Climate cash: the Olympian challenge of UN talks

Getting someone, anyone, to pay the substantial cost of making the transition to a low-carbon economy remains the greatest challenge in the realm of climate diplomacy, bar none. It even trumps the perennially knotty problem of figuring out who has to make what scale of emissions cuts.

UN climate negotiators in Lima, Peru, at the weekend reached a historic compromise that sees emerging countries accept that they too will contribute to emissions cuts, not just the wealthy world. But this was only after the talks were extended for an unscheduled two days amid bitter clashes, increasing tension and brinkmanship, and came close to breakdown as poorer states accused the wealthy world of penny-pinching and worse.

On Saturday morning some 80 developing nations rejected the proposals that were on the table. At one point, Malaysian delegate Gurdial Singh referenced the West’s dark history of colonialism. “Many of you colonized us, so we started from a completely different point,” he told the meeting.

Last-minute corridor diplomacy from the president of the meeting, Peruvian environment minister Manuel Pulgar Vidal saved the talks from collapse, with the finally agreed text making two fresh mentions of the concept of “loss and damage”, or compensation from the rich world for climate-related disasters such as hurricanes or slow-onset processes such as drought or sea-level rise. Likely to be a continued source of grievance, the reference to loss and damage is only found in the final text’s preamble.

Developing countries had also wanted climate funds to be included alongside emissions reduction commitments within the publicly submitted outlines of their climate strategy each country must submit to the UN by March next year, known in the jargon as Intended Nationally Determined Contributions, or INDCs. They didn’t get what they wanted.

This sore point has never really healed. During the disastrous 2009 UN talks in Copenhagen, the G77 bloc of 130 developing countries walked out of discussions over what they felt were paltry sums for climate finance. In 2012 in Doha, Qatar, after a marathon 36-hour negotiating session, wealthy states agreed on the concept of loss and damage compensation, although with an emphasis on developing expertise in this area, and little more than a website arrived afterward. In 2013, a work programme on loss and damage was established, and later that in year at UN talks in the Polish capital, the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts was founded. Again, the emphasis is on enhancing understanding, dialogue and capacity building on the issue.

Parallel to the Lima talks, a handful of nations announced further sums to be pledged to the Green Climate Fund, the UN body through which climate finance cash is to be coordinated and distributed. States agreed in Durban, South Africa in 2011 to mobilise $100 billion a year by 2020 through the Fund, but the resources announced till now have been woefully shy of this unofficial goal. In Lima, cash announcements from Norway, Belgium, Peru, Colombia, the US, Austria and Australia tipped the total sum pledged past another, unofficial early US$10 billion target. A total of 24 countries, including non-OECD countries Mongolia and Panama, have thus far contributed to the fund. Hela Cheikhrouhou, the Tunisian head of the GCF is encouraging other developing countries to chip in as well.

Rich countries were keen to herald this milestone, as earlier this year, the GCF kitty held little more than the $40 million that the South Korean government had committed to set up the Fund’s secretariat in Incheon.

But achieving the $10 billion target was a third less than an earlier unofficial goal of $15 billion, and the sums are to be dispersed over the course of four years, reducing the total to about $2.5 billion a year.

A range of expert bodies such as the Potsdam-Institute for Climate Impact Research and the International Energy Agency have assessed annual climate finance needs at between the hundreds of billions of dollars and over a trillion. Developing countries are balking at the tiny fraction of such assessments being offered.

Rich nations are pleading poverty in the wake of the global economic crisis, but the poor countries are finding it hard to sympathise. For example, the UK committed £720 million ($1.1 billion) in new climate cash, but spent £8.9 billion ($14.4 billion) on the London Olympics in 2012. And overall, the OECD club of rich countries gives away $55-90 billion a year in fossil fuel subsidies.

There are concerns as to whether even the monies that are pledged will actually appear. Within 24 hours, Republicans that control the US Congress signaled that they will block the $3 billion climate gift.

In a related worry, developing countries are sceptical as to whether funds are genuinely new money, or just existing aid money re-labelled as climate cash. The entire AU$200 million (US$166 million) announced by Australia at the Lima meeting, for example, comes from its aid budget.

In Lima, it was revealed that Japan had loaned roughly $1 billion of its climate finance cash to Japanese companies to build three coal-fired power plants in Indonesia. The money was part of an earlier UN orchestrated passing round the hat for climate cash called ‘fast-start financing’, one of the initiatives to emerge from the Copenhagen summit in 2009.

The trick is that Tokyo’s manoeuvre was technically not afoul of any rules, as the UN has no official definition of what counts as climate finance.

Green groups and development NGOs in May had sent a letter to the GCF board, demanding that the UN come up with a clear policy on what does and does not count as legitimate climate projects. “We urge you to make it an explicit policy,” they wrote, “that GCF funds will not be used directly or indirectly for financing fossil fuel and other harmful energy projects or programs.  We note with grave concern and alarm how other international financial institutions include these types of projects in their climate and energy financing, under the logic of ‘lower carbon’ energy and switching to ‘lower emissions’ fuels.”

They want an explicit “exclusion list” of the sort of projects that the GCF will not fund.

Cheikhrouhou has promised that the fund will review project proposals in the new year, “and see which ones are really moving us away from the unsustainable path we are on.” She said that in future funding would not go to business-as-usual projects, but would not however accede to any climate-finance black list.

The GCF has identified three key areas for climate finance mitigation funding: clean energy, clean transport, and technology shifts in industry, and will be rushing over the course of the next year to get a representative sampling of projects to take to the big UN climate summit in Paris in December where a treaty building on the Lima agreement is expected to be concluded.

Meanwhile, Cheikhrouhou wants half of all projects to go toward adaptation projects, in line with demands from developing nations and NGOs, who have for some time issued concerns that adaptation has been cast in the role of ugly sister as private-sector climate finance investors will not chase projects where there is less ability to achieve a decent return on investment, such as flood defence or shoreline vegetation hardening.

The call for an increased emphasis on adaptation will be welcomed by climate-finance watchers, as during the Lima meeting, a fresh report from the UN Environment Programme (UNEP) said that the estimated cost of climate adaptation in developing countries would likely be between two and three times higher than the $70-100 billion a year by 2050 that had been assessed by the Intergovernmental Panel on Climate Change in its latest report. The UNEP study identified agriculture, coastal protection, water management and disaster risk reduction as adaptation priority areas in the Global South.

Germany for its part announced a fresh €55 million ($68 million) for the UN’s Adaptation Fund, a separate entity to the GCF, established in 2007. The Bonn-based AF remains in a precarious financial situation however, and even with the German contribution, is unlikely to meet its funding goals for this year. China also announced a $10 million contribution in south-south funding for climate adaptation.

Cheikhrouhou encouraged developing nations to quickly identify a national authority or other point of contact for the GCF. Just 70 states have so far done so.


Written by . Published on December 16, 2014. Last edited on December 19, 2014.

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