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COVID-19 spending helped to lift foreign aid to an all-time high in 2020

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Foreign aid from official donors rose to an all-time high of USD 161.2 billion in 2020, up 3.5% in real terms from 2019, boosted by additional spending mobilised to help developing countries grappling with the COVID-19 crisis, according to preliminary data collected by the OECD.

Within total Official Development Assistance (ODA) provided by members of the OECD’s Development Assistance Committee in 2020, initial estimates indicate that DAC countries spent USD 12 billion on COVID-19 related activities. Some of this was new spending and some was redirected from existing development programmes, according to an OECD survey carried out in April and May 2020. Most providers said they would not discontinue programmes already in place.

Total ODA equated to around 1% of the amount countries have mobilised over the past year in economic stimulus measures to help their own societies recover from the COVID crisis. Meanwhile the global vaccine distribution facility COVAX remains severely underfunded, OECD Secretary-General Angel Gurría said during a virtual presentation of the aid data.

“Governments globally have provided 16 trillion dollars’ worth of COVID stimulus measures yet we have only mobilised 1% of this amount to help developing countries cope with a crisis that is unprecedented in our lifetimes,” Mr Gurría said. “This crisis is a major test for multilateralism and for the very concept of foreign aid. We need to make a much greater effort to help developing countries with vaccine distribution, with hospital services and to support the world’s most vulnerable people’s incomes and livelihoods tobuild a truly global recovery.”

Foreign aid rose in a year that saw all other major flows of income for developing countries – trade, foreign direct investment and remittances – decline due to the pandemic, and domestic resources under increased pressure. Total external private finance to developing countries fell 13% in 2020 and trade volumes declined by 8.5%. (See the OECD’s Global Outlook on Financing for Sustainable Development 2021.)

The rise in 2020 ODA was also affected, however, by an increase in loans by some donors. Of gross bilateral ODA, 22% was in the form of loans and equity investments, up from around 17% in previous years, with the rest provided as grants.

The 2020 ODA total is equivalent to 0.32% of DAC donors’ combined gross national income, up from 0.30% in 2019 but below a target of 0.7% ODA to GNI. Part of the rise in the ratio was due to the fact that GNI fell in most DAC countries. Six DAC members – Denmark, Germany, Luxembourg, Norway, Sweden and the United Kingdom – met or exceeded the 0.7% target. Among non-DAC donors, whose assistance to developing countries is not included in the ODA total, Turkey provided aid equivalent to 1.12% of its GNI.

ODA rose in 16 DAC countries, with some substantially increasing their aid budgets to help developing countries respond to the pandemic. The largest increases were in Canada, Finland, France, Germany, Hungary, Iceland, Norway, the Slovak Republic, Sweden and Switzerland. ODA fell in 13 countries, most notably in Australia, Greece, Italy, Korea, Luxembourg, Portugal and the United Kingdom. G7 donors provided 76% of total ODA and DAC-EU countries 45%. ODA provided by EU Institutions jumped by 25.4% in real terms as they mobilised funds for COVID-19 related activities and increased sovereign lending by 136% over 2019. 

Short-term support to help with the COVID-19 crisis focused on health systems, humanitarian aid and food security, according to the OECD survey. Aid providers indicated they would focus in the medium-term on making diagnostics and vaccines available to countries in need, as well as offering support to address the economic and social repercussions of the pandemic.

“At the outset of the pandemic, DAC donors said that they would strive to protect ODA volumes. I am grateful and proud to say that they have done that and more. Donor countries have stepped up to support developing countries struggling with the health and economic fallout of COVID-19, even as their own economies and societies have been battered,” said DAC Chair Susanna Moorehead. “The next few years will be tough and the finance we provide must work harder than ever. If we really are going to build forward better and greener, we must focus on the most vulnerable countries and the most vulnerable people in them, especially women and girls.”

Bilateral ODA to Africa and least-developed countries rose by 4.1% and 1.8% respectively. Humanitarian aid rose by 6%. Excluding aid spent on hosting refugees within donor countries – which was down 9.5% from 2019 to USD 9.0 billion and mainly concerned Canada, Iceland and the Netherlands – ODA rose by 4.4% in real terms in 2020.

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Clean energy demand for critical minerals set to soar as the world pursues net zero goals

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Supplies of critical minerals essential for key clean energy technologies like electric vehicles and wind turbines need to pick up sharply over the coming decades to meet the world’s climate goals, creating potential energy security hazards that governments must act now to address, according to a new report by the International Energy Agency. 

The special report, The Role of Critical Minerals in Clean Energy Transitions, is the most comprehensive global study to date on the central importance of minerals such as copper, lithium, nickel, cobalt and rare earth elements in a secure and rapid transformation of the global energy sector. Building on the IEA’s longstanding leadership role in energy security, the report recommends six key areas of action for policy makers to ensure that critical minerals enable an accelerated transition to clean energy rather than becoming a bottleneck.

