Finding the money to pay for climate solutions

ROAD to COPENHAGEN, The Jakarta Post, Fitrian Ardiansyah | Tue, 29 September 2009 | Environment

This week, another round of UNFCCC (UN Framework Convention on Climate Change) talks commences in Bangkok, where various parties will lay the groundwork for faster progress on the very last sessions: Barcelona in November, Copenhagen in December.

Prior to the Bangkok Climate Change Talks, a series of high-level political meetings including the UN Climate Summit in New York and the G20 Summit in Pittsburgh discussed climate change, with specific focuses on the needs for having targets and actions to reduce greenhouse gas (GHG) emissions and on climate finance.

Adequate, sufficient and sustainable financing is required to address the disastrous impacts of climate change and to significantly reduce GHG emissions. A global financial architecture for climate change is also needed to shift public and private finance and investment flows toward decoupling economic growth from increasing emissions to a low-carbon and climate-resilient future (including both adaptation and compensation), particularly in developing countries.

In July 2009 at the Major Economies Forum, in addition to agreeing on the climate science and the need for urgent action this year, heads of state agreed that finance ministers should “work through the G20 to recommend in advance of the Copenhagen conference the best ways to mobilize necessary financing”.

The UNFCCC secretariat’s Investment and Financial Flows report from 2007 estimates that US$133 billion a year in additional investment in developing countries will be needed in 2030 to increase climate resilience and contribute to their low carbon economic development.

The latest survey carried out by the UN Department of Economic and Social Affairs, this year, recommends the need for additional investments amounting more than $500 billion per year, 1 percent of GDP, to help developing countries pay for climate change mitigation and adaptation.

To answer this challenge, all countries, except the least developed, should contribute to financing the fight against climate change on the basis of common but differentiated responsibilities and their respective capacities.

Nevertheless, although emissions, including from deforestation, are rising in some developing countries, industrialized countries have a higher historical responsibility for accumulated emissions and higher economic capacity to deal with this challenge. Therefore, any actions taken by developing countries are based upon actions by developed countries to reduce their own emissions and provision of resources.

The G20 leaders in Pittsburgh, unfortunately, failed to make any specific decisions on financing for climate change. Heads of the world’s 20 largest economies acknowledged the urgent need for a deal in Copenhagen that sets us on a path to a clean energy economy and addresses the devastating impacts of climate change, but very few concrete measures were taken by the group.

They only called on their finance ministers to continue their work and report back at their November meeting in Scotland with a range of options for climate change financing to be considered at the UNFCCC negotiations in Copenhagen.

Within this very limited time, the Bangkok Climate Change Talks should seriously begin exploring adequate, predictable, new and additional options needed to have “make or break” decisions on climate finance in Copenhagen.

These options should start from specifically identifying the means by which the industrialized countries can further mobilize public resources, over and above Overseas Development Assistance (ODA), and channeled through an institution identified by the UNFCCC Conference of the Parties (COP).

Public finance is critical for mobilizing and shifting the estimated $1.5 trillion in annual private sector investment needed to spur the clean energy economy, according to the International Energy Agency (IEA). If the private sector is encouraged and subsequently acts, there are likely to be significant new and additional investments in renewable energy, energy efficiency, tackling deforestation and new climate-friendly technologies.

In addition to this, public finance is important for supporting actions and measures on adaptation in developing countries, and preventing the much higher costs of inaction on climate change.

At the G20 Summit, leaders made a commitment to gradually phase out fossil fuel subsidies. This commitment would strengthen public finance for climate change and has the potential to generate hundreds of billions of dollars for clean energy development and access to clean energy for the poor.

Another conceivable option to drive the necessary global transformation in combating climate change would be the involvement of global carbon markets.

The precondition for this is to have ambitious targets by industrialized countries that are sufficiently stringent to deliver the overall global emission reductions. With this, there will be sufficient demand for credits in carbon markets and the markets can play a role to deliver abatement wherever it appears more cost effective.

Other options that need to be explored include auctioning of Assigned Amount Units (AAU) – finance would be raised by holding back and auctioning a small portion of developed country emissions allowances; revenues collected from trading schemes and fuel levies in international aviation and shipping sectors; and levies on credits from carbon market mechanism.

The Bangkok Climate Change Talks will provide a key opportunity for developing countries, including Indonesia, and industrialized nations to kick off real negotiations for climate financing. Now, negotiators need to take up the mandate from their leaders and make real progress.

The writer is program director of climate & energy at WWF-Indonesia. He can be reached at This weekly column features articles related to developments in the lead up to the UN Climate Change Conference in Copenhagen, Denmark.

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