Harnessing remittances

This case study covers the Seasonal Workers Programme under the Coalition government in Australia and the Temporary and Circular Labour Migration Scheme under the Partido Popular government in Spain

Introduction

The amount of public money available for decarbonising and adapting to the effects of climate change is decreasing. Governments in developed countries are facing periods of low growth, high inflation, and global uncertainty - and they are responding to this by cutting international aid to fund domestic priorities. 

In 2024, developed countries agreed a new climate finance goal of $300bn a year by 2035. This was triple the previous climate finance goal of $100bn a year by 2020. In 2022, the most recent year for which we have data, developed countries provided $115.9bn in climate finance for developing countries. To reach $300bn a year would require $16.6bn extra every year until 2035. But, due to cuts in overseas development aid in many countries, estimated global public spending on climate finance is actually due to go down.  

With the increased demand, there is an urgent need to use new sources to fund climate finance. One source would be to increase the number of countries obligated to pay climate finance to include those like China and the Gulf states. Another way to increase the amount of climate finance available is to make it easier for companies to invest in climate finance projects in developing countries. However, private climate finance primarily funds mitigation finance, which reduces carbon emissions, rather than adaptation finance which enables communities to adapt to the effects of climate change. 

A currently underutilised way of funding adaptation through private finance would be through remittances. Remittances are the money sent back to their home country by those who have migrated to other countries. The Center for Global Development (CGD) has suggested that in certain cases remittances could be classified as private climate finance, if migration schemes are explicitly targeted at recruiting from climate vulnerable regions, increasing resilience in these communities. 

Two examples of migration schemes which deliberately recruited temporary migrants from climate vulnerable regions and led to subsequently high remittances are the Seasonal Workers Program (SWP), which was introduced by the last Coalition government in Australia from 2012 to 2021; and the Temporary Circular Labour Migration Scheme programme that operated under the last Partido Popular government in Spain from 2007 to 2012. 

In both cases, these schemes were temporary so did not contribute to permanent immigration, rather fulfilling a seasonal gap in the agricultural workforce. These schemes were also circular, with employers in the scheme aiming to hire the same migrant workers year after year. Future schemes could be adopted to provide further private adaptation finance and to make remittances more effective transfers of money. 

The need for climate finance 

Climate finance funds anything that contributes to mitigating greenhouse gas emissions or adapting to the effects of climate change. This includes investment in renewable energy generation or electric vehicles to mitigate carbon emissions, and flood defences or air conditioning to deal with the effects of climate change. In developed countries, climate finance is primarily funded through private companies like car manufacturers or energy companies. But in developing countries much more is funded through public finance through bilateral agreements or multilateral development banks like the World Bank or the African Development Bank. 

There is a significant gap between the current level of climate finance and the level of climate finance needed for the world to decarbonise and adapt to the impacts of climate change. The Independent High Level Expert Group on Climate Finance estimates that emerging markets and developing economies (excluding China) need $1 trillion a year by 2025 to decarbonise. This is contrast to the $209 billion that these countries received in climate finance in 2023.

These figures cover all climate finance, including private finance and finance originating from emerging economies. However, the new climate finance goal, set at COP29 in 2024, is for developed countries to give $300bn a year by 2035. 

When this goal was announced at COP29, commentators from developing countries argued that the goal was a “betrayal” that meant “death and misery” for the most climate vulnerable countries. However, the developed countries expected to contribute to this goal were consistent in arguing that it would be difficult to contribute additional funding without new sources of climate finance. 

Since the new climate finance goal was agreed at COP29, the forecast level of global development aid is expected to go down. This will include climate finance. This is due to the aid cuts by donor countries, primarily the USA but also the UK and Germany. Additionally, because many countries tie the level of aid spent to gross national income (GNI), or GDP, forecasted spending will decrease in times of economic uncertainty or downturn.  

The adaptation gap

Within overall climate finance there is a significant disparity between funding for mitigation and funding for adaptation. Adaptation finance makes up only 5% of total climate finance. Of this, only 2.75% of adaptation finance comes from private sources, compared to 49% of climate finance as a whole. Traditionally the public finance focus has been on mitigating climate change by reducing carbon emissions as this is more cost effective in the long run. Because of this large gap in funding for adaptation, finding new sources of international climate finance that focus on adaptation, and especially private sector sources, are especially important. 

Adaptation measures like flood defences provide less direct financial return on investment, compared to mitigation measures like new renewable energy projects which can be operated for a profit. Private adaptation finance does exist, particularly where this adaptation also protects food crops or private capital investment from extreme weather. But these investments are usually concentrated in countries where there is the money to invest in adaptation measures. 

