Is Luxembourg’s financial climate policy the fairy tale it pretends to be? Do the national contributions to the Green Climate Fund correspond to the country’s responsibility in the International Financial Architecture of the UN?
Some insights into the numbers and ethics of a small country that often wants to be named among the big global players except when it comes to real responsibility.
At the opening of the 77th UN General Assembly in New York, UN Secretary-General António Guterres called on “all developed economies to tax the windfall profits of fossil fuel companies. Those funds should be re-directed in two ways: to countries suffering loss and damage caused by the climate crisis; and to people struggling with rising food and energy prices.”[1]
Only two days later – at the ‘Climate Ambition Summit’ – Guterres declared international climate policy to be “a matter for the boss” in the run-up to COP28, almost a revolution in the otherwise so diplomacy-oriented environment of the United Nations. Grassroots democracy at climate conferences has been replaced by a ranking of the member states showing who is serious about climate action and who is not. Guterres made it clear that there is no longer time to leave international climate policy to the member states alone.[2]
The Green Climate Fund – a disappointing performance by UN member states
According to GCFWatch, currently being managed by the Philippines-based Institute for Climate and Sustainable Cities, the Green Climate Fund (GCF) ) – as the world’s largest multilateral fund dedicated to helping countries of the global South address the climate crisis – “has the potential to be responsive to mitigation and adaptation needs, while building capacity to implement best practice environmental and social safeguards and ensure Indigenous Peoples’ rights, gender equality, meaningful consultation and participation, including Indigenous Peoples’ right to Free, Prior and Informed Consent (FPIC), transparency, and access to remedy. GCF financing thus leverages its network to raise the bar on effective, rights-based climate action”.[3]
GCFWatch considers the GCF “as the flagship fund to support implementation of the Convention and the Paris Agreement”. Its adaptation finance is one of the most important resources for the most vulnerable communities. Given the drastic under-resourcing of adaptation the GCF has the critical mandate “to provide a balance of funds between adaptation and mitigation and to ring-fence more than half of its adaptation funding for Small Island Developing State (SIDS), Least Developed Countries (LDCs), and African states”.[4]
However, considering that the pledge made by the economically strong countries made in Copenhagen in 2009 was to reach the US $100 billion target as early as 2020, the current global payment status is nothing less than a deception, as in 2020 the participating countries only pledged US $83.3 billion to reduce emissions in countries of the global South and to advance adaptation to the impacts of climate change. The target was not reached until 2023, and new pledges from 24 countries amount to US $9.322 billion for the period 2024 to 2027.
This is why the Green Climate Fund Observer Network of civil society, Indigenous Peoples and local communities urged the UN member states to be more ambitious by calling for a second replenishment that more than doubles the resources pledged under GCF-1. This would also mean that COP28 must agree on a needs-based New Collective Quantified Goal on Climate Finance.
Has Luxembourg paid its ‘fair share’ to the Green Climate Fund?
From a financial perspective, the climate summit in New York was a pleasant event for Luxembourg: together with France, Spain, Slovakia and Slovenia, the Grand Duchy announced new payments to the Green Climate Fund for the second replenishment round due in 2023 (GCF-2). In total, the climate summit raised US $7.3 billion in pledges, including US $1.7 billion from France, US $240 million from Spain and US $54 million from Luxembourg. Slovenia (US $1.6 million) and Slovakia (US $2.2 million) and nine other countries also contributed to the GCF-2.[5]
According to an analysis made by the Natural Resources Defense Council (NRDC) in New York, the global initial resource mobilization (IRM) in 2014 received US $10.3 billion in pledges from 45 countries, the first replenishment in 2019 received another US $10 billion in pledges from 32 countries, just to give an idea of how slow the international support had been in reaching the US $100 billion goal that should have been available by 2020.[6]
In total, Luxembourg’s contributions and pledges amount to US $147.1 million (October 2023), of which US $46.8 million in the initial resource mobilisation, US $46.3 million in the first replenishment and US $54 million in the second replenishment. Comparing these payments or the pledges made in the following two tables taken from ‘Overseas Development Institute’s (ODI) Working paper ‘A fair share of climate finance?’ (September 2023)’, the adaptation edition, with Luxembourg’s calculated ‘fair’ share of the US $100 billion target (based on each country’s historical responsibility for cumulative greenhouse gas emissions, gross national income and population size), Luxembourg was already in the black in 2021 with US $20 million. This applies both to total climate finance and to the share earmarked for the US $40 million target for adaptation measures. With the current pledges, Luxembourg has a ‘surplus’ of US $57 million.
