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Africa: Climate Debt Deferred, 2
AfricaFocus Bulletin
Nov 9, 2010 (101109)
(Reposted from sources cited below)
Editor's Note
"The UN Climate Convention requires [industrialized countries] to
take a lead in cutting pollution, and to provide the finance and
technology needed by less industrialized countries to overcome the
adverse impacts of climate change ... [yet]
The current financing model being advanced by developed countries,
which centers on carbon markets and financial institutions outside
the authority of the Convention, runs counter to their commitments
under the Convention." - Civil Society Statement on Fair and
Effective Climate Finance, September 2010
Despite a wide range of civil society and developing country voices
calling for adequate financing of climate change action by rich
countries, the response from rich countries is equivocal. The UN
High-level Advisory Group on Climate Change Financing, which just
presented its report, lays out a variety of financing mechanisms.
Its includes some attention to innovative financing mechanisms,
such as international transport fuel taxes and others. But its
stress lies on dubious mechanisms managed by institutions
controlled by rich countries.
This AfricaFocus Bulletin contains excerpts from the civil society
statement cited above, as well as a summary analysis from the
Brookings Institution of the report from the UN High-level Advisory
Group. The highly technical and cautiously worded Advisory Group
report itself is available on the UN website.
Another AfricaFocus Bulletin sent out today
(http://www.africafocus.org/docs10/clf1011a.php) contains excerpts
from a report from the World Development Fund on the slow start of
developed countries' pledges for $30 billion in climate change
financing, as well as from a Climate Change Primer from the Third
World Network.
For additional background resources see:
Report of the Secretary-General's High-level Advisory Group on
Climate Change Financing
http://www.un.org/wcm/content/site/climatechange/pages/gateway
Direct URL: http://tinyurl.com/35offmy
Civil Society Papers and Statements on Climate Financing
http://www.un-ngls.org/spip.php?article3104
Climate Debt Resources
http://www.climate-debt.org/resources/documents
Climate Debt - World Development Movement
http://www.wdm.org.uk/climatedebt
World People's Conference on Climate Change and the Rights of
Mother Earth (Cochabamba Conference April 2010, and follow-up)
http://pwccc.wordpress.com/2010/02/06/810/
Third World Network Briefings on Climate Change Negotiations
http://www.twnside.org.sg/climate.htm
For previous AfricaFocus Bulletins on the environment and climate
change, visit http://www.africafocus.org/envexp.php
++++++++++++++++++++++end editor's note++++++++++++++++++++
Climate Finance Ministerial - Geneva, 2-3 September 2010
Fair and Effective Climate Finance: An assessment of finance in
global climate negotiations
[This and other related documents available at
http://www.un-ngls.org/spip.php?article3104]
When developed countries signed the UN Climate Convention in 1992
they recognized their responsibility for emitting the vast majority
of planet-warming greenhouse gases. Consequently, in recognition of
this "climate debt" the Convention requires them to take a lead in
cutting pollution, and to provide the finance and technology needed
by less industrialized countries to overcome the adverse impacts of
climate change, and to chart a sustainable pathway, rather than
that set by industrialized countries. It's time to meet these
responsibilities.
Finance: the keystone to climate negotiations
The current financing model being advanced by developed countries,
which centers on carbon markets and financial institutions outside
the authority of the UNFCCC [United Nations Convention on Climate
Change], runs counter to their commitments under the Convention
11.11.11 * Action Aid * APRODEV * Both Ends * Campagna per la
Riforma della Banca Mondiale * Eurodad * Friends of the Earth
England Wales and Northern Ireland * Friends of the Earth US *
International Forum on Globalization * Jubilee South * Jubilee
South Asia Pacific Movement on Debt and Development * Pan African
Climate Justice Alliance (PACJA) * Sustainable Energy & Economy
Network,* Institute for Policy Studies * Third World Network *
World Development Movement
The nations of the world affirmed their roles and responsibilities
for tackling climate change in the Bali Roadmap agreed at the 2007
UN climate talks. The Roadmap established a "two-track" approach -
one track to set the next phase of greenhouse gas emission
reductions by developed countries under the Kyoto Protocol, and
another to enhance efforts to implement commitments on adaptation,
mitigation, finance and technology transfer under the Convention.
