the role that the DAC’s exaggerated ODA accounting plays in inflating the “financial effort” of donors in climate finance, showing how the DAC’s flawed rules led OECD’s climate finance report to give a misleading breakdown between concessional and non-concessional finance, and a false impression that bilateral climate finance was more concessional than finance from multilateral climate funds.
On a policy level, the DAC’s far-too-generous rules on ODA scoring are encouraging bilateral donors to offer climate finance loans, often at commercial terms, or equity investments, instead of much-needed grants. The DAC’s rules for bilateral finance also discourage donor countries from contributing to multilateral climate funds, since they can instead score ODA through bilateral loans or equity investments, costing them little or nothing in terms of real fiscal effort.
Our paper makes five recommendations that we urge the international community to adopt ahead of COP 29 and any agreement on new climate finance targets:
1. Any new agreement on targets for climate finance needs clarity on definitions, measurement, accounting methodology and reporting.
2. Future financial targets must include agreements on burden-sharing by countries, and not be expressed merely as “global aspirations”.
3. Donor reporting on financial effort in non-grant instruments should follow the robust Oxfam methodology, not the self-serving and inaccurate DAC methodology.
4. Debt forgiveness should not be counted towards climate finance targets.
5. The international community should divest the OECD/DAC of its role in setting the rules for measuring ODA and, by extension, the financial effort in climate loans and equity investments.
We ask for your help in circulating this paper as broadly as possible. Only an international coalition can succeed in forcing real reform towards serious commitments that are then followed up by honest monitoring.
Total Official Support for Sustainable Development (TOSSD)
We have also just posted two articles related to this relatively new proposed measure of the totality of support being given to promote sustainable development in developing countries.
The TOSSD website (https://www.tossd.org) describes its basic idea as follows:
“Total Official Support for Sustainable Development (TOSSD) is an international standard for measuring the full array of resources to promote sustainable development in developing countries. It is designed to monitor all official resources flowing into developing countries for their sustainable development, but also private resources mobilised through official means. It also measures contributions to International Public Goods.”
Simon Scott and Hedwig Riegler have both been asked recently to look into TOSSD and have discovered some uncomfortable truths about this “measure”. Their two articles are as follows:
The TOSSD Mirage
In his article[4], Simon Scott rejects the claim that TOSSD constitutes a statistical system, arguing that it is instead just a collection of individual notifications of expenditure, where decision-making on what to try to report is left to each provider. As a result, as he points out, practice varies enormously. With no provision for aggregate reporting, each provider just submits data on whatever they can find that seems to fit into the TOSSD definitions.
Simon shows that, in practice, TOSSD’s published totals fall way short of actual official spending on what it purports to measure. Nevertheless, he flags some pretty “idiosyncratic” reporting of projects that seem far removed from what most of us would consider as legitimate expenditure contributing to sustainable development in developing countries.
Simon concludes that, given its shortcomings, it is difficult to envisage that TOSSD will be able to generate usable statistics in the foreseeable future.
TOSSD a statistical measure? Or rather an anecdotal quantitative narrative?
Also writing about TOSSD, in her paper, “TOSSD a statistical measure? Or rather an anecdotal quantitative narrative?”[5], Hedwig Riegler points out the fundamental problems of a system designed under political influence and for political reasons which, perhaps inevitably, suffers from a number of basic methodological flaws.
While TOSSD purports to be a “metric”, Hedwig highlights the excessive breadth of TOSSD’s overall ambition, its lack of clear definitions in various areas, and the welding together of datasets that cannot be meaningfully combined. The cumulative effect of these defects is to produce a fundamentally incoherent system generating figures that do not deserve to be considered “statistics”.
Moreover, Hedwig observes that while TOSSD could have been designed in a way that usefully complemented ODA statistics, it has instead cannibalised ODA reporting while applying different definitions and parameters to it. This inevitably brings TOSSD into conflict with ODA as the pre-eminent measure of development finance, and mutually undermines the credibility of the figures produced by each system.
Falsifying aid records – A Prize Example
Finally, in case you missed it, I wanted to draw your attention to an article Simon posted a few weeks ago, “Falsifying Aid Records – A Prize Example”[6], showing how the DAC’s recently agreed methodology for counting ODA for buying equity stakes allows donors to score ODA from investments that turn out to be highly profitable.
The example Simon uses is scarcely credible…until one realises that he is simply explaining what is going on in the DAC’s own example!
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In closing, I just wanted to thank you for reading this Newsletter. Please feel free to share its contents and the documents linked in the text.
We are entirely independent and unfunded, and are driven solely by a desire to end the abuses being perpetrated around ODA accounting and ameliorate the damage this is doing to the causes of global development and combatting climate changes.
The only support we seek is for you and others to “spread the word” and to build a coalition to demand change. Change that must include divesting the OECD/DAC of its responsibilities in this area in favour of a new body, with both developed and developing country representation, and that operates according to sound principles of statistical measurement and with the required independence from political pressures.
[1] https://www.oxfam.org/en/press-releases/rich-countries-overstating-true-value-climate-finance-88-billion-says-oxfam
[3] https://www.oecd.org/en/publications/climate-finance-provided-and-mobilised-by-developed-countries-in-2013-2022_19150727-en.html
[5] https://www.odareform.org/post/tossd-a-statistical-measure-or-an-anecdotal-quantitative-narrative
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