What James Shaw’s climate change announcement does & doesn’t mean for New Zealand aid

Earlier this week James Shaw announced that New Zealand will give $1.3 billion as climate finance over 4 years to developing countries. As always, in the maddeningly murky world of aid, we know the headline figures, but beyond that, an awful lot is missing.

Here’s what we know and what we don’t:

What we know
Shaw said that this would be government aid money. Under Paris Agreement rules, the money could potentially have involved private finance, but Shaw’s statements rule this out. Also, under Paris rules the money could have had a loan component. But New Zealand doesn’t loan aid, and there’s been no talk of changing this. The money will almost certainly take the form of government aid grants. This is good.

Shaw emphasised that over half the funding will go to the Pacific. It appears that the money will mostly be focused on helping aid recipients adapt to climate change, rather than reducing their own emissions. I hope so. Greenhouse gas emissions must fall, but that’s foremost our job, here in New Zealand. The Pacific, on the other hand, needs to adapt, to the extent it’s possible. And we should be helping them do so.

So New Zealand will give $1.3 billion over 4 years as government aid grants largely to help fund climate change adaptation. This is a good: a genuine policy win for Shaw, and probably for MFAT’s climate change team too.

And, although $1.3 billion sounds like enough money to break the bank, it won’t. Currently aid makes up just 0.8% (80 cents in every $100) of government spending. At most, the new climate change contribution will take our aid spend to 1% of government spending. One dollar out of every hundred. We can afford it.

What we don’t know
In principle, climate finance is meant to be additional to existing aid spending. That $1.3 billion should largely be on top of what we currently give to help developing countries. (I say “largely” because we already give some climate change aid, which should be netted out of the $1.3 billion, strictly speaking.)

If the newly announced climate finance isn’t largely additional to existing aid, we’ll have to close other aid projects (for example health projects) as we scrounge for cash to reach the climate spending target. Or we’ll start claiming projects are climate change-related when they’re not. (This happens in climate finance reporting – see page 29, here).

Some government communications to NGOs have implied that the money will be additional (other than existing climate change spending). But New Zealand voters are owed more than hints right now. The government needs to make a clear statement.

We also don’t know how well the money will be spent. The need for climate change adaptation funding is real. And aid can work well. But it isn’t guaranteed to succeed.

With others, I’ve written a lot about New Zealand aid quality in recent years. I won’t go over it again. But I will note a challenge that the climate financing announcement brings. If the aid really is largely additional to existing spending it will involve increasing the overall aid budget by over 10% each year for the next 4 years. That’s not unprecedented. But when New Zealand aid has risen that fast in the past it’s usually been a one off, as the aid programme has spent big to avoid under-spends. Ten percent year after year will be harder. And if most of the money is focused on the small countries of the Pacific, where it’s not easy to get aid working well, it will be harder again still.

This doesn’t mean the money will be wasted. Some good groundwork has been laid, and MFAT has a clearly thought through climate change programme in the region. But, as the money increases, considerable effort will be needed to ensure it helps people in the Pacific.

This week’s announcement was an important achievement, but equally important questions remain.

Terence for NZADDs admin.