Additionality has various, overlapping uses. In its most general sense, it refers to climate financecommitments over and above those made as part of Official Development Assistance, aid flows that should amount to 0.7 per cent of the GDP of developed countries (although they almost never do).
A more specific meaning relates to lending by the World Bank and other IFIsin relation to projects that also have private sector backing. This is typically assessed as ‘financial additionality’, ‘operational and institutional additionality’, and ‘development and/or climate additionality’, and is very similar to what is now more commonly termed leveraging.
‘Financial additionality’ refers to whether the private investment would have happened without IFI involvement. ‘Operational and institutional additionality’ is an assessment of whether the involvement of IFIs leads to improvements in the social, environmental or corporate governance standards adopted by the project. ‘Development additionality’ relates to whether the total investment has sustainable development benefits and/or contributes to adaptation or mitigation. These measures tend to be highly subjective, and IFIs have been criticized for claiming ‘additionality’ where none exists or can be proven. Even the World Bank Group’s own assessments have often found it falling short. In the case of the International Finance Corporation, the Bank’s private sector arm, a 2011 in-house evaluation found that fewer than half of projects had poverty reduction or distributional benefits amongst their objectives, while only 13 per cent were explicitly focused on the needs of poor people.
Additionality has a more specific meaning in relation to carbon finance, where it refers to to the quantity of greenhouse gas emissions reductions said to have occurred as a result of an offset project. A baseline assumption is made about what the future would have held without the project, the offset project is assumed to have altered that future, and credits are awarded as a result.
Additionality is meant to prove ‘real, measurable and long-term benefits’ in reducing greenhouse gas emissions. In reality, such complex processes as methane reduction, forest carbon sequestration and counter-factual shifts in grid-connected energy production cannot be compared, making it virtually impossible to truly establish the additionality or otherwise of projects.