13.1.1 Types of Output

The three institutions vary considerably regarding the size of their output on climate finance. The OECD has produced numerous reports, meetings and workshops every year since the mid-2000s and enjoys a quasi-monopoly on climate finance statistics, whereas the output of the other two institutions has been less voluminous and regular. The OECD also stands out in terms of addressing climate finance along two distinct strands, addressing the topic as a development finance issue and as an investment issue respectively. The G20 and the IMF have been more unitary in their approach, while still addressing a range of issues covering development, adaptation, mobilising climate finance, leveraging private finance and reducing investment risk. The formal output of all three institutions has consisted mainly of (rather technical) knowledge. Besides the G20’s unsuccessful attempt in 2009 to produce a commitment on climate finance covering its member states (which influenced the subsequent United Nations Framework Convention on Climate Change [UNFCCC] USD 100 billion target), formal G20 output has consisted of reports about how to address specific climate finance issues (adaptation, leverage, etc.). The OECD’s main formal output has been knowledge about levels of climate finance, best practices and a new understanding of financial flows, especially in the context of investment. Moreover, the IMF’s formal output has solely consisted of reports analysing how to address climate finance issues, particularly sources of climate finance. The OECD DAC’s reporting on contributor countries’ climate aid arguably provides incentives for delivering more climate aid by increasing transparency and possibilities for comparison between countries (thus allowing for countries with low contributions to suffer reputational costs). The G20 and particularly the OECD have also produced considerable informal output in the shape of arranging meetings and workshops for experts from different countries and institutions, in the case of the OECD also business, interest groups, think tanks, academia and civil society. These meetings have constituted venues for learning about new aspects of climate finance (e.g. investment, leveraging, risk), venues which have been important as many of the participants have not been familiar with climate finance or the climate negotiations, but have come from finance ministries or other economic institutions, the worldview of which has resonated with the institutions’ framing of climate finance.

13.1.2 Scope and Actors Addressed

All three institutions have provided output aimed at global audiences. The G20 and the OECD have also provided output more specifically targeted at their member states, and the IMF has provided the Climate Change Policy Assessments of individual states. In particular, the 2009 G20 attempt to provide a climate finance agreement, but also the learning processes within the G20 study groups, have been aimed at G20 representatives of member states, often from finance ministries. Likewise, the activities of the OECD Development Assistance Committee (DAC), especially the informal deliberations, have been aimed at OECD member states and to some degree observer states. The OECD investment strand has been more focused on a global and public as well as private audience. Since most of the G20 and OECD publications have been intended for consumption by their member states as well as other actors, it is difficult to draw a sharp line between the output specifically aimed at their member states and that aimed at a global audience. The IMF, with its near-global membership, has provided output aimed at a global membership consisting of states as well as non-state actors, as well as at the G20 in the case of the reports requested by the G20. All three have addressed finance ministries to a larger degree than most other institutions in the climate finance system.Footnote ¹

13.1.3 Cognitive Dimensions

All three organisations have framed climate finance and climate change in economic terms, emphasising the economic consequences of climate change and the need for remedying them with economic instruments. Particular emphasis has been placed on linking climate finance to the issues of carbon pricing (especially by the IMF) and fossil fuel subsidy reform, two issues that in a range of other forums – especially the UNFCCC – have not been linked to climate finance until recently, and even then not to the same extent. Climate finance has also more recently been linked to the issues of investment and risk. Unlike for carbon pricing, addressing the risks associated with climate change (Reference Campiglio, Dafermos, Monnin, Ryan-Collins, Schotten and TanakaCampiglio et al., 2018)– both risks associated with fossil fuel and green investment and with the impact of climate change – does not address the root cause of climate change, but economic obstacles to mitigation and adaptation. Hence, addressing climate finance with reference to these risks constitutes a less ideal-typical case of economisation than addressing it with reference to the externality of climate change (see Chapter 1).

These four issues are all rather ‘economic’ in the sense that they fully (investment, risk) or partially (carbon pricing, fossil fuel subsidies) belong to the realm of economic policymaking. Linking them to climate change policy in general and climate finance in particular also entails an economic framing of the problem of climate change: it should be addressed with economic policy instruments affecting the cost–benefit calculations of actors making economic decisions (whether to invest in a project, buy a particular product, etc.). The economic framing has also included continuously stressing the importance of private finance, a source of climate finance that has been more controversial in the UNFCCC than in the three institutions, especially as concerns counting it towards the USD 100 billion target.

