On a brighter side, international development funding for clean air projects, for the first time, exceeded funding for fossil fuel-prolonging projects in 2021, says the report
Only 1% of international development funding ($2.5 billion per year) and 2% of international public climate finance ($1.66 billion per year) was committed to targeting air pollution between 2015 and 2021, according to the latest report State of Global Air Quality Funding 2023. The report produced by the Clean Air Fund in partnership with the Climate Policy Initiative provided a snapshot of outdoor air quality funding between 2015 and 2021.
Despite the potential win-win for health and climate, outdoor air quality is chronically underfunded. The report found that 10 donors provided 97% of total outdoor air quality funding in the past five years for which data is available. This high concentration of funding between a few funders indicated limited engagement with air quality issues, the report noted.
The data in the report showed a decline in funding for fossil fuel-prolonging projects since 2019. At its peak that year, $11.9 billion of international development funding was channelled to projects for the extraction and production of oil and gas, threatening the clean air cause and the delivery of global climate goals.
However, in 2021, for the first time, international development funding for outdoor air quality projects ($2.3 billion) exceeded funding for fossil fuel-prolonging projects ($1.5 billion)
According to the report, only 2% of international public climate finance explicitly tackled outdoor air pollution. Also, loans were prioritised over grants. The report found that 92% of outdoor air quality funding was provided in the form of loans ($12.9 billion), of which $5.3 billion was low-cost/concessional.
It is important to note that concessional funding is particularly crucial for low- and middle-income economies who may already be burdened with high debt or are in a debt crisis in the aftermath of the COVID-19 pandemic. Grants accounted for the remaining 8% of outdoor air quality funding committed in the period, largely from governments (93%).
Talking about geographical distribution of funding, 86% of the total $12 billion for air quality was concentrated in China, Philippines, Bangladesh, Mongolia, and Pakistan. Meanwhile, other countries in Asia with dangerous levels of air pollution are being overlooked, the report noted.
Among other gaps, African countries received only 5% (or $0.76 billion) of all air quality funding between 2017-2021. The continent is home to half of the world’s top 10 countries with the highest levels of air pollution. And Latin America and the Caribbean received just 1% of the total air quality funding in the same period, the report added.
The report found gaps at city-level too. For example, Accra in Ghana, Jakarta in Indonesia and Lima in Peru could lead the charge if further climate finance is mobilised.
The report recommended substantially increasing the volume of funding for air quality from OECD-DAC donors, whether channelled through multilateral channels or bilaterally. It also said that increasing grant and concessional finance and ensuring that funding reaches all countries and regions in need is crucial. This is particularly important in the context of the debt distress faced by so many countries that receive international aid.
Addressing the Multilateral Development Banks, the report said these institutions can play a critical role in substantially increasing the availability of development finance for air quality. There is a particular role in driving this agenda for the World Bank, whose new president, Ajay Banga, has made access to clean air an explicit part of its remit.
The report advised national policy makers and regulators to track and report on government spending on air quality to increase transparency and assess progress over time. This includes capital mobilised from other sources for projects with air quality co-benefits. For example, private capital could be attracted at scale through innovative financial vehicles, such as Shari’ah-compliant bonds or sukuks, and structured finance mechanisms, such as securitization.
Overall, the report highlighted opportunities for international development funders to do more and to accelerate action on clean air.