Footing the bill for climate change

8/4/2019 Footing the bill for climate change

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Report

Footing the bill or climate change

the duty o the rich and the right o the poor

to development


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This report was originally published in Swedish in early

spring o 2009 as a joint eort by the Swedish Society or

Nature Conservation, Forum Syd, Diakonia and the SwedishCooperative Centre, with Gran Ekl as commissioned

author. Apart rom a ew minor updates this report is

essentially a translated version o the original which was

published as no 33 o Globala Studier. The Swedish version

can be ordered rom www.orumsyd.org.

Author: Gran Ekl

Translation: Emma Henningson

Project Manager: Niclas Hllstrm

Layout: Carina Grave-Mller, Naturskyddsreningen

Photo: www.sxc.hu

Print: tta.45, Stockholm

Order No: 9054

ISBN: 978-91-558-0172-4Produced with economic support rom Sida. Sida has not

participated in the pro duction o the publication and has

not evaluated the acts or opinions that are expressed.


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Preace 4

The challenge 7

Current nancing mechanisms 16

i. Mechanisms within the climate convention 17

ii.Other existing nancing mechanisms 23

Negotiations or new nancing mechanisms 27

i. Proposals that primarily deal with how funds can

be mobilised 27

ii. Proposals that address the allocation of commitments -

and the administration o unds 29

iii. Proposals that primarily address emission trading 32

Climate change issues rom a development perspective 35

Reerence list 43

Contents

Abbreviations:

AOSIS Alliance o Small Island States

CCS Carbon Capture and Storage

CDM Clean Development Mechanism

CIF Climate Investment Funds

DAC Development Assistance Committee

G77 Group o 77 a coalition o 130 develop-

ing o the OECD countries

GDR Greenhouse Development Rights

GEF Global Environment Facility, (UN)

IDA International Development Association,

World Banks und or the poorest countries

IPCC Intergovernmental Panel on Climate Change

JI Joint Implementation

LDC Least Developed Countries

NAPA National Adaptation Programmes o Action

ODA Overseas Development Aid

OECD Organisation or Economic Co-operation

and Development

REDD Reduced Emissions rom Deorestation and

Forest Degradation

Sida The Swedish International Development

Cooperation Agency

UNDP United Nations Development Programme

UNFCCC United Nations Framework Convention onClimate Change


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Ts p ws y pusd

in Swedish in early spring 2009 as a joint eort between our

organisations: the Swedish Society or Nature Conservation

(SSNC), Forum Syd, Diakonia and the Swedish Cooperative

CentreIt serves the primary purpose o clearly mapping this

complex issue and provide a actual basis or policy develop-

ment and advocacy. During the months that have passed

s p, ssu s

v d sd, d s y

Ky ssus , Cp

d yd.

Clearly, there will be no prospect or a genuine agreement

s sus , d s

y wu us dvp u-

tries there will be no chance to curb global warming in time.

Tis is not about charity. It is about making up or theAx-1 us s spsy, u s

us d w s dd s w s-

interest. As clearly stated in the climate convention, the rich,

Ax-1 us w v y usd

crisis, and keeps claiming a disproportionate part o the

sp v py

u d ss dp d -

dvp us. T pp

but dierentiated responsibility needs to be operationalised

.

H wds sss w

developing countries although their per-capita emissions

are much smaller than the rich countries, as is their his-

torical contribution to the problem. o have a chance to

avoid dangerous climate change, drastic reductions must

s s k p dvp us w y

s v u pvy. Adqu s

pqus u ddy y

dvp us k su

a necessary, historically new, ossil-ree, sustainable and

qu dvp jy.Over the many weeks and months o negotiations during

2009, ws vy , y, pss -

s . W EU, s y Ax-1 py

w, y ud vws d

ambitions in late October 2009 it was not only much in line

w sd Eup Css u-

y y, u d wsd

pvd: v ds susy udsd,

ud s pd dvp us -

svs, ODA d Ax 1 uy vss -

sets are double counted as nancial support to developing

countries, there is a rejection to create new institutions

under the UNFCCC, and there is no strong eorts to mobi-

s vv sus su s xs spp

d v. T EU us p d

as the major policy tool rather than public investments, and

pss s s dvp us. I s ud

the EU share o public unds should amount to only 2-15 u p y y ds d

s sd y SSNC, UN d y s.

