Climate finance

At the end of the party, somebody will have to foot the bill.

The climate finance debate is ultimately a fight over who is responsible for climate change and who has to pay. Cost estimates vary widely depending on the assumptions used, but they all share one trait – their magnitude is far greater than the sums pledged and dispersed to deal with the problem.

An aggregation by the South Centre, a developing country think tank, of the various assessments that also bundles mitigation and adaptation together, found that the core of climate finance necessary ranged from $600 billion to $1.5 trillion a year.

At the Copenhagen UN climate talks, the developed world committed $30 billion from 2010-2012 as a good faith gesture known as ‘fast start’ finance and agreed to $100 billion a year by 2020. But so far the cupboard of the UN’s Green Climate Fund is pretty bare, holding little beyond the South Korean government’s contribution of $40 million to cover administrative costs of the GCF in Incheon.

Oxfam, the international development organization, reported that climate finance contributions claimed by developed countries last year amounted to $16.3 billion. However, if loans that are expected to be repaid are excluded, this drops to just $7.6 billion. Pledges have plateaued or declined due to the global finance crisis, and many countries are simply relabeling development aid as climate finance.

At the same time, developed countries have steadily shifted from pledging public funds to offering private money as a way to meet the $100 billion Copenhagen pledge. Public funds already committed would catalyse private investment.

Developing countries for their part are concerned about a lack of what is termed “country ownership” of resources, meaning that national and local governments are to decide which projects are to go forward in their own areas, and to manage how resources are distributed – albeit while operating under international guidelines. Direct access to funds in this way, or “enhanced” direct access with an even deeper domestic devolution of management, has become a major sticking point, with the United States particularly reluctant to support this approach.

Developed nations have pressed emerging economies to commit to targets capping CO2 emissions, but the BRICs – Brazil, India, China and South Africa – refuse to even countenance such a move before the global north delivers on its climate finance pledges. The UN Framework Convention on Climate Change holds that industrialised countries played the main role in causing the climate crisis and are to pay for it. All of this makes it much harder to reach a new global climate pact in Paris in December 2015.

If you want to read more, visit the Green Climate Fund’s website, or for a discussion of the geopolitics of climate finance, researcher Luis Gomez-Echeverri of Austria’s International Institute for Applied Systems Analysis has a comprehensive essay in the Climate Policy journal. Climate finance watchdog group Climate Markets has a series of critical essays and videos, and development group Oxfam follows the issue closely from a third-world point of view.