Despite the deal in Bali, the current financing model being
advanced by developed countries runs counter to their commitments
under the Convention to provide new, additional resources to
developing countries. Developed country financing proposals, which
rely on carbon markets and financial institutions outside the
authority of the UNFCCC, are ineffective at meeting the needs of
developing countries to address climate change now - let alone in
the face of increased warming. Ensuring that climate finance is
raised and managed in fair and effective ways is the key to
advancing together down the path defined by the Convention and the
Bali Roadmap and securing an equitable and effective global climate
agreement.
Polluters pay
The provision of finance by the industrialized, Annex 1 countries,
is intimately linked to their historical emissions and their
failure to adopt and implement sufficient mitigation action. It is
a simple equation - the historical emissions of the developed
countries have lead to the majority of current and committed
warming. Going forward, the weaker the emission reductions in Annex
1 countries, the more harm climate change will cause, and the
deeper the cuts those countries who are least responsible for the
problem will have to make. A lack of vision and leadership by the
countries, corporations, financial interests, and people who have
most benefited from the prevailing but perversely unsustainable
economic paradigm is causing the cost of climate change to rise to
what may soon become unpayable levels for all of humanity.
Existing pledges from developed countries to reduce emissions, add
up to a mere 17-25% cut in emissions from 1990 levels by 2020 - a
scenario that is inconsistent with any fair contribution to their
own 2 degree goal, and that experts say will contribute to warming
the planet between 3 and 4 degrees C.
Worse still, Annex 1 countries intend to emit considerably more
pollution domestically through the use of loopholes in current
rules and proposed carbon markets. These would allow them to make
cuts on paper but not in practice and to claim they are providing
climate finance by buying carbon offsets while shifting the climate
change burden further to developing countries.
Bait and switch?
At the Copenhagen climate conference in December 2009, developed
countries pledged to provide "new and additional" short-term
financing approaching $30 billion between 2010-2012. It now seems,
however, that little will be new and less will be additional.
Developed countries are recycling old pledges made before
Copenhagen as new financing under the Convention. They are
re-labeling other funds, such as those for agriculture and water,
as "climate-related". Many countries intend to double-count climate
finance and Overseas Development Assistance, inflating their
support on paper, but leaving adaptation, mitigation and other
urgent priorities for development, such as health, education and
sanitation, underfunded.
Through these and other sleights of hand, discussions of climate
finance are beginning to resemble a shell game in which the
industrialized countries of the North offer money, then shift their
pledges rapidly from one container to another, only to leave the
purported recipients short changed. This seems an unlikely strategy
for securing trust and reaching the agreement we all need to combat
climate change.
On the road to Cancun, countries now have only a few more
opportunities to discuss the generation and oversight of climate
finance, and the role of a new climate fund under the UNFCCC.
Building trust, and gedng the scale, sources and governance of
financial resources right, are key objectives for upcoming
negotiations.
Scale of the need
The G77 and China have called for an annual financial transfer from
North to South equivalent to at least 1.5% of Annex I GDP by 2020,
with other countries estimating that developing nations will need
the equivalent of up to 6% of Annex I GDP to keep the world safe.
These figures are based on the ambitious efforts needed to keep
warming within safe levels, the spiraling costs of climate-related
damage, as well as compensation for the over-consumption of
atmospheric space by the industrialized countries. The latter
figure represents less than what is spent worldwide on armed
conflicts each year -- a reasonable investment to stabilize the
Earth's life support system.
Limiting the discussion on financial needs to only $100 billion per
year by 2020 - a number established in the Copenhagen Accord - will
have dire implications for developing countries and indeed, the
entire world. This amount falls astonishingly short of all
reasonable estimates of adaptation and mitigation costs in
developing countries. The amount is even more inadequate when
measured against developed countries' weak emission reduction
pledges -- which would shift an even larger burden of mitigation
and adaptation costs to developing countries.
