International climate finance

Climate Finance at the G20 Summit in Los Cabos

G20 Leaders are meeting June 18 to 19, in Los Cabos, Mexico, presumably to discuss ways to deal with the current economic and financial challenges, such as the Eurozone crisis. What the heads of state and government of the most powerful 20 nations on this planet will actually concretely talk about in those two days is only known to few insiders and those segments society granted special access, such as the B20, the advocacy grouping of the business sector, because the G20 remains the least transparent and least accountable global governance process. Climate change and sustainable development – with global leaders meeting just a few days before the Rio+20 Summit starts – should be high on their agenda. As the G20 website points out (and it is actually one of the very few pieces of information on the summit available on it): The weather in Los Cabos, one of Mexico’s major tourist destinations, is “very dry, dry and semi-dry.” Let’s hope that this will inspire our leaders to reflect upon how they can help deal developing countries to adapt to climate change impacts by providing long term climate finance…

Climate Finance on the G20 agenda

While the G20 so far has made no concrete promise on climate financing, it has taken a couple of climate-finance related actions and in one case, made an important promise that if held could spell significant additional amounts for financing climate action.

Starting with the promise: at the Pittsburgh Summit in 2009, the G20 committed to phasing out fossil fuel subsidies. If implemented, this would free up significant amounts of public finance for low-carbon investments in poorer countries. For example, just looking at the subsidies for the production of fossil fuels that developed countries still continue to provide, they amount to at a minimum double the amount yearly (more than US$60 billion) that the rich countries have committed to raising as fast start finance over 3 years. Developed countries have also recognized in submissions to the UNFCCC that ending their fossil fuel payments could increase the ambition of their emissions reductions commitment. Ending developed countries’ subsidies for fossil fuel production is a clear win-win situation for climate and development.

The G20 under the French Presidency also commissioned two reports on climate financing. The first one, called Mobilizing Climate Finance, was presented at the G20 Summit in Cannes.  It was written by the World Bank, International Monetary Fund, the OECD and various regional development banks and confirmed what an earlier report by the UN’s High Level Advisory Group on Climate Change Financing (AGF) had concluded that reaching the climate finance goal of USD 100 billion per year by 2020 was “challenging but feasible”. Both reports highlighted the role of public finance contributions and the potential of new innovative sources of financing.  A second report for the G20 by the Gates Foundation on financing for development also underscored the potential for innovative public financing sources, such as a financial transaction tax (FTT) and levies on the carbon emissions of the maritime and air transport for development and climate finance.  Air and maritime transport emissions, the so-called “bunkers” are currently not covered under the UNFCCC.

Lastly, the current Mexican G20 presidency established a study group on climate finance chaired by France which is to look at how best to mobilize the needed resources and to ensure that the Green Climate Fund is operationalized and can start disbursing funding to developing countries quickly.

Expectations for Los Cabos

The Cannes Communiqué of last year’s summit was disappointing with respect to climate finance. G20 leaders only acknowledged the two reports but did not recommend concrete ways to move the climate financing agenda forward, for example by proposing action on a concrete innovative financing source, such as an FTT.  Instead, political leaders stayed non-committal, saying only that new sources of funding for development and climate finance should happen ‘over time’, but without concrete financial pledges or time targets.

In Los Cabos, the G20 could start by reiterating its Pittsburgh promise and substantiating it by proposing a concrete action plan with time-lines to phase out fossil fuel subsidies as quickly as possible. G20 developed countries could also pledge concrete amounts for climate financing now, including for capitalizing the new Green Climate Fund, to ensure that with the end of the fast-start period funding for climate action in developing countries does scale up to the 2020 target, and not stagnate, or worst-case-scenario drop. The G20 could also be helpful in working toward an agreement on the most promising sources of innovative financing that G20 members are willing to support and by giving the climate finance study group clear terms of references for what it needs to accomplish.  The G20 can and should set the political signal for progress on climate change financing with such concrete pledges and actions.

G20 and the UNFCCC process

The G20 is not only the club of the 20 most economically powerful nations on earth; it is also the club of the biggest polluters and includes with the G7 countries the biggest historic contributors to climate change.  Thus, whether and how the G20 discuss climate change and the financial resources needed to deal with urgent mitigation and adaptation actions matters.

However, the G20 must honour that the framework for decisions on climate financing, including on the sources and the composition of long-term climate change financing, has to be agreed multilaterally under the UNFCCC. Its 194 parties include ‘the other 174 countries’ that don’t have an official voice and vote in the G20. Such actions would support the UNFCCC Durban work programme on climate finance and ensure that the next climate summit in Doha/Qatar at the end of 2012 can make further progress.

Therefore, the way the G20 discusses climate financing can help set a political signal for overcoming the trust deficit between developed and developing countries that continues to plague the official climate negotiations and is also evident in the way the Rio+20 discourse is led..

So while German Chancellor Angela Merkel, British Prime Minister David Cameron, US President Barack Obama and other G20 leaders have decided to skip the Rio+20 conference (presumably to save carbon emissions?), we expect them to speak up in Los Cabos for concrete climate financing pledges and finally  deliver on their promises.

Liane Schalatek & Lili Fuhr, Heinrich Böll Stiftung