International climate finance

Climate Finance: Work to Be Done Before Paris

Negotiations at Geneva’s Palais des Nations: Is progress possible in climate finance? © Eferrante via Wikimedia Commons

Next week, negotiations on a new, comprehensive agreement to combat climate change will be entering the home stretch. The meeting in Geneva will be the last round of talks before the first draft of the new climate treaty is presented in May. From then until the international UN climate conference in Paris at the end of the year, there will be time to fine-tune the text of the agreement.

There is still dissent over some key components of the new agreement. These include—and this may come as no surprise—the question of how to ensure that every country makes its fair contribution to global climate protection. Another of the more difficult subjects is climate finance: on the one hand giving poor countries financial support in their battle against climate change, and on the other shifting private investment away from fossil fuels and toward renewables.

Lima: Standstill on Climate Finance

The last international UN climate conference, in Lima, brought little progress on these points. Although before and during the conference many donor countries (including Germany) made sometimes notable pledges to the Green Climate Fund for the years to come, the industrialized nations stubbornly refused to make any binding statements on how they plan to fulfill the larger, long-term commitment to increase climate finance to at least $100 billion per year by 2020. In the latest discussions, too, the rich nations have systematically rejected all suggestions that would enshrine their obligations for support in the new climate agreement, in other words for the period after 2020.

The European Union is often among the positive forces in climate talks, but this time it has squandered opportunities. Experience shows that the degree of European influence in the climate negotiations depends on how far the EU succeeds in forging strategic alliances to wrest concessions from players such as China or the United States. Because they share similar interests with the EU when it comes to climate protection, particularly appropriate partners for such alliances are the small island states, the poorer developing countries (especially in Africa), and Latin American countries such as Costa Rica or Colombia, who repeatedly offer very constructive approaches. For these countries, the topics of climate finance and adaptation to climate change are of prime importance—yet in Lima the EU showed little inclination to talk about these subjects seriously, and joined the other developed countries in rejecting all the demands and proposals put forward by the poor countries. Clearly, that is no basis for coalition-building.

The developed countries’ attitude is problematic not only because of its impact on the relationship of trust between rich and poor countries, but also because ultimately financial support forms part of the rich countries’ fair contribution. As such, it will be critical in the careful brokering of the new agreement and its obligations on individual countries.

Work to Be Done before Paris

One thing is indisputable: success in Paris will depend to a large degree on whether the developed countries can demonstrate in time for the conference that they are well on their way to fulfilling the $100 billion promise. This involves more than a sound footing for the Green Climate Fund (which has already been achieved) and evidence that the funds provided annually have risen steadily over past years (which in many countries is still difficult to find). The rich countries will also have to present an overall growth plan for financial support up to 2020, including rising allocations from public budgets, creative ideas for opening up new and alternative funding sources, and innovative instruments designed to mobilize more private money in the area of emissions reduction.

No less important is the question of how the developing countries can be adequately and fairly supported post-2020 by means of provisions, pledges, and obligations in the new treaty. The rich nations emphasize that they intend to continue giving financial support to the poor countries after 2020—but at the same time they are blocking all proposals for concrete obligations to be included in the new agreement. Among their arguments is that national budgetary laws prevent them from making financial commitments across several years.

Yet there are plenty of ideas on how to resolve difficulties of this kind. For example, it would be possible to agree longer-term, global goals for support that do not yet specifically quantify the obligations on individual countries. These goals could be checked and adjusted periodically, say every five years, and they could be set separately for emissions mitigation and adaptation. That distinction is useful, because whereas the mobilization of private investment plays a major role alongside public funding in the area of emissions reduction, public funds will be the more important source when it comes to adaptation measures in key domains such as food production, water supply, or risk and disaster management. The global targets could be supplemented by short-term pledges from the donor countries (perhaps in two- to three-year cycles, a pattern that worked for fast-start finance in 2010–2012), with levels of fulfillment constantly checked against the targets. To tailor the organization of climate finance to changing needs, the new agreement could institute a mechanism enabling the poor countries to carry out regular needs analyses, and giving them practical help in that task. The analyses would provide information on the volumes needed and on the requisite instruments and channels of climate finance. At regular intervals, the needs analyses would be formally fed in to the process of implementing the Paris agreement. This would allow the international community to formally address any gaps between available climate finance and actual needs, and if necessary adjust the global goals accordingly.

Of course, we’re not only talking about public money from the national budgets of the developed countries, but also and especially about the mobilization of private investment in the developing countries. To an extent, such private investment will be stimulated by the implementation of the developing nations’ own climate protection contributions. However, the developing countries will also need support in this area, for example through appropriate instruments at the international level and specific programs offered by the multilateral and regional development banks.

And Germany?

At present, climate finance from Germany presents a mixed picture. Germany was the first country to make an appropriate pledge to the Green Climate Fund, putting pressure on other countries to follow its example. On the other hand, 2014 saw drastic cuts in bilateral funding for climate finance, cuts that the Federal Government discreetly hid behind adjustments to the accounting system (fortunately, funding is due to rise again in 2015). What is new is a Federal Government decision that no more development funding must be used to support coal-fired power plants; the aim is to shift the focus more clearly onto renewable energies. Nevertheless, the German government continues to supply credits and guarantees for the export of coal technology, as if the interests of industry should take priority over the imperatives of global climate change mitigation. On this point other countries, including the United States, have a better record.

Jan Kowalzig / Oxfam