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UK aid’s alignment with the Paris Agreement: A rapid review (October 2021)

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Executive summary

The Paris Agreement is an international treaty of the United Nations Framework Convention on Climate Change that aims to limit global warming and strengthen countries’ ability to deal with the adverse impacts of climate change. The UK government’s commitment to align its official development assistance (ODA) with the Paris Agreement was made in 2019. It reflects one of the Paris Agreement’s long-term goals – to make finance flows consistent with low-emission, climate-resilient development pathways. It is part of the UK’s ambition to integrate climate and environmental considerations into all its decision-making processes and lead by example.

This rapid review examines the progress towards aligning all UK aid with the Paris Agreement. Recognising that this commitment is relatively recent, the review focuses on the relevance and coherence of the UK’s emerging approach to alignment and its measures for delivering alignment in all UK aid-spending departments, rather than how effective these measures have been.

Findings

The UK has made an important commitment to align its aid with the goals of the Paris Agreement. It reflects the urgency of addressing the climate crisis and the reality that the level of effort needed to mitigate and adapt to climate change goes beyond channelling aid to programmes specifically addressing climate change. Since 2019, the Foreign, Commonwealth and Development Office (FCDO) (and before 2020, the Department for International Development) has developed four programme-level tools for Paris alignment: climate risk assessment, shadow carbon pricing, fossil fuel policy, and alignment with country partners’ own mitigation and adaptation plans. In April 2021, FCDO’s Programme Operating Framework (PrOF) rule 5 mandated the use of these four tools at the design and development stage of new FCDO ODA and non-ODA programmes.

The four tools mainly reflect emerging good practice among donors for screening out high-emission development projects and identifying those with high risks of adverse climate impacts. The current programme-level approach is limited to screening out harmful activities, and does not yet contain positive selection tools designed to encourage a systemic shift towards low-emission, climate-resilient options. Such a screening out approach could be interpreted as a conditionality on aid, limiting development options available to developing country partners. In order to support developing countries’ pursuit of the Paris Agreement goals, the evolving UK approach will need to include different types of support to partners to tackle the transformational shifts necessary to achieve low-emission, climate-resilient development.

Paris alignment of aid is a challenging commitment in the absence of agreed best practice and with the high diversity of developing country contexts. The UK’s approach is work in progress. It took 21 months from the commitment being made to mandate Paris alignment to the point of establishing PrOF rule 5. There are a number of exemptions to the comprehensive application of the four alignment tools to bilateral FCDO ODA spending. For FCDO aid spent through multilateral channels and CDC Group, the UK’s development finance institution, the UK is largely reliant on these institutions’ own efforts to achieve Paris alignment. There are also gaps and inconsistencies in how other government departments pursue Paris alignment of ODA. Only the fossil fuel policy is currently a cross-government policy, whereas the three other tools are limited to FCDO ODA and non-ODA programming.

FCDO has undertaken significant work to operationalise Paris alignment. However, there is no roadmap for full operationalisation of the commitment across UK ODA-spending departments, taking into account their variable mandates and differing risks of misalignment. There is also no timeline for developing the approach beyond minimum requirements and ‘do no harm’. FCDO is planning to introduce portfolio- and strategic-level approaches to Paris alignment, recognising the importance of doing so to achieve its ambition of making transformative progress towards low-emission, climate-resilient development pathways. Such approaches would help embed Paris alignment within the multiple strategies that guide UK ODA spending, and could broaden the application of alignment rules and guidance beyond FCDO to the UK’s wider aid programming. Wider use of PrOF rule 5 guidance would also emphasise that responsibility for Paris alignment sits not only in FCDO’s Climate and Environment Directorate, but across all ODA-spending departments and teams.

Paris alignment will be implemented at the same time as UK climate finance programming to developing countries is increasing. This means that gaps in capacity and capability to apply the PrOF rule 5 guidance are likely to be felt across FCDO, as well as in other government departments, if they also adopt this guidance for their programming. The gaps will vary between the ODA-spending departments and the overseas network, depending on ODA spending characteristics, country context and the existing climate change experience and knowledge of individuals. FCDO must also pay attention to how well existing draw-down resources, such as the climate mainstreaming facility, can cope with increased demand. Outreach and training to the overseas network and other government departments on Paris alignment has recently started, but an acceleration of action will be needed across all levels of management to reflect the urgency of the problem, as well as to avoid Paris alignment being badged as a ringfenced ‘climate issue’.

Within FCDO, the application of the PrOF rule 5 guidance has so far been limited, since the rule has only been in place since 1 April 2021 and only a few new programmes have been designed and developed since then. However, it is unclear how the lines of reporting on Paris alignment between and within teams and departments will look as the alignment process rolls out. There is no metric or assessment for monitoring progress on Paris alignment, in contrast to the usual level of attention paid to the monitoring and evaluation of UK aid. This hinders the tracking of progress and the provision of public information on the commitment.

The UK has been an effective influencer within the multilateral development banks (MDBs), whose scale of investment will have impact on future emission and resilience pathways in developing countries. Together with like-minded shareholders, the UK has communicated to the MDBs the need for clear implementation plans for their Paris alignment commitments and a target date for implementation. The UK could strengthen this influencing role further, pushing beyond the MDBs to other multilaterals. This is particularly relevant considering the UK’s desire for leadership in green finance, as outlined in its 2019 Green Finance Strategy.

Recommendations

Based on the findings of this review, a number of recommendations are made to support the UK in continuing to develop its approach to aligning aid with the Paris Agreement:

Recommendation 1

The UK should ensure that a commitment to align ODA with the Paris Agreement, with timebound milestones, is embedded at the heart of the forthcoming International Development Strategy.

Recommendation 2

The UK needs to develop a cross-government reporting and accountability process for Paris alignment of UK ODA that ultimately allows public scrutiny of progress.

Recommendation 3

The UK should urgently build appropriate capacity and capabilities across its ODA spending teams in order to design and deliver alignment of UK aid with the Paris Agreement.

Recommendation 4

The UK should work with other leading countries, including developing countries, to establish and promote international best practice on Paris alignment of ODA.