New sources of climate finance 

A variety of new sources of climate finance have been proposed, including a wealth tax on the richest 1% of people in the world or a tax on frequent flyers. While initial polling on these measures suggests that many people are supportive of them, polling questions which explicitly highlight the precise level of wealth of the richest 1% globally are scarce. At all levels of income, it has been shown that people significantly underestimate how wealthy they are. It is likely, therefore, that the high levels of public support in wealthier countries for a wealth tax would evaporate if polling contextualised the 1% in question. This would include highlighting that the global 1% of income is equivalent to £49,000 a year post-tax and that even a full time minimum wage worker in the UK is part of the highest 6% of global earners. To administer this tax, it would require every country in the world to sign up to enforce it. It is in effect, not practical. 

A frequent flyer levy under most methodologies would also impact around 1 in 5 people in the UK. This would also disproportionately affect people who happened to have family in other countries, particularly if they were elderly or ill. However, the biggest issue with frequent flyer levies is that campaigners who argue for it are pursuing mutually contradictory ends. If the benefit of the levy is environmental then it will be effective in reducing the number of frequent flyers in the UK. This is the reason the Climate Change Committee has included a frequent flyer levy in its policy suggestions. However, if a levy discourages flights then there is a limit to how useful a tool it is for new climate finance as it will fail to raise significant amounts of money. Therefore, while a frequent flyer may be adopted in the future by some governments, it will most likely be done so as a measure to mitigate the carbon emissions from aviation, rather than a new climate finance source. 

Other suggestions for new climate finance sources have included more market-based solutions, such as increasing the amount of private finance mobilised by public finance instruments like British International investment (BII). The BII invests in private sector projects in developing and emerging market economies with the aim of encouraging sustainable growth and reducing poverty. Alternatively, measures such as a carbon border adjustment mechanism (CBAM) raise revenue by applying a cost to products like steel when they are imported from countries with less rigorous environmental policies. These sources may be helpful in funding climate finance but they still rely heavily on state mechanisms. 

If total climate finance is to increase, it will need to include new sources of private finance. At COP29, rules on Article 6 of the Paris Agreement were finally agreed, bringing an international carbon market one step closer to existence. This is a good development but there is still a long way to go before it is operational. In the meantime, some policymakers have been turning to harnessing existing private flows of finance to work for climate adaptation. 

Remittances

It is common for migrants who have migrated from a poorer country to a richer one to send money back to their family still living in their country of origin. Because of the difference in earning potential between the two countries, they are able to provide a high level of support to people back home, despite the higher cost of living in the developed country and the high cost of most international money transfer platforms. These transfers are known as remittances and they can be used as an effective tool for development. 

Remittances hold a number of advantages over traditional forms of development assistance. Chief amongst these is the scale. In many countries, remittance flows surpass combined flows from foreign direct investment (FDI) and Overseas Development Aid (ODA) combined. This includes the whole of Africa, where remittance flows surpassed $100bn in 2022, making up around 6% of total African GDP. This is double the level of total global adaptation finance from public and private sources and nearly the same as total public climate finance transferred to developing countries in that year. 

Remittances are also a very resilient source of income. During the COVID-19 pandemic, remittances fell by just 1.1%, compared to the 3% fall experienced by overall global income. When there are global economic shocks, remittances tend to remain stable or even rise. This is because they are not driven by business needs but by emotions and a feeling of obligation. When an origin country is in crisis, these remittances can rise further as migrants want to support their family or friends at home. 

One of the reasons that remittances are particularly useful in a development context is that they are direct cash transfers. This means that there is less money spent on administrative costs, or on measuring and reporting impacts. Because of this, many conservative voices from developing countries have suggested that remittances are a more effective means of providing financial assistance to developing countries than traditional development finance. 

Remittances as climate finance

One study of farmers in Ghana showed that all farmers assessed felt that the climate was changing and that it made it more difficult to farm because of lower rainfall and longer periods of drought. The study assessed the types of adaptation practices that farmers were using and what the impact of remittances was on the farmers receiving them. 

The study found that remittances accounted for 64% of the variation in smallholder farmers’ adoption of climate change adaptation strategies in northern Ghana. This means that remittances were the single most influential factor in explaining why farmers chose to adopt certain climate adaptation practices like using drought resistant seeds or irrigating their land more than other factors like education or access to credit. Another study by BASE and Oxfam in the Pacific found that almost half of the receivers of remittances in Tonga, Fiji, and Vanuatu used these remittances to respond to extreme weather events and rebuild homes and farms more resiliently. If migrants come from climate vulnerable nations then the remittances sent are likely to fund some adaptation measures. There are not many studies on the role of remittances as adaptation measures, with most of the academic focus being on government funding or funding from international charities. 

The Center for Global Development has argued that the remittances from some seasonal migration schemes which draw on climate vulnerable countries for a workforce could be classified as private climate finance. In their assessment of how effective this measure could be, they highlight two examples from previous centre-right governments in Australia and Spain. 

