This year’s oil crisis has sent the costs of energy skyrocketing for many countries, including diesel-dependent Pacific countries, some of which have declared a state of emergency in response to fuel shortages and rising costs.
This crisis has only reaffirmed what we know — that climate finance from developed countries to developing countries and particularly small island developing states is essential to ensure reliable, affordable and locally produced renewable energy to aid their development, protect them from global fossil fuel price shocks and contribute to climate change mitigation. As we head into an anticipated “Godzilla” El Niño period, and see heatwaves across much of the world, we are reminded that climate finance is also essential for low-income countries and communities to prepare for and recover from increasingly severe climate impacts.
At this critical time, new analysis by Oxfam shows that developed countries’ climate finance provisions remain overstated, and the chasm between the climate finance reported and what is delivered to developing countries remains staggeringly large.
Countries report their climate finance provision using methodologies agreed for reporting under UN Framework Convention on Climate Change (UNFCCC) processes, which are also reflected in OECD reporting. The issue is that these accounting rules were designed to quantify financial flows without taking into account the actual value of the financial effort from an accounting and climate perspective. A major concern is that loans are generally counted at their full face value, even when much of the money loaned will have to be repaid. Another issue is that the costs of projects whose primary objectives are not climate-related, but are asserted to have some secondary climate objectives, may be reported wholly or partly as climate finance.
To arrive at a more accurate picture of the support provided, Oxfam uses a measure called Climate-Specific Net Assistance (CSNA), which estimates the actual financial effort made by donor countries. CSNA measures loans in grant-equivalent terms. It also accounts for the actual climate significance of projects.
In 2024, developed countries reported providing A$207 billion (US$136.7 billion) in climate finance. However, according to Oxfam’s methodology, the real financial effort was only around one-quarter to one-third of that amount — in the range of A$49.6 billion (US$32.7 billion) to A$67.7 billion (US$44.7 billion). The adaptation allocation, by our estimation, was only A$22 billion (US$14.5 billion) to A$27.3 billion (US$18 billion). We see similar results for 2023 (see Figure 1).
Figure 1: reported climate finance versus climate-specific net assistance, 2023-2024
Source: Oxfam, Climate Finance Shadow Report 2025.
The red bars show reported climate finance as compiled by the OECD. The orange and green bars show our estimates of total CSNA. The orange bars use the OECD Development Assistance Committee’s standard discount rates for calculating grant-equivalence: fixed benchmarks of 6%, 7% and 9% depending on the recipient’s income group. These rates trace their lineage to the 10% discount rate adopted in 1972 as a rough proxy for the opportunity cost of capital in developing countries; they do not reflect what it costs donors to raise the money. Oxfam argues this inflates the apparent effort behind a concessional loan, because donor borrowing costs are typically far lower. The green bars instead use the OECD’s Differentiated Discount Rates, which are based on each donor’s long-term government bond yield and so reflect the fiscal cost to the donor. Lighter shading indicates the range between low and high estimates.
Our research also found that Australia contributes a relatively small amount. Australia’s Climate-Specific Net Assistance is estimated at between A$500 million (US$330 million) and A$1 billion (US$700 million) in 2024, or roughly A$18 to A$37 per person. Using that same per-person measure for ease of comparison, Australia trails the Netherlands (A$863 million to A$1 billion, or around A$48 to A$56 per person), Germany (A$4.5 to A$7.7 billion, or A$53 to A$91 per person) and the United Kingdom (A$2.8 to A$4.3 billion, or A$41 to A$63 per person), and is broadly comparable on a per-person basis to Japan (A$1.9 to A$2.8 billion, or A$15 to A$23 per person). Independent fair-share analyses that adjust for national income and historical emissions place Australia in the bottom group of developed-country donors, well below what its capacity would suggest. Developed countries’ climate finance contributions, on the whole, are also well below what was identified as a US$1 trillion annual need by the end of the decade.
Oxfam’s finding of overestimated support comes at a crucial time in the UNFCCC climate negotiations and at a time when Australia steps into centre stage as the President of Negotiations for COP31 in Antalya in November.
