International climate finance

COP 17 in Durban: What was the result in terms of international climate financing?

The so-called “Durban package”, is comprised not only of a second commitment period for the Kyoto Protocol from 2013 to 2017 (or 2020, the decision is still open) as well as a mandate to negotiate a legally binding agreement for all nations by 2015 (to take effect in 2020), but also includes the operationalization of the Green Climate Fund decided in Cancun. It is expected that the GCF will be able to promote climate protection, rainforest preservation, and adaptation to the impacts of climate change in the developing countries on a very different scale than previous funds and in so doing support innovative and transformative approaches. Germany, among other countries, hopes to host the secretariat of fund, and promised to contribute 40 million euros in Durban, but not to the GCF itself, but to capacity building for developing countries in order to prepare them for GCF support. Can this be considered a success?

Durban as a whole achieved rather disappointing results and the world is still heading toward a warming of 4°C or more. All the same, the Green Climate Fund can indeed be considered a success. Just a few weeks ago, the transitional committee, which had spent a year negotiating the details of the Green Climate Fund, reached no final agreement. The debate thus had to be continued in Durban and was threatened to fail. Now the fund has been established, but it remains largely empty. There is still no agreement on how the financial support for developing countries in terms of climate change adaptation, cutting emissions, and rainforest preservation can be provided in an appropriate and reliable way, and how much should be channeled through the fund.

In light of the massive resistance of the United States, the establishment of a work program inspires little faith that the situation will advance next year. In Copenhagen, the industrial nations agreed to contribute 100 billion annually as of 2020, but both the source of the funds and the channels through which they should flow remain unsettled. In addition, a whole series of overlapping questions need to be clarified: for example, the relationship with the adaptation framework and the standing committee. The proposal to introduce a global levy on bunker fuels, which also foresees compensation for especially impacted developing countries  through a so-called rebate mechanism, was discussed for two weeks, but no longer surfaced in the final version of the relevant decision at Durban.

However, one of the main points of contention that almost blocked an agreement on the operationalization of the fund in Durban is the role of the private sector. Two representatives of the private sector will be participating in the board as observers along with two civil society representatives.  The Fund will also have a specialized private sector facility for mitigation and adaptation in developing countries. Here, many developing countries and NGOs see a great danger that scarce public funds will be used to leverage private capital without any guarantee that these investments will be indeed additional and implemented taking into account  poverty elimination and the needs of vulnerable groups.

Further points of disagreement that are now fixed as a to-do list for 2012 in the COP decision include the balance between financing mitigation and adaptation (there is far too little in adaptation), a concrete growth scenario for international climate financing after 2012, and the role of the World Bank as a current and potentially long term trustee of the fund (something that many developing countries do not want)

Whether the German Government is chosen to host the secretariat of the fund will only be decided over the course of the coming year. The application will surely benefit from Germany’s maintaining its own pioneering role in climate financing in practice. This should provide an additional incentive. It would be important for the German government to present a growth scenario for the years 2013 to 2020 that shows how Germany will fulfill its promised contribution of 100 billion euros. The German contribution to international climate financing should be 7 to 10 billion annually by 2020.

To fulfill this promise, the Federal Government should promise in a next step—if possible by 2013—to allow the German contribution to the Green Climate Fund to rise to at least one billion euros per year.

The promised 40 million euros can truly only mark the beginning. At least the German government was able to commit 303 million euros to the World Bank’s Climate Investment Fund in just six months after its founding. It should thus be possible to provide adequate financing for a Green Climate Fund that is borne by almost 200 nations.