Sources of finance that are fair
To meet developed countries' commitments, climate finance must be
public, grant-based so as not to further indebt developing
countries, new and additional (not recycled ODA) and flow through
institutions under the UNFCCC.
Civil society and developing countries have called on developed
countries to provide financing from public sources - to implement
their commitment and to ensure that the costs of mitigation and
adaptation actions are covered, particularly for initiatives that
are not likely to be profitable such as adaptation measures and
those currently at a market disadvantage like clean, renewable
energy.
Developed countries, however, have emphasized the role of the
private sector in meeting their obligations to cover the costs of
developing countries' responses to the climate emergency. They
envision whole sectors of developing countries' mitigation
potential being sold off to private interests through an expanded
Clean Development Mechanism (CDM), REDD, or a new global carbon
market.
Developed countries must not be allowed to use offsets to justify
business as usual in their own economies, while outsourcing the
difficult task of lowering emissions to developing countries.
Carbon offsets must not be used to fulfill developed countries'
climate finance obligations because their financing is explicitly
dedicated to meet the emission targets of the developed countries.
Furthermore, most carbon offsets are sold as derivatives, and as
such are poorly regulated. As carbon markets become dominated by
financial speculators, the risk of shoddy offsets that fail to
deliver promised reductions, as well as fraud and corruption,
increases. Conflating this with public sources is inconsistent with
the climate convention, unfair and ineffective.
Equitable and effective governance
Climate finance will only be as equitable and effective as the
institutions through which it is channeled. Developing countries
and social movements worldwide are calling for a new global climate
fund under the authority of the UNFCCC with equitable and balanced
representation, effective participation in all decision-making,
direct access to funding and an absence of economic or other policy
conditionality.
The new global climate fund should have: 1) a board with equitable
representation among the United Nations regions with additional
seats for countries most vulnerable to climate change, civil
society, and affected community members; 2) an independent trustee
selected through a process of open bidding; 3) an independent
secretariat to support the work of the fund board; and 4) a set of
technical panels and funding windows to enable effective
mitigation, adaptation and technology transfer, and support for
activities in specific sectors such as forest conservation. The
UNFCCC should also establish systems to track delivery of
contributions from developed countries, and evaluate the source,
additionality, and nature (grants vs. loans) of contributions,
among other activities.
The World Bank - an institution often championed by developed
countries to be the world's new climate banker - has a history
marred by environmental degradation and human rights violations and
lacks adequate developing country representation. It continues to
be among the world's chief proponents of an unsustainable
development model and largest public fossil fuel financiers. Funds
at the Global Environment Facility, an operating entity of the
UNFCCC financial mechanism that is linked to the Bank, have proven
difficult to access and ineffective in raising and channeling
funds. This situation is not appropriate for the management of
global climate finance.
The road to success in Cancun
Addressing the legitimate interests and concerns of developing
countries on climate finance is a keystone to a successful climate
agreement. In Cancun, Parties must work together to clarify the
scale - both short- and longterm - of financing, as well as its
sources and governance.
Industrialized, Annex 1 countries can build trust by ensuring
transparency and accountability in their shortterm financial
commitments. They should, at a minimum, clarify: 1) the proportion
of funds they pledged before Copenhagen and the proportion that is
genuinely "new;" 2) the proportion that is above their current
commitments for Overseas Development Assistance (both 0.7% of GNI
and current levels) and so is genuinely "additional;" 3) the
proportion that is to be provided through grants (as opposed to
loans that are to be repaid by developing countries); 4) the
proportion of funding going to adaptation versus mitigation; and 5)
the proportion of funding going through UNFCCC channels.
Transparency of short-term finance is a first step towards more
effective and accountable governance of climate finance over the
longer-term.
