Climate change: how to pay for the cost?

Friday, July 1, 2011 - 16:12

Ministers must revive talks on innovative sources of climate financing 

Senior  Ministers’ meeting in Petersburg this week in the run up to December 2011 climate summit in Durban, South Africa must provide political impetus to mobilize $100b climate financing through innovative public sources.

The impacts of climate change are already occurring and are having devastating impacts on communities across the globe. Smallholder farmers, particularly in Africa, who are losing their crops and are facing unpredictable weather conditions urgently need climate finance to adapt to these changes, which have been caused by unsustainable growth model of rich countries. 

South Africa and Germany are jointly hosting the second Petersburg Climate dialogue in Berlin from 3 – 4 July 2011. Thirty five ministers, chairs of key negotiating tracks (AWG-KP and AWG-LCA) , subsidiary bodies (SBSTA and SBI)  and the Executive Secretary of the UNFCCC (United Nations Framework Convention on Climate Change) have been invited to this ministerial in the lead-up to the December 2011 climate summit in Durban, South Africa.

During the recent round of climate negotiations in Bonn last month no progress was made on several sticky issues.

The second commitment period of Kyoto Protocol beyond 2012, the legal form of the agreed outcome under the Convention, the ambition gap on mitigation and finance and more, were the issues that did not progress in Bonn.

In this informal ministerial, as per the internal ‘input paper for discussion’ prepared by the organisers, the ministers are given a set of questions to:  1.) identify issues in and beyond Durban;  2.) discuss implementation of implementation of Cancun Agreement, including  setting-up of the Green Climate Fund, the role of the Standing Committee and mobilization of long-term finance;      3.) Possible scenarios for the outcome in Durban; and 4.) Deliverables for Durban.

To me, one of the key issues that needs major momentum in the second Petersburg Dialogue is the issue of climate finance. In COP 15 in Copenhagen and COP 16 in Cancun, developed countries agreed to deliver new and additional $30 billion in the period between 2010-2012 (referred to as fast-start finance) and $100 billion per year by 2020 for adaptation and mitigation (referred to as long-term finance). However, developing countries have not received the committed fast start financing, which developed countries claim over half of it has been delivered or is in process and there are serious questions being raised on how much is actually new and additional to regular aid. There is also no progress on raising public finance through innovative sources for midterm from 2013 to 2020 when the phase of fast start financing ends. 

There are multiple ways to generate sustainable, adequate, and predictable public financing for climate change.

Taxing the financial sector, redirecting fossil fuel subsidies in developed countries, mechanism in the shipping and aviation sector, or use of IMF’s (International Monetary Fund) special drawing rights are all potential options. 

ActionAid demands that developed countries quickly meet and exceed their commitments with budgetary contributions and innovative sources of public finance, including use of Special Drawing Rights (SDRs). SDRs are reserve assets created by the International Monetary Fund (IMF) at no cost and distributed to IMF member countries and a government can use it to build up reserves at its central bank or can convert its SDRs into hard currency. We specifically demand that a number of developed countries dedicate at least 10% of their 2009 SDRs to the Green Climate Fund for mitigation and at least 10% for adaptation.  At least 50% of resources are dedicated to adaptation.

In Bonn, discussion on innovative sources of financing was blocked by USA, supported by Canada and Japan, saying that countries should decide the source on their own and UN is not a forum to discuss it.

Such an attitude and approach will weaken the multilateral and democratic UN system where all countries have equal voice and vote. 

We urge the ministers of rich countries, particularly USA and EU, attending 2nd Petersburg Climate Dialogue to agree to revive the talks on innovative sources on financing at UNFCCC and agree on a set of innovative sources, including SDRs. It will be meaningless to design a fantastic new climate fund without adequate and regular funding.