Cash demands from developing countries reinserted into text during UN talks in Bonn, as World Bank official hails progress
By Ed King
The world’s richest countries are back on the hook.
For a few balmy weeks in October a proposed draft UN deal offered a chance they might not have to fork out billons to help developing countries climate-proof their economies.
A section detailing what assistance poorer countries will require to invest in green energy and protect communities against climate impacts had swelled from 12 paragraphs to 2.5 pages.
“The storm was useful – we need predictable and adequate finance for developing countries,” said Alix Mazounie from the Climate Action Network.
“Now it has everything it needs… all the essential pieces… clinging on to every paragraph. From that perspective it’s a good start,” said Oxfam’s Jan Kowalzig, a seasoned observer of these talks.
Kowalzig emphasised the document’s renewed stress on a target of US$100 billion a year by 2020 represented a floor, not a ceiling on cash flows.
A round of talks on the finance chapter runs from 7-9pm CET tonight, as diplomats hone language for a global deal to be finalised in Paris this December. Wallets will need to remain open.
Finance is key at UN climate talks. It lurks at the centre of a web of contentious issues including adaptation, mitigation and loss and damage.
Addressing a meeting of business and finance chiefs in Washington DC on Tuesday, US secretary of state John Kerry could not have been clearer.
“The road through Paris is paved through investment decisions we are going to make this week,” he said.
Poorer countries say they will need funds to adapt to future extreme weather events, funds to mitigate carbon emissions by using clean energy, funds to invest in early weather warning systems.
The good news, say UN officials, is that wealthy countries are already over halfway to providing the $100 billion, a goal first detailed in 2009.
A recent OECD study revealed climate finance flows topped $60 billion in 2014, a calculation that includes public and private funds, multilateral bank contributions and export credits.
Many believe the OECD – a forum representing the world’s developed economies – has overblown these figures by including flows of cash not directly linked to climate change.
The UN’s climate chief Christiana Figueres told media in Bonn it was a “robust input” but admitted the figures had not been discussed or agreed by envoys.
France foreign minister Laurent Fabius – charged with steering these discussions during the December meet in Paris – called for a new assessment to add clarity by the end of next month.
Still, others appear optimistic this most toxic of issues could be put to bed – notably Rachel Kyte, the World Bank’s top climate official.
At the recent IMF/World Bank annual meeting in Lima the top multilateral development banks (MDBs) pledged to double their green finance flows up to 2020.
“It’s not our job to do the maths but that gets you along the way if not all to where you need to be, and I think you can honestly say there is a politically credible pathway to the $100 billion,” she told Climate Home in an interview.
Kyte described the 150+ national climate plans (known as INDCs) submitted to the UN in anticipation of a Paris deal as a “first generation investment prospectus” for climate-related projects.
“For us an INDC is going to form part of our dialogue and that will determine what our lending programme will be for that country in the next period,” she said. “Some are seminal documents and the process has already had an impact.”
A major headache for envoys in Bonn is the abject lack of finance on offer for adaptation. This can include sea walls to ward off sea level rises, better irrigation for parched land or heat-resilient plant seeds.
Just 16% of funds were directed towards these types of projects from 2013 – 2014, the OECD study revealed. That figure fell to 10% for private sector funds.
There are some explanations for the shortfall. Adaptation projects often take place in poorer countries where costs are low, and they also can take longer covering multiple budget cycles.
Still, as Bangladesh scientist Saleemul Huq observed on Climate Home, most banks want a return on their investments. They’re more likely to get that from a clean energy plant than a sea wall.
Kyte tends to agree. “If you are investing in a massive solar array then that finance will flow and it’s a big ticket item,” she said.
This is a problem many hope Paris will solve. One new addition to the text under debate in Bonn stipulates that 50% of all funding flows should be for adaptation [page 12, paragraph 6bis].
This is a red line demand for climate vulnerable countries, said Kowalzig, explaining they “need some confidence that will actually happen.”
The overnight inclusion of a global goal for adaptation [page 9, para 1] in the text could also help, suggested Mazounie, offering a specific date poorer countries can tie demands for cash to.
Amid the maelstrom of Bonn and twitter rage from NGOs banned from private government talks, signs of compromise are emerging.
No-one disputes the need for finance to support climate goals. A recent study sponsored by developed and developing countries reported $90 trillion will be invested in infrastructure by 2030, whether green or brown.
The 134-strong G77 has dropped its politically toxic demand for 1% of rich countries’ GDP to help drive a green revolution, said Kowalzig.
Some of its members are already contributors to the Green Climate Fund and China recently stunned observers with a $3.1 billion finance offer, decapitating the idea that only “developed” countries should make these types of pledges.
“Now the question is how do you ensure that money is flowing where it is needed… are all the channels of finance – like the Heineken advert – getting it to where it is needed?” said Kyte.
Textual differences remain. Where the G77 + China group talks of direct financial “support” the US-led Umbrella group refers to “mobilising” funds from public and private sources.
But outside the negotiating halls, the finance picture is getting clearer.
More funds are expected to be pledged in November; the EU’s much vaunted “finance toolbox” will be released; the G20 will announce its own plans after its Antalya summit.
Will it be enough?
It’s unlikely in an arena where nearly 200 parties are continually trialling their own versions of game theory, but they appear to be heading in the right direction.
“The thing about this process… given it’s party driven – there will always be new things that come in and those that go,” said Mohamed Adow, Christian Aid’s climate advisor.
“That’s the nature of negotiations – it’s a process of give and take.”