For the longer term, developed countries should agree to the
following:
- Climate finance discussions should be held within the UNFCCC to
ensure inclusivity of all perspectives and knowledge about the
needs and demands of those most impacted by climate change.
- The scale of financial resources committed by developed countries
to developing countries must match the scale of the need. The G77
and China have called for longer-term financing equivalent to at
least 1.5% of Annex I GNP. Many governments and much of civil
society have called for higher amounts, such as those proposed by
the African Group and Bolivia, based on the need for truly
ambitious action to stabilize the Earth's climate system.
- Climate finance must be conducted in a manner that is consistent
with the obligation of Annex 1 countries to settle their climate
debt. It must be consistent with the need, both North and South, to
advance toward new modes of production and consumption that are
respectful of the rights of people and of the planet. It must not
be used as a vehicle for shifting the burden of mitigation or
adaptation to developing countries, or shifting funding from other
development priorities. Climate finance must therefore be sourced
from public money, must be in grant form, and it must be new and
additional to ODA; resources generated by the purchase of carbon
offsets must not count toward developed countries' commitments.
- Through a COP [Convention of the Parties] decision, establish a
new democratically and equitably governed global climate fund under
the authority of the UNFCCC on terms consistent with the proposals
of developing countries and civil society. Establish a new
democratically and equitably governed global climate fund, through
a COP decision and under the authority of the UNFCCC on terms
consistent with the proposals of developing countries and civil
society.
Mobilizing $100 Billion per Year for Climate Financing
Kemal Dervis, Vice President and Director, Global Economy and
Development
Katherine Sierra, Senior Fellow, Global Economy and Development
The Brookings Institution
http://www.brookings.edu/global.aspx
November 05, 2010
Today, the U.N. Secretary General's High Level Group on Climate
Change Financing (AGF) reported that raising $100 billion each year
by 2020 to finance climate mitigation and adaptation in developing
countries is "challenging but feasible." The group, made up of
heads of state and government, as well as finance leaders from both
developed and developing countries, was tasked to develop the $100
billion per year pledge of long-term financing under the Copenhagen
Accord. Designed in parallel to the global climate negotiations
under the UNFCCC, it aims to provide a technical assessment of
financing options, filtered against criteria such as political
acceptability. While the report will disappoint those who want a
bold recommendation, it does move the dial by providing a menu of
international and domestic financing options, some considered more
promising than others.
So how is raising $100 billion per year doable? Members of the
high-level group anticipate new public funds to flow in from a
combination of revenues from emission allowances or direct taxes;
taxes on international transportation fuels; and redeployment of
fossil fuel subsidies or other carbon-based mechanisms like a small
levy on electricity (wire tax) that could raise $50 billion per
year. Add to this the net flows from private investment that could
raise $10-20 billion per year (total private investment that could
be leveraged by this would be in the order of $100-200b) and net
flows from the carbon markets of $10 billion. Another $11 billion
per year could be raised by providing increased resources to the
Multilateral Development Banks. Taken together, these could total
$80-$90 billion per year, with traditional public finance from
budget appropriations covering the balance. Fast Start funding
under the Copenhagen Accord of $10 billion per year shows that
public finance could cover the difference at the higher end of the
assumptions, but more effort would be needed at the lower end.
The report emphasizes that raising these sums has to be part of a
broader package of meaningful mitigation actions along with
transparency of implementation. This ties the debate back to the
Copenhagen Accord and the United States' position that the elements
of the accord have to be mutually reinforcing. A key assumption is
that emission reductions targets, and associated instruments, would
result in a price on carbon of $20-25 per tonne of CO2 equivalent.
So it is critical to take action on this in order to raise
financing.
An opportunity missed.
The report reaffirms the importance of strong commitments to
domestic climate mitigation and introduction of carbon-based
instruments, and calls for strengthening the carbon markets. But a
much stronger case could have been made for taxing carbon through
an outright tax or broad-based use of auctioned permits to not only
provide a source of finance for developing countries, but to also
help reduce deficits in advanced economies.
