International climate finance

G7 summit: what’s in it for climate finance?

Progress on climate finance is conceivable, but will likely be difficult to achieve. A possible outcome: mere platitudes. Image © German federal government

Climate change will rank high on the agenda when the leaders of the seven major developed economies – Germany, France, the United Kingdom, Italy, Japan, the USA and Canada (G7) – meet in Bavaria’s Schloss Elmau in June. The focus is inevitable, as Chancellor Merkel may have thought to herself, if a comprehensive climate change agreement is to be reached in Paris in late 2015. Moreover, she had not attended the last gathering of heads of government on the topic – the UN climate summit in New York last September – with the very excuse that climate change would feature prominently at the G7 summit under German presidency.

Progress on climate finance will apparently also be a focus of the meeting. At the G7 summit in Brussels in 2014, the heads of government had already reaffirmed the pledge they made in Copenhagen in 2009 to increase their financial support for developing countries in the fight against climate change to $100 billion annually by 2020.

The G7 summit: an opportunity for climate finance?

With just six months to go until the United Nations Climate Change Conference in Paris, the industrialized countries have understood that they must submit a credible roadmap for the fulfillment of their pledge – to date they have always dismissed such demands by developing countries and thus played into the hands of countries aiming to complicate the negotiation of a new agreement. The German government is now planning to put the $100 billion question on the G7’s table as well. It remains to be seen whether this will result in mere platitudes or a workable plan to achieve the 2020 goal. There is little hope, however, as the temptation will be strong to engage in label engineering and counting every conceivable private investment toward the goal instead of committing to true growth in public climate aid.

While crediting private investment toward the $100 billion goal is a controversial topic, the use of suitable instruments and support by rich countries to mobilize such investment in developing countries in particular is nevertheless one of the most important ongoing projects in international climate policy. The German government is discussing possible new initiatives in this field with its G7 partners as well. In principle, everyone likes the idea, as mobilizing the private sector would reduce the strain on stretched public budgets. The problem is that without incentives, little can be expected from the public sector. New initiatives will therefore require public money after all – and that is in such short supply that it will be difficult to put truly new G7 climate finance initiatives in place at Schloss Elmau.

In the run-up to the summit, the German government is also thinking about climate-friendly investment criteria for public funds such as the resources of the multilateral development banks. The result could be that the G7 countries will signal at least a vague willingness to establish such criteria to ensure that future investment by public actors does not torpedo climate protection. The German government is incidentally also subject to scrutiny in this issue, not least since its decision to stop financing the construction of coal-fired power plants in poor countries with development aid, but to continue supporting through export finance by the state-owned KfW bank and credit insurance by Euler Hermes AG. While the terms of export finance have been tightened somewhat recently, it remains to be seen how effective these measures will be.

Jan Kowalzig, Oxfam