The fight to halt climate change

The European Commission has reaffirmed its commitment to contributing to the $100 billion a year needed to combat climate change in developing countries. But is it enough?

The fight to halt the climate change trend has been given a financial boost thanks to the European Commission’s assessment that the 2020 target of $100 billion a year for climate actions in developing countries is an achievable target.

“Challenging but feasible” was the conclusion of the European Commission’s working document "Scaling up international climate finance after 2012", which assumes that the Commission will be responsible for providing about one third of the total amount.

At the United Nations climate change talks in Cancun last December, developed countries committed to a goal of jointly raising $100 billion a year in order to assist developing countries mitigate the effects of climate change in a transparent way. The Commission document builds on the UN Secretary General’s report - High-Level Advisory Group on Climate Change Financing - from an EU policy perspective and expands on the framework for good governance required to make climate funding effective.

International coordination

It seeks to strike a financial balance between a combination of funding sources. These include public funding, funding raised from international carbon markets, as well as private funds, partly leveraged by development banks. The document also stresses the need for a good governance framework to implement the funding. It highlights the importance of climate funding going hand-in-hand with development aid, steered by strong international coordination, to ensure efficient spending and maximise the impact of future climate actions.

Among the most innovative financing sources available to the EU is the auction revenues from carbon markets under the EU Emission Trading Scheme (EU-ETS), which has the potential to deliver revenues of more than EUR 20 billion a year by 2020. Member States are committed to using at least half of this to tackle climate change. There’s also revenue from carbon taxes to take into account, which a number of Member States have already introduced.

However, global agreement is needed to leverage other, substantial sources of finance from international maritime and aviation transport and a tax on financial transactions. This is yet to be achieved.

Damian Ryan is a Senior Policy Manager at The Climate Group, an NGO that works with government and business to advance smart policies and technologies to cut global emissions and accelerate a clean industrial revolution. He says the EU is moving in the right direction when it comes to putting its money where its mouth is.

“If any developed country, or group of developed countries, is going to be serious about delivering on this it’s going to be the EU,” Ryan says.

Though the EU’s commitment to helping developing countries deal with climate change is not in doubt, the realities of the current economic climate are a cause for concern. While several of the public sources of funding related to carbon pricing are already in place, competition for fiscal resources, which are already under intense pressure as Member States tighten their belts, is fierce.

With the help of the private sector

Olli Rehn, Commissioner for Economic and Monetary Affairs, emphasised the importance of multiple funding streams from multiple sources saying that "many advanced economies will face serious fiscal constraints in the years to come. Therefore this cannot be paid by public money alone. We need to rely also on innovative sources of financing, in particular, in the private sector and carbon markets. We should make good use of innovative financing mechanisms in close cooperation with development banks."

“It’s fairly clear that the private sector will need to play a very important role,” agrees Damian Ryan. “But the really key thing is making sure that government sector funding leverages a significant amount of private sector funding. If you get your policy environment right, and you remove the risks that are stopping private sector funding going into developing countries then suddenly, for every public dollar that you spend, you start getting a lot more back in return.”

But is it enough? “You only have to look at what the International Energy Agency has said about the kind of funding that’s needed annually between now and 2035 - around $700 billion[1] invested into clean energy and they’re only looking at the energy side, says Damian Ryan. That’s an extra $46 trillion total funding needed to develop technologies that can cut global CO2 emissions in half by 2050[2]. This would require ramping up global investment in clean energy to a trillion dollars a year through to 2050. So that $100 billion figure suddenly looks pretty small in comparison. But it’s a start.”

[1] http://www.un.org/News/Press/docs/2011/sgsm13352.doc.htm

[2] http://www.iea.org/techno/etp/etp10/English.pdf

The EU and Pacific Island countries join forces

As reported in the January edition of The Courier, the EU and Pacific Island countries have launched a joint initiative to mobilise donors to help the region deal with the effects of climate change. Development Commissioner Andris Piebalgs attended the High Level Conference on Climate Change in the Pacific in Vanuatu in March to agree on a strategy and Plan for Action.

Some of the key priorities for implementing the joint initiative were:

Building stronger political dialogue on climate change

Making cooperation on climate change more effective:

The Conference agreed to work towards merging the two relevant regional frameworks for action, namely the Pacific Islands Framework for Action in Climate Change and the Pacific Disaster Risk Reduction and Disaster Management Framework for Action.

Mobilising international efforts on climate change around the Pacific: Swift supply of ‘fast start’ financial assistance to developing countries is essential to addressing the urgent need in recipient countries’ capacity development to address climate change. In this context, the Commission is engaging with EU Member States to identify suitable options for them to contribute to the Joint Initiative.

Follow up and monitoring:

The Plan for Action will be reviewed substantively in 2014 to integrate the EU financial perspectives 2014-2020 and the programming cycle for the cooperation between the EU and Pacific Countries and Territories starting that year.

Sylvia Arthur