The climate change nettle to be grasped in Paris

Of all the thorny issues that UN climate negotiators will face at the Paris summit in two weeks’ time, finance from industrialised nations for mitigation and adaptation in the developing world will be the spikiest — and the most pivotal.

Poor countries have repeatedly warned that climate finance is a make-or-break issue for them as they cannot afford to sign up to the Paris deal in the absence of assistance from rich nations. Many of them, including third largest greenhouse gas (GHG) emitter India, have dutifully come forward with their climate pledges, but also made these conditional on receiving the necessary funding.

High-profile figures, including French president Francois Hollande and UN secretary-general Ban Ki-moon, have called for clear financial commitments from developed countries, as they see this as crucial to securing a strong deal in Paris.

Rich nations have been painfully slow in delivering on their promise — made round five years ago in Copenhagen, Denmark — to ramp up climate finance to $100bn/yr by 2020. The pledge was made in recognition that industrialised nations carry most of the blame for climate change.

Contributions to the Green Climate Fund (GCF), the UN’s main instrument for channelling the $100bn/yr, stood at just over $10bn by the end of 2014. Since then, no more pledges have been forthcoming. Nearly half of this total — including a $3bn contribution from the US — is yet to be signed over by the relevant governments. Last week, US secretary of state John Kerry conceded that the Republican-controlled Congress was “making it hard” for the country to realise the funds to meet its pledge.

Meanwhile, rich nations have refused to outline interim targets towards meeting their 2020 goal or — crucially — to commit to any new post-2020 funding. In addition, they have been guilty of creative accounting when measuring progress towards their 2020 pledge.

Last month, the OECD released a report estimating that in 2013-14 an average of $57bn/yr in climate finance was transferred from the developed to developing world, of which 70pc was from public sources. The report was widely touted by rich nations as proof that they are already beyond the halfway mark in meeting their pledge of delivering $100bn/yr by 2020.

But the OECD’s findings were challenged by nongovernmental organisations (NGOs) and developing countries that question the reliability of a report commissioned by donor countries. The average $40bn/yr in public finance reported by the OECD includes non-concessional loans, non-climate specific project finance and relabelled overseas development aid, they say. If only grants are counted, the figure would be slashed by more than half.

Admittedly, countries such as Germany, the UK and France have recently come forward with new pre-2020 climate finance commitments — but these were made within the context of expanded overseas development aid budgets. NGOs argue that this is unsustainable in the long term and, given stagnating overseas development aid levels, may divert aid from other priorities such as education or health.

In a recent interview with Argus, the World Bank’s climate envoy Rachel Kyte refused to be drawn on the issue of post-2020 climate finance. Instead, she blurred the boundaries between climate finance and development aid by saying that, in future, all overseas development aid had to be climate smart.

At issue is how climate finance should be defined, and how to distinguish between climate-specific finance and overseas development aid, as well as between public funding and leveraged private-sector finance.

Industrialised countries are increasingly calling on developing nations to shoulder their fair share of the mitigation and climate finance burden. Their own inadequate performance and their reticence to commit to pre-2020 interim targets or post-2020 climate finance pledges stand in sharp contrast with this rallying cry.

Meanwhile, China has pledged $3.1bn through the Climate Co-operation Fund to developing countries. As such, it is one of the largest climate finance donors, despite still being an emerging economy. Of the 33 countries that pledged money to the GCF, eight are developing countries.

Rich countries cite budgetary constraints and annual budget cycles as limiting their ability to make commitments too far forward in the future. But these limitations did not prevent them in 2009 from committing to $100bn/yr by 2020. And they have no difficulty in stumping up over $500bn in fossil fuel subsidies each year.

It is imperative that rich nations honour their climate finance pledges and come forward with new ones. Not only is this crucial for building trust ahead of the UN summit, but without the financial means needed to turn words into action, the Paris deal will not be worth more than the paper on which it is written.

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