There is also a shared emphasis on mitigation rather than adaptation (also evident in the emphasis on carbon pricing and fossil fuel subsidies), although all three institutions increasingly address adaptation issues. The increasing attention to adaptation arguably reflects the overall trend in the climate finance system and was evident in the OECD (markedly with the Rio adaptation marker) at an earlier stage compared to the G20 and the IMF.

Nonetheless, there are important differences between the institutions. Notably, the OECD in its development strand has defined climate finance as a subtype of development finance, whereas the IMF has proposed measures that would clearly set climate finance apart from development finance, for example, domestic and international carbon pricing of domestic and international emissions, and the earmarking of domestic revenue. The G20 has occupied the in-between position (but closer to OECD), treating climate finance as more than a subtype of development finance but still with a significant overlap. The IMF has also emphasised the link with carbon pricing – particularly regarding emissions from the international shipping and aviation sectors – to a much larger degree than the other two institutions.

13.1.4 Normative Dimensions

In terms of normative ideas, the three institutions have all prioritised efficiency over equity norms such as Common but Differentiated Responsibilities and Respective Capabilities (CBDR) and vulnerability, and mitigation over adaptation. CBDR has not been central to any of the institutions’ output, although the normative idea that climate finance is something developed countries should provide has been inherent to their output. As concerns the allocation of climate finance, although the OECD and the G20 have stressed adaptation finance and climate finance for the most vulnerable, the overall approach has been that efficiency is the key principle. The IMF has been less explicit regarding the allocation of climate finance but has more recently also stressed the importance of adaptation within the context of individual developing countries. The efficiency focus matches the institutions’ economic worldview, since it highlights the importance of keeping economic costs low.

Yet, the institutions have diverged more regarding normative ideas than cognitive. Generally speaking, the IMF has advocated solutions rooted in a vision of how climate finance ideally should be addressed, whereas the G20 and the OECD have largely based their positions on the actual state of affairs and in the case of the OECD tried to forge ahead within the context of this state of affairs. First, in the 2010 reports to the G20, the IMF (implicitly) advocated a global burden-sharing key based on emissions, while the G20 and the OECD left it to the individual country to determine its contribution. Second, carbon pricing has been addressed in different ways: whereas the IMF outright advocated adopting it at the domestic and the international levels (especially the latter might infringe on the fiscal sovereignty of states), the OECD and particularly the G20 have stressed that adopting carbon pricing is inherently a national decision. The IMF advocacy of carbon pricing has been rooted in its framing of climate change as an externality that should be addressed by pricing the externality, a vision not shared with the G20 and the OECD (see Chapters 7 and 12 regarding the IMF’s promotion of carbon pricing). Altogether, the output from the OECD and the G20 has been more closely aligned with the preferences of its member states than the output of the IMF. Thus, economisation has been more ideal-typical or ‘pure’ in the case of the IMF, and less ‘contaminated’ with member state preferences (as discussed in Section 13.2).

13.1.5 Incentives

The institutions have provided very few direct changes to the incentive structures to the actors involved in climate finance, be they contributors, recipients or a third kind of actor. The incentives provided by the institutions have not been in conflict at any point, and have to some degree been synergistic. The OECD DAC’s monitoring of bilateral (and recently also multilateral) climate aid, incentivises countries to provide more climate finance (but also to designate more of their development finance as climate-related), as well as to prioritise vulnerable countries and adaptation. Such incentives may consist of reputational costs associated with not living up to climate finance commitments, which reduce the credibility of the states and developed countries as a group when future commitments (regarding climate finance or other issues) are negotiated. Yet, the absence of individual country climate finance targets limits the impact of such reputational costs. The 2009 G20 attempt to create a shared climate finance commitment for industrialised countries would have constituted an important change to incentive structures (in terms of developed G20 countries facing reputational costs if the commitment were not fulfilled), yet did not succeed. It was only influential in an indirect way through influencing the UNFCCC’s Fifteenth Conference of the Parties (COP15) climate finance commitment, most notably the USD 100 billion target, which the developed countries may suffer reputational costs if they do not meet. The IMF’s recent attention to climate measures in its interaction with individual countries via so-called Climate Change Policy Assessments and in the future also Article IV consultations) may affect the incentives of both contributors and recipients of climate finance, for example, by tying IMF finance to the Assessments or by contributor countries providing more finance to countries with positive Assessments. At the time of writing, five countries (Belize, Grenada, Micronesia, St Lucia and the Seychelles) have been the subjects of such Assessments.

