Hope of progress on a global climate deal at the year-end Cancun summit is rapidly dimming with rich countries backtracking on their commitment to provide climate funds. Finance is a key issue for rebuilding trust among developing and developed countries.
The two-day informal Geneva Dialogue on Climate Finance held late last week focused on sources of long-term climate finance, particularly the role of public and private funds. The developing world is concerned about the increased emphasis by industrialised countries on private sources and markets for climate funds.
There is hesitation on the part of the rich countries to commit public funds on account of global financial crisis and the ensuing austerity cuts.
Environment minister Jairam Ramesh, who attended the meeting, cautioned industrialised countries not to walk away from their commitment because of the current financial crisis. According to Mr Ramesh, the Geneva meeting was “not a productive event” as there was “a conscious effort by developed countries to underplay finance and overplay the role of markets in climate finance.”
Industrialised countries are going back on their funding commitments made in Copenhagen. The developed countries had pledged to provide $30 billion as fast-track finance between 2010 and 2012 for poor developing countries. This was supposed to be new and additional funds.
In the Copenhagen Accord, the industrialised countries had pledged to mobilise $100 billion every year by 2020 to help fund climate change action in developing countries. This money was to be raised from a “wide variety of sources, public and private, bilateral and multilateral, including alternative sources of funding.”
Since the December 2009 climate summit there has been a concerted push to look to markets to raise climate funds. The industrialised countries have consistently pushed for a greater role of markets in climate finance. The European Union has been a prime mover for increased role of markets.
The pitch has become louder in view of the global crisis. This is not a viable option for the developing world, particularly the most vulnerable and the least developed.
“The whole financing game, with the financial squeeze in the developed countries, there is an attempt to redefine their obligations as part of paragraph 5 in the Copenhagen Accord,” Mr Ramesh stressed.
This attempt to redefine obligations is bound to have repercussions on the global climate talks, which has been dogged by an absence of trust between the developed and developing world. UNFCCC executive secretary Christiana Figueres acknowledges that finance is of critical importance for rebuilding trust between the rich developed and poor developing countries.
“If there is anybody who is backtracking on the Copenhagen agreement it is the Americans and the Europeans because they are reinterpreting the $100 billion by 2020.
By and large financing for adaptation has necessarily to be public financing, while mitigation will involve a mix of public and private funds.
Now they are trying to redefine the $100 billion by saying that if we come with ten billion and leverage the remaining $90 billion, we have met our target of $100 billion,” Mr Ramesh said.
Industrialised countries have argued that new “innovative” sources were always part of the long-term financing promise. The rich industrialised countries have suggested that “emerging” countries contribute to providing resources for climate financing. This is not acceptable to India and China, two key advanced developing countries.
The financial crisis has also cast doubt on how much of the $30 billion fast track finance is actually new and additional. “With the growing financial crisis in the developed countries, there is a visible backtracking on the public component of $ 100 billion and they are also redefining ‘new and additional funds,” Mr Ramesh said.
There is growing apprehension that developed countries are re-routing existing developmental aid as climate fund. Ms Figueres, who also attended the Geneva meet said that the developing countries expectation that the fast track finance would “completely new and additional” was “very justifiable”.
Global climate talks have been hamstrung due to the slow progress and lack of clarity on funding for developing countries. Finance is one of the building blocks of the Bali Action Plan. Headway on funding of climate action is crucial for a global deal.
The Geneva dialogue was one of the informal ministerial being organised by Mexico, which holds the presidency of the 16th Conference of parties under the UNFCCC. These meetings are not part of the UNFCCC negotiations process but efforts to provide a constructive atmosphere for discussions and regaining trust in order to breathe life into the stalled process.