Quo vadis, European climate funding?

EU workshop in Copenhagen: where does climate funding from Europe go from here?

Nobody wants climate financing to end after 2012 – that was the lowest common denominator that representatives from the finance and environment ministries of the 27 EU member countries were able to agree on at a meeting on climate funding from Europe in late February in Copenhagen. It’s a start.

The workshop of the Danish EU presidency did not otherwise lead to concrete results – but that was not its objective. It was more a matter of communication and reflection on the financial topics of the UN climate negotiations, which are set to take shape in 2012 in a work program on long-term financial support for mitigation and adaptation to climate change in developing countries.

The questions included what will happen after 2012 when the fast-start commitment period ends. The credibility of the European Union would take a severe hit if climate funding from Europe were to decrease after 2012. The participants of the EU workshop also shared that view, at least in principle. However, many EU member states are reluctant to think in concrete terms about developing a framework for the continuous growth of financial support until 2020, although they reportedly acknowledge that such growth must be clearly visible no later than 2015. The EU could thus demonstrate to developing countries that it delivers on its promises. This would be a way to get developing countries behind the adoption of a new comprehensive climate change agreement – which is in fact slated for late 2015.

Most EU countries do not consider their tight public budgets to be up to such growth. Innovative sources of financing are thus becoming all the more interesting. The currently most promising policy would be a global mechanism to curb the growing emissions from international shipping (which are not covered by the Kyoto Protocol), which could also bring in billions in supplemental funding for the Green Climate Fund to support poor countries. The EU member states are still quite divided about the pros and cons of such a mechanism – yet an important realization of the workshop was that without such innovative sources, pressure on government budgets will continue to increase.

This is inconvenient because it requires political ambition, and despite the unchanged urgency, there is not much ambition to go around at the moment, especially in the climate debate. In that respect, it certainly helped that the participants of the workshop also learned about the ongoing, and in some cases substantial, climate protection measures in developing countries – in EU finance ministries, the belief is widespread that developing countries are simply waiting idly until the wealthy countries pick up virtually the entire climate protection tab.

Nevertheless, cash-strapped EU finance ministers hope to shift the bulk of the responsibility to the private sector. In cases where investments are insecure or unprofitable, scarce public funds could be used to leverage private financial resources for investments in sectors such as renewable energies in developing countries. This is often reasonable, provided the investments are in line with the development and poverty reduction strategies of the respective countries. In many cases, however, the possibilities of private capital are limited – for example, for the protection of tropical forests in their role as vital carbon sinks, and particularly with regard to climate change adaptation measures (i.e. aid programs for small farmers in Africa to combat increasing drought, disaster preparedness in Asian flood regions, and the development and implementation of national adaptation strategies in the poorest countries). Because such measures are not very profitable for the private sector, they will inevitably rely to a significant degree on direct subsidies from the public budgets of donor countries.

It is therefore all the more surprising that the EU workshop hardly mentioned the Climate Green Fund, considering its envisaged role as a central international financial support vehicle to help poor countries cope with climate change. The fund was formally established at the UN climate conference in Durban in late 2011. For now, however, it remains an empty shell – the seed funding pledged by Germany and other industrialized nations is not yet in sight. Perhaps we can expect it at the end of the year at the next UN climate conference. All we can do is wait.

Jan Kowalzig, Oxfam