There are several reasons why climate finance is particularly critical to the negotiations this year.
First, the current global volatility in fossil fuel costs is highlighting the need to transition to more secure, affordable and sovereign forms of renewable energy.
Second, the previous US$100 billion climate finance goal for developed countries expired in 2025. While developed countries claim this goal was met and exceeded, recipient countries are not feeling the claimed support and Oxfam’s analysis reveals why. The New Collective Quantified Goal on climate finance of US$300 billion by 2035 was agreed at COP29 but, so far, just a few countries have made pledges beyond the 2025 period.
Third, as a result of the inadequate support provided to low-income and vulnerable countries, climate finance remains one of the most contested issues at the COP negotiations. This year it is threatening to derail the talks unless Australia can steer the ship toward some safe harbour of progress in this area.
Like many other developed countries, the Australian government is yet to announce a new international climate finance commitment to replace its 2020-2025 pledge of A$3 billion, which the government reports it exceeded by nearly A$900 million.
A key test, therefore, of Australia’s leadership on climate finance will be the new goal that is set by the government, which could function as an important signal to like-minded countries who genuinely want to see progress made at COP31. Previously, Australia’s commitments have been well below what we consider Australia’s fair share of the previous US$100 billion climate finance goal (A$4 billion per annum), based on Australia’s historical emissions and its capacity to pay as a developed nation.
Looking ahead, Oxfam, along with other civil society experts and leaders, has been calling on the Australian government to triple its climate finance contributions in line with the tripling of the global climate finance goal from US$100 billion to US$300 billion per annum. We are calling for a new goal of A$11 billion over 2025-2030, scaling up from the A$1.356 billion provided in 2024-25 to A$2.7 billion by 2029-30 and hitting over A$4 billion by 2030-31 — other trajectories are of course possible. This should be delivered primarily as public, grant-based finance, particularly in light of the adaptation and loss and damage priorities of countries in our region.
With the bulk of this funding likely to be drawn from the aid budget, which is projected to be only around $5.6 billion at the end of this decade, the Australian government would need to commit a considerable amount of new and dedicated funding for climate aid to reach this target, or risk displacing other important development priorities. The government currently has a target that 80% of aid projects valued at over $3 million must have a climate change objective by 2028. This should bump up our climate finance spending numbers but, according to DFAT, most of this will be met from projects where climate is a secondary (or lower) objective. For context, just 8% of Australia’s climate finance between 2014-2023 was spent on projects where addressing climate change was the primary objective, and this proportion could actually get smaller over time to if even more projects are required to “multi-task” in pursuit of the 80% target — unless the government commits new and dedicated funding.
It makes sense that climate change is a secondary objective for much of Australia’s current aid spending. We don’t want to see reduced spending on other important aid priorities like health, education and gender equality, and we do want that spending to factor in climate change so as to avoid maladaptation and take advantage of any clear synergies between climate and other development outcomes. But we also need to see the Australian government rise to the huge new challenge that climate change poses, and mainstreaming it into the existing aid budget is simply not enough. Nor is hoping that private finance will deliver, particularly in a region where the adaptation and loss and damage needs are high, and there is little commercial return for private investors in these areas.
So to ensure dedicated funding, alongside the headline A$11 billion, five-year goal, we are calling for a target of 30% of ODA-eligible climate finance programs to have a principal focus on climate change by 2030, with a strong emphasis on locally led and gender-transformative programming.
Oxfam also argues that a requirement for gaining greater trust is adopting better and more transparent climate finance accounting and reporting methods. Reforms in this area must be on the agenda for climate finance negotiations; dollar figures alone should not be the sole focus. If the necessary reforms can be agreed, we will be able to secure a clearer and more credible understanding of the real financial support being delivered — and of progress toward the global goal.
If Australia announces a strong pledge at the start of COP31, with new, dedicated climate finance, and can steer other like-minded developed countries to do the same, then it will have secured one crucial element in building the trust required to help ensure COP31 negotiations progress productively.