“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions,” said Fatih Birol, Executive Director of the IEA. “The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action. By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions.”

“Left unaddressed, these potential vulnerabilities could make global progress towards a clean energy future slower and more costly – and therefore hamper international efforts to tackle climate change,” Dr Birol said. “This is what energy security looks like in the 21st century, and the IEA is fully committed to helping governments ensure that these hazards don’t derail the global drive to accelerate energy transitions.”

The special report, part of the IEA’s flagship World Energy Outlook series, underscores that the mineral requirements of an energy system powered by clean energy technologies differ profoundly from one that runs on fossil fuels. A typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a similarly sized gas-fired power plant.

Demand outlooks and supply vulnerabilities vary widely by mineral, but the energy sector’s overall needs for critical minerals could increase by as much as six times by 2040, depending on how rapidly governments act to reduce emissions. Not only is this a massive increase in absolute terms, but as the costs of technologies fall, mineral inputs will account for an increasingly important part of the value of key components, making their overall costs more vulnerable to potential mineral price swings.

The commercial importance of these minerals also grow rapidly: today’s revenue from coal production is ten times larger than from energy transition minerals. However, in climate-driven scenarios, these positions are reversed well before 2040.

To produce the report, the IEA built on its detailed, technology-rich energy modelling tools to establish a unique database showing future mineral requirements under varying scenarios that span a range of levels of climate action and 11 different technology evolution pathways. In climate-driven scenarios, mineral demand for use in batteries for electric vehicles and grid storage is a major force, growing at least thirty times to 2040. The rise of low-carbon power generation to meet climate goals also means a tripling of mineral demand from this sector by 2040. Wind takes the lead, bolstered by material-intensive offshore wind. Solar PV follows closely, due to the sheer volume of capacity that is added. The expansion of electricity networks also requires a huge amount of copper and aluminium.

Unlike oil – a commodity produced around the world and traded in liquid markets – production and processing of many minerals such as lithium, cobalt and some rare earth elements are highly concentrated in a handful of countries, with the top three producers accounting for more than 75% of supplies. Complex and sometimes opaque supply chains also increase the risks that could arise from physical disruptions, trade restrictions or other developments in major producing countries. In addition, while there is no shortage of resources, the quality of available deposits is declining as the most immediately accessible resources are exploited. Producers also face the necessity of stricter environmental and social standards.

The IEA report provides six key recommendations for policy makers to foster stable supplies of critical minerals to support accelerated clean energy transitions. These include the need for governments to lay out their long-term commitments for emission reductions, which would provide the confidence needed for suppliers to invest in and expand mineral production. Governments should also promote technological advances, scale up recycling to relieve pressure on primary supplies, maintain high environmental and social standards, and strengthen international collaboration between producers and consumers.

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Global e-commerce jumps to $26.7 trillion, fuelled by COVID-19

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Parts of the online economy have boomed since COVID-19 began, while some pre-pandemic big-hitters have seen a reversal of their fortunes in the last year, amid widespread movement restrictions, UN economists have found.

According to UN trade and development experts UNCTAD, the e-commerce sector saw a “dramatic” rise in its share of all retail sales, from 16 per cent to 19 per cent in 2020.

The digital retail economy experienced most growth in the Republic of Korea, where internet sales increased from around one in five transactions in 2019, to more than one in four last year.

“These statistics show the growing importance of online activities”, said Shamika Sirimanne, UNCTAD’s director of technology and logistics. “They also point to the need for countries, especially developing ones, to have such information as they rebuild their economies in the wake of the COVID-19 pandemic.” 

The UK also saw a spike in online transactions over the same period, from 15.8 to 23.3 per cent; so too did China (from 20.7 to 24.9 per cent), the US (11 to 14 per cent), Australia (6.3 to 9.4 per cent), Singapore (5.9 to 11.7 per cent) and Canada (3.6 to 6.2 per cent).  

Online business-to-consumer (B2C) sales for the world’s top 13 companies stood at $2.9 trillion in 2020, UNCTAD said on Friday.

Bumpy ride

UNCTAD also said that among the top 13 e-commerce firms – most being from China and the US – those offering ride-hailing and travel services have suffered.

These include holiday site Expedia, which fell from fifth place in 2019 to 11th in 2020, a slide mirrored by travel aggregator, Booking Holdings, and Airbnb.

By comparison, e-firms offering a wider range of services and goods to online consumers fared better, with the top 13 companies seeing a more than 20 per cent increase in their sales – up from 17.9 per cent in 2019.

These winners include Shopify, whose gains rose more than 95 per cent last year – and Walmart (up 72.4 per cent). 