Seasonal Workers Program (Australia) 

The Seasonal Worker Program (SWP), introduced by the Australian Liberal-National Coalition government in 2012, building on an earlier pilot programme, allowed Pacific islanders from Kiribati, Papua New Guinea, Tonga, Vanuatu, Samoa, Solomon Islands, Tuvalu, and Nauru to work in Australia. They were entitled to work in Australia for a single employer for nine of every twelve months. This was a very limited visa system for the migrants, who were tied to a single employer and not permitted to bring dependents or apply for another visa while working on the SWP.  

While initial demand for the visa was low, it has since grown, leading to 12,000 workers a year being employed on the scheme, rising to an estimated 37,500 by 2030. Around 86% of workers on this scheme send home remittances and they send a high proportion of earnings. Migrant workers on this visa send more remittances to Tonga that Australia gives Tonga in aid. 

Over the two year pilot programme, which continues to this day as the Pacific Australia Labour Mobility (PALM) scheme, the average amount remitted by migrants was estimated at AUS$5000 with a total of AUS$9.7 million remitted by migrant workers over the scheme (around £4.6 million). 

While the scheme was not directly targeted at climate vulnerable countries, in practice every country included in the Seasonal Workers Program is considered to be highly climate vulnerable and communities actively sought to send migrants who would highly benefit.

Temporary and Circular Labour Migration scheme (Spain)

Spain also had a seasonal migration programme which focused on climate vulnerable countries and was directly targeted at communities which have suffered from natural disasters. This programme operated from 2007 to 2012 under the then Partido Popular prime minister, Mariano Rajoy. The Temporary and Circular Labour Migration (TCLM) scheme was originally a programme, much like the SWP, which gave visas to agricultural workers from countries which had circular migration agreements with Spain.

Under the TCLM scheme, Spain’s autonomous communities and regions were able to apply for a quota of agricultural workers, depending on their seasonal needs. The administrative burden of applying for quotas means that in practice, only a few regions in Spain used this migration programme - i.e. those where the need for agricultural workers was highest. 

This scheme was not originally intended to focus on climate vulnerable areas. But, after the eruptions of the Galeras volcano in Colombia in 2005 and 2006, the scheme was adapted to prioritise migrants from the worst affected areas. After this, the programme was explicitly expanded to other ‘rural communities, where crops and land are vulnerable to natural disasters’. The numbers involved were still relatively low, at around 1500 a year, and eventually the programme was paused due to an economic downturn and the availability of more migrants from within the Schengen zone to fulfill agricultural needs. Nonetheless, it served as an example of a successful migration programme which targeted communities impacted by climate change.

Seasonal work visas in the UK 

In the UK, great progress has been made in automating the process of growing and harvesting food. Root vegetables, wheat, and barley crops have been very successfully automated so that the amount of labour needed to produce food is minimal. However, softer fruits and vegetables or flowers that need to be individually picked cannot yet be harvested by machinery and so require seasonal labour to harvest. 

Efforts to get UK workers to fill these jobs have been largely unsuccessful. The 2020 ‘Pick for Britain’ scheme which aimed to get UK workers to fill seasonal fruit and vegetable picking jobs during the Covid-19 pandemic was closed with only 5-11% of the 70,000 jobs being filled.

Instead, the agricultural sector in the UK relies on short term seasonal work every year. Since 2021, this has been through the Seasonal Worker Visa. Around 45,000 visas are issued every year, primarily for fruit and vegetable picking, with some visas also issued for poultry processing. This is a limited scheme that does not permit migrant workers to bring dependents, access public funds, or take a second job. Migrants must also show they have enough personal funds to support themselves before they apply for a worker visa and must have the sponsorship of an employer in the UK. 

The National Farmers Union (NFU) has previously claimed that the withdrawal of a previous seasonal worker visa aimed at agricultural workers led to the scaling back of production, or ceasing work altogether for some horticultural farms, rather than filling these roles with UK workers. Seasonal work for agriculture, therefore, will be important for years to come to support the UK agriculture sector until automation becomes a viable option. 

Given the UK, and many other developed countries are unable to fill seasonal agricultural jobs from the UK workforce, remittances are almost certain from any group of migrants likely to fulfill these jobs. While ideally these migrant workers would spend their salaries in the UK, and therefore boost the local economy, practically, the demand for remittances is very inelastic. Attempts to regulate or tax remittances are much more likely to drive spending into unregulated methods than reduce spending. It is likely then, that some level of remittance spending is close to unavoidable. Changing the current Seasonal Worker Visa to recruit from climate vulnerable countries, perhaps from the Commonwealth, would allow these migrants to send remittances that improve community resilience and invest in climate adaptation measures like flood defences or drought resistant crops at no extra cost to the UK. 

