International climate finance

Can Addis start a Domino Effect for Raising Multilateral Ambition in 2015?

6. July 2015

The conference in Addis Ababa will set an important signal if the course will be changed. Poto: Asian Development Bank. This picture is licenced under a Creative Commons Licence.

Just a few days before the third UN Conference on Financing for Development (FfD-3) from July 13-16, in Addis Ababa, Ethiopia, Heinrich-Böll-Foundation published an in-depth analysis of what is at stake at the conference. While climate finance is not an official issue for the conference, this article shows that for climate finance Addis is highly relevant for several reasons:

A weak outcome at FfD-3 in Addis could have a “domino effect” that undermines the two subsequent UN events. Many countries, including Germany, want the FfD-3 outcome to be a strong influence on the other two events – namely, the key pillar for financing as a crucial means of implementation (MOI) of the post-2015 framework and the goals for climate adaptation and mitigation.
Developing countries and civil society demand that “additionality” for climate finance has to be defined as money provided on top of existing ODA commitments, i.e. regarding the developed countries’ pledge from the 2009 Copenhagen climate summit to raise $100 billion per year by 2020 in “new and additional” climate finance for developing countries.
In the Addis FfD negotiations, developed countries downplay the core role of public finance provision for global public goods, citing budgetary constraints at home and a changing global landscape with stronger emerging market economies. Not only do they respond negatively to any call for an increase in public resources, but several key developed countries have also blocked further progress in the application of innovative sources of financing, including a more than regional implementation of a financial transactions tax (FTT), currently restricted to 11 countries in the EU, or global levies on maritime and air transport applied in a way that developing countries would not be burdened disproportionally. A carbon levy on the biggest fossil fuel producers should also be considered.
Instead, developed countries promote a focus on using scarce public resources for leveraging and blending with private sector resources. This represents a landmark change in the global investment model. At the upcoming FfD-3, leaders will outline a new model, which significantly relies upon public investment as a support for private investment in an effort to shift trillions of dollars into toward sustainable development and climate goals. The shift signifies not only a transformation of the partnership between developed and developing countries, but also of the roles of public and private finance. Taken to an extreme, the model promoted by the draft Addis Ababa Declaration can undermine the states’ role as duty bearers to citizens as the holders of inalienable rights.
Civil society activists urge that the shift of approach from Monterrey to Addis be challenged in two ways. First, they claim that there is insufficient evidence of the good performance of public-private partnerships (PPPs) to scale them up – especially in sensitive sectors, such as health care, education, water, and electricity. Whereas PPPs may succeed in returning an investment to private partners, they often fail to invest in poor communities or provide affordable services.
While some have advocated for “PPPPs”, or “public-private-people partnerships,” as a more inclusive way to conduct business, there is no fleshed out proposal on how to desgin them. In such a model, civil society should have genuine participation in governance and oversight to ensure that risks and rewards of such projects are shared fairly. Moreover, true PPPPs would seek to prioritize domestic micro-, small- and medium-sized enterprises, include clear accountability mechanisms and meet social, gender equality and environmental standards. This approach, which can however only be one piece in a wider toolkit of approaches, will require more than “guidelines and documentation for the use of PPPs, and to build a knowledge base and share lessons learned through regional and global fora”, which is all that the current Addis draft promises. Instead, governance and accountability systems over multi-stakeholder partnerships in the UN must be established before more such partnerships are sanctioned and carried out.
Without significant improvement in terms of the tone and substance of its draft outcome document, the Addis Ababa Declaration clearly risks being upstaged by the Pope’s recently released ‘Laudato Si’ encyclical which warns that blindly trusting in the power of technology and markets, including carbon markets, will not address the unsustainable production and consumption patterns that leave too many of the world’s people deprived of their basic needs and disenfranchised and could just lead to new forms of speculation.