Scorecard of progress towards Annex II countries’ fair share of the US$100 billion climate finance goal (2021)[7]
Scorecard of progress towards Annex II countries’ fair share of the doubling of adaptation finance (2021) [8]
So, everything’s fine in Luxembourg, isn’t it?
According to the ODI paper, Luxembourg pays its fair share. But does this also mean that the government is taking the climate policy responsibility for economic activities of companies based in Luxembourg? Does it mean that Luxembourg is using the legislative, economic and financial opportunities available to it to make national and global climate-friendly decisions? Are the decisions on social and environmental justice really based on the needs of the people concerned?
The sobering answer is: No. The reasons are obvious (and for the biggest part not new):
- Unambitious international targets and negotiations excluding key interlocutors: although Luxembourg has contributed its fair share to the 100 billion target, this target is neither socially fair nor climate-friendly, as it includes only a fraction of the necessary funds, just like the loss and damage fund. Moreover, it has not been set in consultation with the affected countries of the global South. The parties involved are aware of this. In addition to climate financing for mitigation and adaptation projects, and in addition to development cooperation, adequate funds must be made available for a loss and damage fund. Luxembourg should lobby internationally for adequate funding of the loss and damage mechanism in accordance with the polluter pays principle and assume its own responsibility in an exemplary manner – financially and fairly and not only with the € 10 million that have been announced.
- Denial of responsibility: Luxembourg likes to present itself as a cosmopolitan, innovative and diplomatic player that can and wants to act on the global stage. Unfortunately, when it comes to taking responsibility, it often means ‘keeping its head down’ and referring to the country’s small size. This behaviour has become a political tactic.
- Lack of coherence between cooperation, environmental, economic and financial policies.
- What seems to be a fairy-tale tax haven to multinational corporations and the financial sector is quickly turning into a nightmare for the global South. One of the unwritten laws in Luxembourg seems to be the untouchability of multinationals and the financial sector, despite the known impacts of their activities on human rights, the climate and the global South. Is justice only for the ‘elite’? This is not only a big mistake but in principle tantamount to corruption.
It’s your turn, Luxembourg. Be the change that the urgency of the crisis demands, no one is too small to make a difference!

Start by initiating the legislative process for a national due diligence (including the financial sector) with all of its positive impacts on climate justice and human rights, and don’t hide behind the EU Corporate Sustainability Directive. Then go ahead – with its recommendations and demands during the parliamentary elections, Luxembourg’s civil society has given a lot of ideas to face these challenges and to change them for the better.
Furthermore, the government is called upon to advocate for international debt relief for vulnerable states in the context of loss and damage: since a climate shock can trigger debt crisis almost automatically and overnight, debt relief is an appropriate instrument. A debt relief initiative for highly indebted (island) states could, in the event of a natural disaster – and only then – transform existing debt, i.e. debt already budgeted for in public budgets, into an instrument of emergency and reconstruction aid. And as with all financial reporting, transparency should also be the key.
But what is the real ‘fair share’ in climate politics?
First of all, inclusiveness is key. The success of COP28 will be determined by how inclusive the parties are. The outcome will not be determined by political feasibility, but by the perspective and the willingness to change for the better by including the most vulnerable people and states.
“No, we are not all in this together”, says Nina Lakhani, senior climate justice reporter for The Guardian. “We didn’t all contribute equally to the climate crisis; we haven’t all benefited equally from burning fossil fuels, and we’re not all suffering the impacts of drought, extreme heat, floods, melting glaciers, and sea level rise in the same way. Climate reparations are about making the polluters pay for the loss and damage they’ve caused – and continue to cause – as a matter of justice and economic necessity.”[9]
But a new study (‘Time to pay the piper’) offers hope: for the first time, researchers have quantified the economic burden caused by individual companies that have made – and continue to make – fortunes from heating the planet with fossil fuels.[10] Corporations such as BP, Shell, ExxonMobil, TotalEnergies, Saudi Arabia’s state-owned oil company and Chevron are among the top 21 polluters responsible for US $5.4tn in droughts, wildfires, rising sea levels, melting glaciers, and other climate disasters by 2050.