Some innovative public finance proposals gain momentum.
While sources of public finance have continually been debated over
the past several years, the AGF report signals that several
previously controversial innovative sources of finance are now
being considered viable, such as revenues from taxation and
auctioning of emission allowances; taxation on international
transport via maritime bunker and aviation fuel taxation; and
redeployment of fossil fuel subsidies. Though delicately worded,
the proposal to leverage IMF Special Drawing Rights seems to have
been eliminated, as well an international financial transaction
tax, though a nod is given to countries and regions that may want
to use this as a source. And despite the dismal fiscal situation of
advanced economies, use of general public revenues remains. The
report acknowledges that public finances in many developed
countries are under extreme pressure. Indeed, the current political
environments will make this option difficult in many countries.
Simultaneously, the AGF reaffirms the expectation that direct
general public contributions will also play a key role in the long
term.
The potential of private finance.
The AGF correctly makes the case that whatever the source, private
sector investment will be critical if developing countries are to
successfully move to low-emission development pathways. But the
diplomatic language describing differing points of views on whether
and how to count total flows, and on the balance between public
versus private finance in the overall package, point to continued
strain between developed and developing countries. We maintain that
developing countries are right to expect that only the grant
equivalent of public flows should be accounted for as part of the
contribution from the developed countries. This should also include
the net grant element embedded in the potential increasing carbon
markets as has been the case for the Clean Development Mechanism.
The logic here is that these flows are going to support a global
public good: mitigation. But developed countries are also correct
in their position that private flows will need to cover a
significant part of the costs. So having a metric that also
captures the total flows will be critical to assess whether the
incremental public financing is indeed crowding out the massive
amounts of private funds that will be needed to finance the
investments as a whole.
The loan versus grant debate.
Authors of the report found consensus over a topic that has caused
great consternation in the climate finance world, especially among
civil society advocates: should all climate finance come in the
form of grants, or can concessional loans (and guarantees) serve as
the right instruments? The report supports the use of both loans
and grants, but notes that grants and highly concessional loans are
crucial for adaptation in the most vulnerable countries. The AGF is
correct in saying that for mitigation, funds like the Clean
Technology Fund prove loans and guarantees can be structured to
leverage significant private and public finance. But this has to be
accompanied with the caveat that, in terms of burden sharing on
mitigation efforts, only the grant equivalent embedded in these
loans should be counted toward the contribution from the developed
countries. For adaptation initiatives, a stronger call for grants
for the poorest countries would make sense politically. Otherwise,
the positive results from these flows, like building trust, will be
obscured by the rhetoric that highly concessional loans deepens the
debt of those countries who are least responsible for climate
change in the first place.
The role of the multilateral development banks.
The report notes the importance of the U.N. in capacity building,
and describes some proposals for direct access of funds to
developing countries. But simultaneously it strongly defends the
use of MDB capabilities, sending a clear signal to those who
advocate against the utilization of the MDBs. The AGF focuses in
particular on the multiplier role that the MDBs can play by
combining support for public policies that will support low-carbon
and climate-resilient futures. The MDBs have the ability to combine
sources of finance to provide significant leverage. The AGF also
sets the stage for considering the contribution to the climate
finance equation of future capital increases and IDA-type
replenishments.
While the report is not the breakthrough that many hoped for, it
does make progress on tackling climate change by signaling
acceptance of innovations that may now gain momentum. But designing
these instruments will be challenging. The financial amounts that
can be raised will depend on significant mitigation targets. And
ultimately, domestic action will depend on each nation's political
acceptance. It will be an uphill battle in the United States to
overcome the skepticism of the electorate and the expected
opposition in the new Congress to any new taxes (even if they are
immediately given back to domestic taxpayers by lowering other
taxes on income or payroll) and policies that provide transfers to
the developing world. Although challenging, it is these types of
policies that will make climate finance, and in turn global
coordination and agreement, feasible.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
AfricaFocus Bulletin can be reached at africafocus@igc.org. Please
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