Climate Finance, Climate Politics

Climate finance: why we need a clear roadmap on public finance

This article is written by Clément Bultheel.

When COP 21 takes place in Paris next year, it will need to send a signal to business, investors, governments and the public that the transition to a low carbon, resilient world is inevitable. A key part of the agreement will include climate finance.


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Climate Talks

Ooops, I married a zombie…

Last week I was back in my old hometown, Bonn, Germany, for the latest round of UN climate negotiations. As you can tell from the title of this piece, it wasn’t particularly inspiring.

The previous summit, in Durban, South Africa, achieved a fragile package of four elements:

  1. Establishment of the Green Climate Fund – but as yet no money in it.
  2. Agreement on a second commitment period of the Kyoto Protocol – for a tiny handful of countries.
  3. Agreement to raise the level of ambition from now until 2020 – but not for me! says every country.
  4. Agreement to negotiate a new legal agreement by 2012, to be applied by all countries from 2020 – we’re a long, long way off.

The fights in Bonn were about each of these elements. Essentially, developed countries dragged their feet on 1 and 2, and developing countries (correspondingly) on 3 and 4.

Only a small group of developed countries, led by the EU, have submitted quantified targets for a second commitment period. Others, like Australia and New Zealand, are showing much more reticence, despite the agreement in Durban. Canada, Japan and Russia will not join a second commitment period at all.

How many negotiators does it take to change an LED…?

Developed countries were also reluctant to discuss the means of raising the promised $100 billion for climate finance by 2020. This agenda item promises to be extremely difficult, with the US Congress doing their version of the Texas Chainsaw Massacre on anything that looks like climate financing – domestic or international.

Currently there is absolutely no clarity on how the money will be raised, although a number of proposals are on the table, notably international levies on aviation, shipping or banking transactions. Unmoved by the promises of good faith from developed countries, developing countries are understandably annoyed.

Items 3 and 4 revealed the conflict at the heart of the process. Durban achieved a “globalization” of the responsibility to address climate change (see my analysis here), i.e. an evolution in the principle of “common but differentiated responsibilities” to reflect developing counties’ growing wealth and emissions.

So far, so good. Developing countries are, by and large, ready to consider adopting more responsibility after 2020. They recognize that their circumstances will change and that the principles governing action should evolve. But they are not willing to countenance a renegotiation of these principles until 2020. The problem is that Durban put both of these processes in the same basket, without the guiding framework of equity being explicitly mentioned at all.

Much of the two-week struggle in Bonn was therefore about the agenda. Should we have two new working groups, one on ambition until 2020 and one on the post-2020 legal regime? Cheers from developed countries, boos from a group of developing countries.

Or should we establish one new group on the post-2020 legal regime, and continue working on pre-2020 ambition under the Kyoto Protocol and the process established at Bali in 2007? There, at least, the principles of equity are firmly anchored. Cheers from developing countries, boos from developed.

Eventually the struggle was solved with a grammatical nuance (one agenda item in the new Durban process, two sub items on the post-2020 regime and pre-2020 ambition). The substantive divergence still festers.

It all sounds incredibly banal. And in a way, it is. But what is at stake here is nothing less than the renegotiation of our entire development paradigm, i.e. the right to exploit the current motor of growth, fossil fuels.

This renegotiation will be the central issue at the talks for the next couple of years. Negotiators have acknowledged the need to tackle it head on. But the prospects for at least a degree of consensus on the explicit repartitioning of responsibility seem slim at the moment.

Fortunately, it will also play out in the science labs of the world, as new technologies like solar PV become increasingly competitive with incumbents (see here and here). And in the hearts and minds of society, as we (maybe) start to grapple with the essential question of the good society and the good life. Sometimes it seems that the talks are too divorced from these levels. Stay tuned…