In 2021, clean air initiatives received more financial support than fossil fuel projects for the first time ever, but more needs to be done
A new report reveals that only 1% of global development funds and 2% of climate finance are allocated to addressing outdoor air pollution. While air pollution poses the greatest environmental threat today, securing funding has always been a challenge in the fight for clean air. In an effort to expedite progress, researchers conducted a study on funding for outdoor air quality, providing policymakers, funders, and activists with transparent and compelling evidence.
Air pollution not only significantly contributes to climate change, biodiversity loss, and health problems, but also results in 7 million premature deaths annually, according to the Clean Air Fund. Currently, the focus has shifted to heatwaves caused by climate change, which have caused numerous deaths worldwide, including in India.
However, air quality tends to deteriorate during heatwaves. Addressing this concern, the World Meteorological Organization (WMO) emphasized in a recent report that climate change and air pollution must be dealt with together. This sentiment is echoed in the new report by the global philanthropic organization Clean Air Fund, titled The State of Global Air Quality Funding 2023.
While clean air projects received more funding than fossil fuel projects for the first time in 2021, the report underscores the ongoing insufficiency of funds dedicated to air quality. Despite the US Environmental Protection Agency’s estimation that every $1 spent on air pollution control results in $30 in economic benefits, many international donors continue to overlook projects that address air pollution. Over the past six years, only 1% of global development funds ($2.5 billion per year) and 2% of international public climate finance ($1.66 billion per year) have been directed towards combating air pollution, as stated in the report.
Japan emerged as the top contributor to outdoor air quality funding over the past five years, followed by the Asia Development Bank and Asia Infrastructure Investment Bank. The top 10 contributors accounted for 97% of total funding for outdoor air quality projects.
The report also noted progress in reducing funding for projects that prolong the use of coal-fired power. Since 2019, there has been a decline in funding for such projects. Additionally, in 2021, global development funding for outdoor air quality projects ($2.3 billion) surpassed funding for projects that prolong the use of fossil fuels ($1.5 billion) for the first time. During the 2021 UN Climate Change Conference (COP26), 34 countries and five public finance institutions agreed to halt international public financing for fossil fuels by the end of 2022. To achieve significant outcomes, governments must commit to a complete phase-out of fossil fuels and transition to clean energy at the upcoming COP28 in December.
Moreover, the report reveals that only 2% of international public climate finance explicitly addresses outdoor air pollution. There are several financial instruments available to funders that can be used to incentivize and catalyze more funding for air quality projects. For example, green bonds, social bonds, and results-based funding can make long-term private capital accessible for air quality initiatives.
Another issue highlighted by the report is that 92% of funding for outdoor air quality projects is provided through loans ($12.9 billion), of which $5.3 billion is offered at low cost or on concessional terms. This can pose a significant burden for low- and middle-income economies, especially those already grappling with high debt due to the COVID-19 pandemic. Progress towards cleaner energy is likely to be impeded without grants.
The report offers several recommendations, including increasing grant and concessional finance to ensure that funding reaches countries and regions in need. It also suggests that multilateral development banks can play a crucial role in significantly increasing the availability of development finance for air quality. Finally, national policymakers and regulators should monitor government spending on air quality to enhance transparency and evaluate progress.
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