Cashing-up

Overall, global e-commerce sales jumped to $26.7 trillion in 2019, up four per cent from a year earlier, the UN number-crunchers noted, citing the latest available estimates.

In addition to consumer online purchases, this figure includes “business-to-business” (B2B) trade, which put together was worth 30 per cent of global gross domestic product two years ago.

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COVID-19 has reshaped last-mile logistics, with e-commerce deliveries rising 25% in 2020

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COVID-19 has shifted the way people buy goods, accelerating the rise in online shopping and e-commerce deliveries. According to a new report from the World Economic Forum, this has led to a 25% rise in consumer e-commerce deliveries in 2020.

The new report, Pandemic, Parcels and Public Vaccination: Envisioning the Next Normal for the Last-Mile Ecosystem, explores changes seen over the last year which will greatly influence last mile deliveries in the future. For example, it’s expected that 10%-20% of the recent increase in e-commerce deliveries will continue after the pandemic and the lifting of COVID-19 restrictions.

“Covid-19 shutdowns have completely reshaped how we live and of course this includes how and what we’re buying,” said Christoph Wolff, Head of Mobility, World Economic Forum. “Leaders must consider and respond to the effects COVID-19 has had on e-commerce deliveries and what impact these changes will have on their cities and communities.”

Beyond rising demand, the past year has also seen a large shift to greener delivery options, with wider spread EV across the industry and more stringent carbon emission rules from cities expected to shape delivery networks in the near future.

Overall, the report finds six main structural changes to the delivery and logistics sector that are expected to last:

Six structural changes

The pandemic has caused an increase in last-mile deliveries that are likely to persist.
In 2020, business-to-consumer parcel deliveries have risen by about 25%. The report suggests that part of this increased demand will be durable, with at least 10%-20% of the growth remaining post-pandemic.

Consumers increasingly buy new types of products online and consider environmental and health impact when buying.
As consumers continue to buy a wider array of goods online, they are also becoming more ecologically aware. For example, 56% of millennials cite environmental protection as the reason for choosing alternatives to home delivery.

Decarbonization of last-mile deliveries has accelerated.
Companies and cities have ramped up commitments to make emission-free deliveries, while many pandemic-related economic stimulus packages, especially in the European Union and China, contain provisions to support green mobility and goods transport.

Faced with budget challenges and increased transport needs, cities steer last-mile transitions.
Many cities, like Seattle and Boston, have started to repurpose kerb space to designated delivery pick-up. Others, including Santa Monica and Amsterdam, are taking bold action on cleaner delivery with “zero-emission delivery zones” and electric vehicle charging infrastructure.

Proven technologies are fuelling the last-mile ecosystem revolution.
While disruptive new technologies, such as drones and delivery robots, will continue to emerge, the last-mile revolution is happening now as proven technologies scale up. The likes of parcel lockers and data sharing for load pooling are being adopted around the world as the costs of implementation decrease

New business models emerge to meet increased demand for sustainable delivery vehicles.
Certain logistics companies are now offering services to online retailers, which will help them identify the delivery routes most suited to make the immediate transition to electric delivery vehicles.

Last mile for vaccines

While ensuring equitable access to COVID-19 vaccines remains the most pressing issue in global vaccine distribution, effective last-mile delivery is another critical issue for countries. The key challenges are cold storage, second vaccine dose needs, and a disconnect between the vaccine and patient journey.

“Governments and logistics companies could think about teaming up with players who are experienced in managing very local, capillary demand and with integrating a large number of local retail outlets,” says Anja Huber, Engagement Manager, McKinsey & Company. “Examples include large online retailers, eGrocery giants and technology platform players”

Potential solutions countries can implement for efficient vaccine delivery include real-time logistics planning, data integration, centralized management of delivery strategies at the national level and many more.

There are also early examples of countries that have handled this challenge particularly well. While there are many factors in vaccine distribution success, broadly speaking, countries with tight integration of healthcare and logistics stakeholders seem to show the highest national vaccination rates two months into 2021.

These include Israel, the UK and Chile outperforming other countries with more decentralized healthcare systems, like the US and Germany, which had slower initial vaccine rollouts.

Clearly, much still needs to be done to ensure developed countries overcome operational issues with vaccine delivery. However, mobility solutions should not overshadow an even larger ethical challenge in the differences of vaccine access between the global north and global south, which is a priority for greater equity.

Future of the last mile

The impact of COVID-19 on the last-mile delivery has accelerated existing trends across the sector, leading to six structural changes expected to shape the future of last mile deliveries.

These will be part of a broader urban mobility transition, driven by public policy and company actions. As cities and logistics leaders continue the sustainable urban delivery transition, close public-private coordination will be critical. Zero Emissions Urban Fleets (ZEUF) network, for example, provides a relevant dedicated stakeholder platform for this work.

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