There will be no legally binding agreement at the Paris Climate Summit that is at present taking place if an agreement on finance that is acceptable to the developing countries cannot be reached. Two aspects of this issue need to be considered.
At the Climate Summit in Copenhagen in 2009, financing adaptation and mitigation measures to contain and then hopefully reverse the current direction of climate change was a hugely contentious issue. However, at the last moment a financial agreement was arrived at wherein the industrialised countries committed to provide US$30 billion as ‘fast-start’ financial assistance and to give US$100 billion a year in additional climate finance from 2020 onwards.
In 1970, by way of a United Nations resolution, the developed countries promised to provide 0.7% of their GDP as official development assistance to developing countries, and notwithstanding all the campaigns over the years (some seeking to name and shame the countries that have not fulfilled the commitment) to cajole them into fulfilling this commitment, to date over 20 developed countries have still not done so (http://www. unmillenniumproject.org/press/07.htm.).
Dealing with climate change might be somewhat different because its effects are more likely to directly disturb the developed countries, but even so, the developing world now has a healthy understanding that promises from the rich world must not be taken at face value.
As Pascal Canfin, senior advisor on international climate affairs at the World Resources Institute, who also advises the French government, said, ‘At Paris, if we are not able to demonstrate that finance is there, why should developing countries believe in an agreement? If we can’t demonstrate it, there won’t be a deal’ (http://www.theguardian.com/environment/2015/jun/03/private-sector-climate-change-development-fund).
But the story does not end there, for the developing countries also want a similar agreement to be established for the period beyond 2020 and there is much disagreement, if not about the necessity for such funding certainly about how it should be formulated. Developed countries want the multilateral development banks and the private sector to play a major role in raising such resources but some developing countries feel that most of it should be coming from the governments of the developed countries.
Of course, the above mentioned funding is but a pittance compared to what would be needed to effectively keep climate change on track to achieve what now appears the official goal of a temperature of 2ºC above preindustrial levels by the turn of the century. (The goal of 1.5ºC, which is much more favoured by developing and particularly small island developing countries who fear that even at the 2ºC they will suffer greatly from floods, etc., appears all but forgotten.)
The World Economic Forum 2013 ‘Green Investment Report’ estimated that the normal current investment on the water, agriculture, telecoms, power, transport, buildings, industrial and forestry sectors then stood at about US$5 trillion per year to 2020 but that such business-as-usual investment will not deliver stable growth and prosperity. New kinds of investments are needed that also achieve sustainability goals.
‘If public-sector investment can be increased to US$130 billion and be more effectively targeted, it could mobilize private capital in the range of US$570 billion. This would come close to achieving the US$0.7 trillion of incremental investment required to move the world onto a green growth pathway. However, greening the remaining US$5 trillion in infrastructure investment will remain a major challenge requiring policy reform and a stronger push toward investment-grade policy.’
It would appear that the developed countries have kept the first part of their agreement and US$30 billion of ‘fast-start’ financing has been provided and that the problem is now with the other aspects of the Copenhagen deal. As late as last June, a report by the World Resources Institute argued that the global target of US$100 billion was likely to be missed unless private sector finance was ramped up significantly. In the scenario most likely to achieve the target, the governments of developed countries needed to increase their contributions to about US$31 billion per annum, the multilateral banks should contribute US$28 billion and these together should leverage about US$78 billion from the private sector. This would amount to about US$137 billion, thus exceeding the target of US$100 billion.
No doubt aware that a deal would not be arrived at in Paris if there is not some certainty about the financial commitments, countries have been ramping up their pledges. For example, in September the UK pledged US$8.8 billion, a 50% increase, over the next five years. The UK’s increase followed similar doubling by Germany, the Asian Development Bank, a US$4 billion annual pledge France, a pledge by China of US$3.1 billion over a non-specific timeframe, etc.
As is always the case when pledges come from the developed world, questions always lurk as to whether what is being pledged is the donor’s fair share of the burden to be addressed given its wealth and if the pledged sum represents new money or old money being recalculated. In the latter case, other worthy projects might be allowed to fall by the wayside because climate change is now politically fashionable.
For example, apparently although the UK doubled its contribution, it came from a much smaller base and in 2020 France and Germany will be giving approximately twice the UK’s intended contribution. The Guardian newspaper quoted Maria Athena Ronquillo-Ballesteros, director of the World Resources Institute’s sustainable finance programme to the effect that, ‘This is close but definitely not 100% of the UK’s fair share. The UK needs to do more together with other donor countries but this is a significant gesture to raise ambition, and especially during a time of austerity.’
Relatedly, Tim Gore, Oxfam’s lead advisor on climate change policy, has claimed that comparing country contributions can be difficult. Germany’s climate finances included a lot of rather traditional development assistance and France included a lot of subsidised loans. ‘If one looks at what the French budget provides (some of it to make loans concessional) then the French amount is much smaller’ (Ibid.).
Last October, the OECD published a report which suggested that the goal of US$100 billion is on track to being met with about two-thirds of the funds being in place by the end of 2014. It estimated that in 2014 the amount of public and private climate finance mobilised by developed countries was US$61.8 billion compared with US$52.2 billion in 2013. To this must be added the increased momentum and pledges and the pathway suggested by the World Resources Institute above. (http://www.oecd.org/environment /cc/OECD-CPI-Climate-Finance-Report.pdf).
No wonder than that British Environment Minister Greg Hunt could be upbeat. A week ago, he told the National Press Club that negotiation over meeting the US$100 billion goal was a major risk for the conference. However, ‘It now appears that we will be able to achieve that outcome of US$100 billion through all sources in terms of developed to developing [countries]. What’s interesting is much of it is economic investment and not just classical aid… I think that is the model which is most important for the world, because it is most sustainable … [W]hat had been the biggest risk to the talks in the conference will probably be resolved’ (http://www.smh. com.au/federal-politics/political-news/paris-2015-biggest-risk).
