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UK demands repayment of climate aid to poor nations

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Britain's £800m international project to help the poorest countries in the world adapt to climate change was under fire last night after it emerged that almost all the money offered by Gordon Brown will have to be repaid with interest.The UK environmental transformation fund was announced by the prime minister to international acclaim in November 2007, and was widely expected to be made in direct grants to countries experiencing extreme droughts, storms and sea level rise associated with climate change.But the Guardian has learned that the money is not additional British aid and will be administered by the World Bank mainly in the form of concessionary loans which poor countries will have to pay back to Britain with interest.A letter signed by two government ministers and seen by the Guardian shows that Britain has been pressing other G8 countries to also give money to the new fund, which will be launched in July in Japan at the G8's annual meeting."UK contributions from the environmental transformation fund ... will need to be primarily concessional loans. We will also talk to other donor countries about the possibility of grants," the letter, signed by environment minister Phil Woolas and international aid counterpart Gareth Thomas, said.The letter shows that the US has resisted the idea of loans, preferring to give developing countries grants. "We understand that grants would be the US preferred approach," the British ministers say. Both their departments are understood to have argued strongly that the money should be in direct grant form on principle, but were overruled by the Treasury.
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