22.07.2013 | ALLIANCE SUD

Rich Countries Not Living Up to Their Climate Change Promises

"Climate Financing" in Developing Countries

At the 2010 climate conference in Cancún the industrialized countries promised to support developing countries with new and additional funds in their climate-friendly development. The situation after two and a half years is sobering: it is a case of much old wine in new skins. Switzerland too comes up short on innovative approaches to finding new funding sources.

Industrialized countries promised developing countries USD 100 billion annually as of 2020. That was intended, not least of all, as an incentive to the countries in the South to take more climate protection measures of their own. To bridge the intervening period, the industrialized countries also promised an additional USD 30 billion between 2010 and 2012. As of 2013, the «climate funds» should then increase in successive stages.
But at the 2012 climate conference in Doha no additional funds were approved, with the result that a massive financial deficit is now being created. This is endangering climate-friendly development. The failure to deliver on promises is also making it difficult to agree on a new global climate treaty, which should be negotiated by 2015 and bind all States to climate protection as of 2020.

New is not the same as additional

The Cancún decision requires the climate financing from the North to be «new and additional». «New» means that the funds must not have been previously earmarked. The Swiss Parliament having decided in 2012 to increase development aid to 0.5% of gross national income (GNI) by 2015, Switzerland is reacting calmly to criticism that it is short on climate funding. For its own convenience, it interprets the word «additional» in the same sense as «new» and has opted to follow the guidelines of the OECD countries. This club of donor countries has itself decided to treat development aid as climate funds insofar as it believes that they are being used in a manner that impinges on climate.

From a developmental perspective, however, «additional» means that the funds must be in addition to previously agreed development aid. The logic behind this is that climate change, for which the North is largely responsible, is generating additional costs to the South, over and above those already arising from traditional poverty reduction programmes. Therefore, anyone who today charges a project for the sustainable use of natural resources to climate funding is merely pouring old wine into new skins. After all, even earlier projects involving the reckless exploitation of natural resources were not state-of-the-art development cooperation.

The fable of private climate funding

How the industrialized countries intend to source their funding promises is still unclear. The industrialized countries have opted for raising private financing by means of public (development) funds. Some countries argue that they have already mobilized so many private investments that most of their promises have already been fulfilled. What is needed is a transparent reporting system that would make it possible to compare the amount and sources of the financial contributions of all countries.

Switzerland is pushing for the formulation of internationally applicable criteria whereby private investments and export guarantees can count as climate funding. A study*, commissioned by the Federal Office for the Environment analyses the current situation as regards private climate funding in Switzerland. The upshot is that between CHF 0.5 and 2.7 billion from private sources have already gone into projects in the South that are somehow classified as climate-related. These amounts contain investments in projects that serve to offset emissions under legally prescribed climate protection obligations. If these funds were not counted, and additional minimum criteria for determining climate relevance applied, Switzerland's private climate funding would quickly evaporate.

The raising of private funds by means of public monies – called leveraging – is controversial, as it is difficult to pinpoint which investments and credits would have come from private sources anyway. Besides, investors generally pay no attention to national development strategies and in that way undermine the responsibility of the recipient countries themselves (see also the article on PPDPs).

Only new and strong criteria will be able to ensure that private monies are additional, pro-development and climate-related. If such criteria were to be applied, the enormous private financing potential would contract so dramatically that it would be far from sufficient to fulfil the funding promises of the North.

Innovative funding sources lacking

New and innovative funding sources are therefore needed. In addition to those responsible for causing climate change, the financially very strong countries also have a duty. The economic strength of the industrialized countries ultimately rests not least of all on their high CO2 emissions, both at home and abroad. As a basis for calculating climate funding, national income must therefore be weighted at least as heavily as emissions (see below).

At the national level too, climate funds should be raised in a manner commensurate with causative responsibility and economic strength. Examples of innovative instruments for generating new and additional funds are the airline ticket tax, as well as a financial transaction tax recently agreed on by 11 EU member countries.

The funds so far provided are a drop in the ocean compared to what climate change is costing the South. According to the World Bank, the cost to the South resulting from climate change is already running at US$70-100 billion per annum. Those figures do not include investments for emission-reducing technologies, in other words climate protection. They clearly show how low the financial pledges by industrialized countries are compared to actual costs.

There are only three major negotiating rounds to go before agreement should be reached on an international climate convention in 2015. The next one is scheduled for November in Warsaw, where temperatures can be expected to be cool, in contrast to a much more heated negotiating climate. As an antidote to the further raising of tempers and temperatures on the planet, financial pledges are needed from the industrialized countries that are made in accordance with clear transparency requirements and that will be honoured.