13.3.1 International Level

The three institutions have interacted with a range of other institutions, with considerable overlap between them in terms of which institutions they have interacted with. Arguably, the most important influence on another institution has been the influence of the G20 on the UNFCCC, when the discussions within the G20 in spite of the disagreements helped make an agreement on climate finance possible at COP15. The G20 process established an understanding among emerging and developed country finance ministries, which influenced how climate finance was addressed in the UNFCCC (interview with senior Indian Finance Ministry official, 3 November 2014). The G20 process meant that the G20 representatives involved in the drafting of the Copenhagen Accord (a small group of countries in which G20 countries constituted the majority) knew what would be acceptable to the other G20 countries’ finance ministries, making an agreement easier. The understanding included that private finance would count as climate finance (accepted by the emerging G20 countries) and that there should be a collective climate finance target (accepted by developed G20 countries). The increased credibility of negotiation offers constitutes an incentive-based influence.

Cognitive influences constitute the most widespread kind of influence, adding to the degree of synergy in the climate finance system. The OECD has had an important cognitive influence on the UNFCCC, particularly the Standing Committee on Finance, which has used OECD estimates of finance flows in its reports. These OECD estimates as well as other OECD climate finance have also been used by other international institutions, including think tanks, research institutions and non-governmental organisations. Regarding the recent trend of focusing on investment, all three institutions have influenced the World Bank and other MDBs, as well as UNEP and UNDP. Beyond this, the cognitive influence of the IMF has been rather limited at the international level beyond the G20. Collaboration on producing publications and participation in workshops and seminars have been important channels for G20 and especially OECD cognitive influence on international institutions including the MDBs, UNEP, UNDP and other economic, development and environmental institutions. By defining the terms of the workshops and especially in the case of the OECD also producing much of the data material and analyses discussed, the two institutions have been able to encourage and shape the other institutions’ output on climate finance.

As regards more normative interaction, the three institutions have addressed the key normative issues in climate finance in a way that reflects their character as economic institutions, and have hence increased the degree of divergence on normative issues in the climate finance system. This is evident in their strong emphasis on efficiency, which sets them apart from the UNFCCC. The three institutions have been able to cluster together with other economics-oriented institutions such as the MDBs and the Financial Stability Board on these normative issues, but have differed from environmental and development institutions, especially those within which developing countries have significant influence. In terms of agenda-setting, only the G20 has had an influence on the institutions it requested to provide an analysis of climate finance (beyond the IMF and the OECD mainly the MDBs but also the Bank of International Settlements and other economic institutions).

13.3.2 Domestic Level

The influence on the domestic level is more difficult to discern, inter alia because there has been less direct interaction with this level. The most important influence has been the institutions’ contribution to a climate finance system in which the most important decisions regarding climate finance allocation are made by the contributor countries with developing countries having few possibilities for influencing these decisions. The Copenhagen Accord is an important element of this system, and hence the G20 influence on the Copenhagen Accord has contributed to shaping this system.

In terms of more direct influences, the OECD DAC output has constituted an incentive to provide more climate finance and to do so in line with equity normative ideas such as prioritising vulnerable countries and adaptation. Furthermore, its data has been used in (by NGOs) and among countries to highlight and criticise the provision of climate finance of individual governments. The IMF has a less direct influence on recipient countries that have been the subject of Climate Change Policy Assessments. These assessments may in the future influence how much climate finance they receive and for which projects.

Cognitive and normative influences are more salient for all three institutions, especially the G20 and the OECD. Through meetings and workshops the two institutions have been able to influence the participants’ understanding of climate finance, especially as many of them have come from finance ministries and thus have been new to the topic and more susceptible to the framings of climate finance promoted at the meetings. The engagement with finance ministries has also meant that the two institutions have exerted an (albeit limited) agenda-setting influence over these finance ministries.