Monday, 30 November 2009

Climate finance - it's still the one

Climate finance is one of the four issues on which a future climate regime will rest (the others being mitigation, adaptation, and technology development and transfer). It will also prove to be the main stumbling block during the Copenhagen meeting on climate change this December.

This weekend came the news that the Commonwealth Heads of Government Meeting (CHOGM) in Trinidad had agreed to UK Prime Minister Gordon Brown's and French President Nicolas Sarkozy's proposal to establish a $10 billion fund to help developing countries reduce their emissions and adapt to a changing climate. The fund, expected to kick in by 2010, is an important step - one more push towards securing at least a political outcome in Copenhagen.

But several issues remain unresolved. The most important is the 'additionality' of funding. This is jargon for the demand from developing countries that funding made available for climate change should be over and above existing allocations for official development assistance. In other words, they do not want climate change finance to simply substitute money intended for education, health and other development aspirations. Today, The Guardian reports that it has evidence that the European Union is trying to delete references to additional funding from the Copenhagen text. The United Kingdom supports additional funding, but even its climate-related aid allocations have come from existing aid budgets, not as extra money. As a clarification, a Department for International Development spokesman said, 'Additional funding for climate change would be made available from 2013...'

At one level, the question of additionality is problematic because it is difficult to distinguish between assistance for general development programmes, say improving water management systems, and activities geared towards climate adaptation.

But the bigger problem is that the funds required are several multiples of what is currently spent (only $1 billion a year on adaptation). On mitigation, too, scholars suggest that at least $50 billion might be needed annually in the form of public financing support (see my paper with Kevin Watkins; Lord Nicholas Stern repeats the point in an op-ed today). But current levels of public financing are much lower (since 1991, the Global Environment Facility has cumulatively provided only $2.5 billion for climate financing and leveraged another $15 billion).

A further problem - and related problem - is the long history of unmet commitments on development assistance, which has resulted in an atmosphere of sheer mistrust and bad faith between rich and poor countries. Moreover, the richest country (the United States) has yet to table any offer regarding climate financing. President Obama admitted at the G8 summit in July this year that the United States had 'sometimes failed to meet its responsibilities so let me make it clear those days are over.' It doesn't look like those days are over yet.

So, why will climate finance prove to be the stumbling block? Because all other actions will be contingent on the available funding. Over the last few weeks, we have seen one country after another offering unilateral commitments to reduce emissions (Brazil; Russia; South Korea; United States) or carbon intensity (China; even India is considering an announcement). Fast growing developing countries are adopting measures that they believe to be in their interest anyway. But any additional actions will depend on additional funding. As one developing country delegate in climate negotiations earlier this year complained, asking poor countries to take on climate-related actions without promised financing was like selling lottery tickets without announcing the prize! Such tickets would not find many buyers, he noted.