Where will the money for climate change action come from?

Billed as the ‘finance summit’, Warsaw delivered little and promised less, leaving many questions unanswered

(Pic: Oxfam)

(Pic: Oxfam)

By Nilima Choudhury 

The UN’s main climate summit in Warsaw was billed as the moment when outstanding questions over levels of climate finance would finally be resolved.

The ferocity of Typhoon Haiyan, which swept through the Philippines days before the conference started, highlighted the need for more investment both to prevent climate change and help countries adapt to changing conditions.

But while predictable flows of funding are what is needed for countries to plan for the future, the reality has been very different.

In 2009 pledged to deliver US$100 billion a year by 2020 to help developing countries cope with global warming and efforts to avoid it. It is still unclear where this cash will come from.

More immediately, ministers in Warsaw were pushed to deliver ‘concrete pledges’ for support up to 2020. Around $30bn was provided between 2020-2012.

This has largely dried up, leading to rising frustration among delegates from developing nations, concerned of the impacts of global warming and that they may be asked to accept tough greenhouse gas emission cuts in a proposed UN treaty to be signed in 2015.

Philippines negotiator Yeb Sano, who fasted during the conference in protest at a lack of ‘meaningful outcomes’, told RTCC it is vital to “clarify without any doubt what the commitments are from rich countries so countries like mine can adapt and cope with the ravages of climate change.”

Key Warsaw pledges:
Adaptation Fund (refill) – US$ 100 million (variety of countries/public money)
Least Developed Countries Fund – £125 million (UK)
-UN’s forests programme (REDD+) – US$280 million (EU, USA, Norway, UK and Germany)
-EU pledged 20% of new budget to climate-related investments
-Japan increased climate finance budget from US$13bn to $16bn

In terms of real substance,  talks did not result in “anything particularly significant”, according to Jonathan Grant, director of sustainability and climate change at PwC.

As our brief outline above indicates, money was pledged for the UN Adaptation Fund, which helps poorer countries prepare for extreme weather events associated with global warming.

But final texts on the Green Climate Fund and Long Term Finance suggest little else was agreed in Warsaw, bar a few ad-hoc promises.

They “recognise” the commitments made by developed countries to mobilise $100 billion annually by 2020, and “acknowledge” the pledges and announcements made by developed countries since the last conference in Doha.

The texts also “urge” developed countries to continue increasing finance and commit to providing $100 billion per year by 2020.

It raises serious questions over the viability of the Green Climate Fund, which has a home in South Korea and a Secretariat, but bar a promise of US$40 million from its new hosts no cash to play with.

Lost decade

The climate finance talks can be roughly divided into two parts. Pre-and post 2020.

Developing countries say there is virtually nothing on the table for pre-2020, meaning their chances of developing resilient cities and low carbon infrastructure will be limited.

A study undertaken by the Overseas Development Institute (ODI) showed pledges to climate funds in 2013 were 71% lower than they were in 2012, despite global commitments to scale up climate finance from both public and private sources.

“This was supposed to be a finance COP and they couldn’t even deliver numbers for the coming years,” says climate finance analyst Mattias Söderberg from DanChurchAid.

“There is a lot of text saying that there should be money, but there are no commitments and no clear figures on how much the Green Climate Fund will be. In COP15 [in Copenhagen] they managed to give a number for 2020, why can’t they give a number now for 2015?”

It’s a question that was not clearly answered in Warsaw, although the continuing economic slowdown and a lack of clarity over the ability of the GCF to receive funds were both cited by officials from developed nations.

Post 2020

How the US$100bn by 2020 target will be set is equally unclear, perhaps for reasons that are easier to understand. PwC’s Jonathan Grant says countries cannot provide specific numbers because budgets for those periods are yet to be set.

“It’s hard to be more specific about what we’re going to commit in 2020 when we don’t know what our economical decision will be at that point,” he says.

“What we would say is that investment in mitigation and resilience is money well spent – the fact that it’s not even just the humane thing to do, it’s the most cost effective thing to do.”

The trouble is this could lead to inaction and less development in poor countries, and investment in cheaper and easier forms..

“For example,” says Söderberg, “shifting towards a green renewable pathway for developing countries. If they have no money they will go for cheaper solutions like fossil fuels.”

“They need to do action which means they will take the money from somewhere else. Developing governments are forced to take money from schools, hospitals towards adaptation. When disasters hit, they need to respond.”

Analysis: pathways towards scaling up finance

There are options on the table to generate funds, aside from politically unpopular moves to raid public coffers.

Söderberg says governments can either raise taxes or shift priorities in national budgets.

Another option is to implement a financial transaction tax, which would mostly apply to businesses. This would require companies to pay a small tax on international transactions between companies and banks when moving money between countries.

Grant suggests taking money from carbon-intensive sectors to clean technology: “What we need to see is not so much $100 billion a year being ring fenced for clean and green investment. What’s really needed is we tilt the trillion a year away from high carbon production towards low carbon solutions.”

Ban Ki-moon

In his brief visit to Warsaw during the summit, the UN Secretary General repeated calls for wealthier nations to deliver on past promises.

This is likely to be a major theme at the Climate Leader’s meeting he plans to host on the sidelines of the 2014 General Assembly in New York.

Analysts like Smita Nakhooda from the UK-based Overseas Development Institute believe this gathering could provide a platform for pledges to be made, but warns it “will require a lot of effort back home in countries to get key decision makers bought into the idea that more is going to need to be done at the end of 2014, than was done at the end of 2013.”

She hopes countries will “commit funding to the GCF in the hope that by that point it will have advanced its operationalisation process to the point where there are concrete activities that it could take forward that would help meet countries expressed, identify priorities and mobilise and engage private investment and climate compatible activities.”

In her view, decisions made at Ban’s summit and the main 2014 UN climate meeting in Lima could “unlock the possibility of more ambitious action” by the time we get to the climate change talks in Paris in 2015.

“If countries are able to start implementing actions that work and are successful and yield climate benefits alongside development benefits then that lays the groundwork for more action,” she says.

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