Improving the efficiency of targeted circular migration 

The efficacy of a seasonal migration scheme to provide funding for climate adaptation relies on how large the remittances received are. 

Remittances are much more efficient than climate finance distributed through NGOs or development organisations at getting money to an affected community. This is because they do not rely on staff to establish bids for finance or to measure impact. But significant amounts of remittances are still lost in transit because they go through international payment services. 

Remittance costs tend to be higher on smaller payments, where the fees can reach 10-15% of the total sent. Cutting the cost of remittance fees would also bring an additional benefit of encouraging money to flow through official channels, making it easier to track money laundering and providing an official paper trail. When remittances fees fall, they incentivise the spending of more remittances. Indeed, for every 1% reduction in remittance fees, there is a 1.6% increase in the amount of remittances sent through official channels. 

The US has recently introduced a 3.5% tax on remittances, through the ‘One Big Beautiful Bill Act’. This means that any remittances sent through official channels will be subject to a tax and the sender subject to increased identity checks. This measure has been strongly criticised by the centre-right Tax Foundation on the grounds that it is likely to increase the compliance burden on remittance providers, while driving migrants sending remittances to more unregulated methods, like moving cash across borders, investing in cryptocurrency or simply asking an American national to transfer the money on their behalf. Worse still, the Tax Foundation warns that the new compliance regulations may discourage foreign investment into the US. 

The main way to reduce remittance fees would be to encourage more competitors to enter the international money transfers market. Policies to increase competition in the remittances market include publicising comparison sites, like the World Bank’s remittance database or the site previously hosted by the UK’s former Department for International Development (DFID). 

Once the money is in recipient communities, it can be used to boost climate resilience. But to do this requires this money to be prioritised for adaptation over other uses. In Samoa, one of the countries which was eligible for visas through the RSE scheme, a New Zealand scheme similar to the Seasonal Workers Programme, village leaders, as well as RSE employers, worked to encourage recipients of remittances to save for specific projects.   

Circular migration as climate adaptation

Climate migration is a source of growing concern for many governments in developed countries. But while climate-led migration is a real phenomenon, this migration tends towards being seasonal and internal. This means that the most common form of migration driven by climate change is to move from one part of a country to another part of the same country as the seasons change, usually to avoid a rainy season or a particularly hot, dry season. For many, seasonal migration will be preferable to permanent relocation as it will have fewer costs and not require moving away from one's family or community. 

When opportunities for seasonal migration are not available, this will cause migrants to move permanently elsewhere, including other countries. Therefore, by enabling seasonal migration in climate vulnerable countries, particularly where agricultural seasons in the host countries can line up with rainy or hot and dry seasons in the original countries, this can reduce the numbers of people seeking to relocate permanently.

Circular migration, where migrants can return to the same or similar jobs in the same area for multiple years in a row holds a number of advantages over seasonal migration.  For the migrants and their employers, it is a useful approach because returning migrants do not need as much training in basic skills and can develop skills every year, rather than the employer having to retrain every year. 

For the migrants’ origin communities, it is especially important that migrants return in multiple years as studies have found that, for the first two or three years, remittance money tends to go on private or family debts. It is only after these initial years that migrants feel able to invest in wider community projects funded by remittances. 

Finally, circular migration can reduce friction with host communities as migrants who return year after year will gain a deeper understanding of the host communities’ language and customs with each subsequent visit, reducing costs of training and outreach programmes. 

Lessons to be learned from circular seasonal migration schemes

• There are ways to provide private climate adaptation finance - Private finance for climate adaptation projects is usually difficult to generate because of the small scale and comparatively low returns. Targeting seasonal migration to maximise remittances to climate vulnerable communities, however, supports people to privately fund climate adaptation without significant costs to governments. 

• Reducing barriers to markets increases development - The easiest way to increase the efficacy of remittances is to reduce the costs of sending them. By increasing market information through comparison tables for fees and encouraging competition amongst money transfer services, governments can increase the flow of private money that directly supports development abroad. 

• Remittances can be an important tool for development - In many countries, the money brought in from remittances funds more than ODA and FDI combined. This can be an important tool for development and allows communities to own their own projects, rather than having them imposed by other countries or NGOs. 

• Temporary circular migration can be a strategic climate adaptation tool - Circular migration schemes show that migration does not always have to be a last-resort response to climate disasters. Well-designed migration policies can provide opportunities for individuals from climate-vulnerable regions to build resilience at home while contributing to host economies.

The Conservative Environment Network is the home for conservatives who support responsible environmental stewardship. As part of CEN’s international work, we are compiling case studies of successful centre-right environmental policies from across the world. If you would like to help contribute or have any further questions, please email fin@cen.uk.com. Thanks particularly to Samuel Huckstep for his comments and suggestions.