So, these numbers bring us much closer to a realistic estimate of fair climate finance. These numbers give a glimpse of the sums that should be added to what the rich countries owe the global South. Right now, we face the situation that even if all countries were to meet their fair share of climate finance, $100 billion a year remains a fraction of what is needed to support developing countries to achieve their climate goal as stated in the Paris Agreement. Needs amount to an estimated $4 trillion by 2030 to keep to a 1.5C trajectory. [11] And in order to put an end to the continuation of colonial practices in climate financing, the distribution of funds according to the watering can principle must finally stop. The people living on the frontline of climate change in countries of the Global South are the ones who have to formulate the financial needs in terms of the damage caused, not those who can afford COP tickets. However, financial compensation is and remains only part of the task. Global justice primarily requires equal access to resources for all and the limitation of one’s own ecological footprint to a value that does not impair other people in their way of life and thus also sustainably preserves the basis of life.
A new report by OXFAM illustrates very impressively that this is not at all the case at present: “It would take around 1,500 years for someone from the bottom 99 per cent of the population to produce as much carbon as the richest billionaires in one year.”[12]
Here we are at the heart of climate justice: compensating for the atmosphere as a natural commons that has not been used equitably for all.
The new Luxembourgish government urgently needs to understand and address this major challenge to contribute to a consistent policy of social justice – nationally and globally. If you look at the current coalition agreement, legitimate doubts arise concerning the question of social justice.[13]
Do all fairy tales begin with “once upon a time”? No, many of them begin, “if I am elected, I promise …”
Notes:
[1] https://unric.org/it/secretary-general-remarks-at-the-opening-of-the-general-debate-of-the-77th-session-of-the-un-general-assembly-20-september-2022/ (viewed 12 November 2023)
[2] Pötter, B. (2023), ‘’Ehrgeiz-Gipfel’: Guterres meldet Führungsrolle beim Klima an’, Table.Media, ‘Climate.Table’, 21 September 2023, https://table.media/climate/analyse/ehrgeiz-gipfel-guterres-meldet-fuehrungsrolle-beim-klima-an/ (viewed 12 November 2023)
[3] Green Climate Fund Watch (2023), Statement on the climate ambition summit, https://www.gcfwatch.org/gcfnews/statement-on-the-climate-ambition-summit (viewed 12 November 2023)
[4] Green Climate Fund Watch (2023), Statement on the Second Replenishment of the Green Climate Fund, https://www.gcfwatch.org/wp-content/uploads/2023/04/GCF_ReplenishmentStatement_EN.pdf (viewed 12 November 2023)
[5] Tagesspiegel, 25 September 2023: ‘Fünf Länder zahlen in grünen Fonds GCF ein’, https://background.tagesspiegel.de/sustainable-finance/fuenf-laender-zahlen-in-gruenen-fonds-gcf-ein (viewed 12 November 2023)
[6] Thwaites, J. (2023), ‘Green Climate Fund Pledge Tracker’, Natural Resources Defense Council, 5 October 2023, https://www.nrdc.org/bio/joe-thwaites/green-climate-fund-pledge-tracker (viewed 12 November 2023)
[7] Pettinotti, L., et al. (2023) ‘A fair share of climate finance? The adaptation edition. ODI Working Paper’, London: ODI (https://cdn.odi.org/media/documents/ODI-OM-FairShare-WP-Aug23-Proof06_urGrtOo.pdf) (viewed 12 November 2023)
[8] Pettinotti, L., et al. (2023) ‘A fair share of climate finance? The adaptation edition. ODI Working Paper’, London: ODI (https://cdn.odi.org/media/documents/ODI-OM-FairShare-WP-Aug23-Proof06_urGrtOo.pdf) (viewed 12 November 2023)
[9] Lakhani, N., « Fossil fuel firms owe climate reparations of $209bn a year, says a study », The Guardian, 19 mai 2023, https://www.theguardian.com/environment/2023/may/19/fossil-fuel-firms-owe-climate-reparations-of-209bn-a-year-says-study (consulté le 8 novembre 2023)
[10] Grasso, M., Heede, R. (2023), ‘Time to pay the piper: Fossil fuel companies’ reparations for climate damages’, CellPress, 19 May 2023, vol. 6, edition 5, https://www.cell.com/one-earth/fulltext/S2590-3322(23)00198-7 (viewed 12 November 2023).
[11] https://floodresilience.net/
[12] https://policy-practice.oxfam.org/resources/climate-equality-a-planet-for-the-99-621551/
[13] https://www.reporter.lu/wp-content/uploads/2023/11/Letzebuerg-fir-dZukunft-staeerken.pdf
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