T s ds d dd s

report remain, and we thereore nd it well motivated to

pvd sd vs , Es spk

wd v sy ss, s d d. A

ew notable developments have happened in the months

s p ws s pusd:

Te estimations o total nancing needs have grown

several times and are likely to continue to escalate.

A study rom the International Institute or

Environment and Development (IIED) let by ormer

IPCC co-chair Martin Parry concludes that the ear-

IPCC sudy dp udsd

ss y 2-3 s, d dd v sd y

sectors. Te total costs or adaptation may thereore

easily amount to USD 500 billion a year, or likely

even trillions i adequate action to curb emissions is

urther delayed. Te UN World Economic and

Social Survey (WESS) 2009 Promoting

Development; Saving the Planet estimates the needs yy pu vss d -

w y dvp us sv

Preace


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udd USD, dy 2012. T

International Energy Agency estimates the global

yy vs ds y

USD 1 y 2030, w s s

wud d pp dvp us. I

contrast, the EU states in its position that total costs

or adaptation and mitigation or all developed

us w u Eu 100 y 2020,

o which only 22-50 USD would be covered by public

uds. T s us s -d p w

EU overall cost estimates and these recent assess-

s.

Tere has been a urther polarisation o views on

ks vs pu vss. W EU ps-

s x xpd

ks s dv d, s u qu s su

pp. Y, EU d s dvpd u-

s pus vy w s d

d py-CDM. As s, UN WESS -

p uds ssv, -dd pu

investment approach that integrates climate and de-

velopment objectives is the only way to eectively

d quky dv s w

energy that is needed. SSNC supports this approach,

which is gaining increasing traction among both

country delegations and civil society organisa-

tions. As one concrete example, a system o nation-

d- syss w y ud

be set up with unds rom a global energy und under

the UNFCCC. Over a period o 10-15 years such a

system could eectively transorm energy invest-

s dvp us w ss-

ree energy, while simultaneously providing aord-

y 1.5 p pp w dy

k y. Ts wud s

d p us - dv ss w y dw v pv w

ss y. Su w-w pp wud

line with the rich countries obligation under the

convention, while yet benetting both rich and poor

countries. It would redene how we understand

costs and create jobs and investments opportunities

s N, wud dv ps dw d

wud s pv sp w

and poor countries. It would also have the benet o

great transparency unds would only be dispersed

in connection with the delivery o the renewable

y.

Te issue o historical responsibility and climate

debt has become articulated in new ways and

brought more into the center o debate in the

UNFCCC negotiations. By analysing the use o both

remaining and past carbon budgets, developing

us pu us s qusand beginning to translate these into nancial terms.

Te concept o climate debt has been articulated

d suppd y fy us

s.

It is clear that climate nancing goes to the core o the debate

d s k k ssu. W dd, ss

or real action and unleash unprecedented international

p. Wy d w, s d u

polarisation, distrust and a loss o valuable time or e-

ecitvely tackling climate change. From the point o view o

SSNC, most o the responsibility alls on the rich countries,

w d k u d -

structive approach. Many o the current positions much

d v pv y s.

y SSNCs u s s ssus:

T v v pu d-

vp us us s sy d

likely be, wihtin a ew years, in the realm o USD 500

yy.Climate nancing must be additional to the 0.7%

ODA (1% Swd) . Ay du u


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ud d ODA s s p-

ples o the climate convention, and means taking

rom the poorest and decreasing the eorts to reach

Mu Dvp Gs.

Carbon trading can, likewise, not be double counted

as nancial support or developing countries. Tese

reductions are part o a zero-sum game aimed to

make it cheaper or Annex-1 countries to achieve the

s Ky.

Climate nancing must be governed and set up

under the Climate Convention. A global und under

UNFCCC sud s up

handling, and to create trust. Te World Bank, which

is eectively governed by the donor countries with

USA in veto power can not have a signicant govern-

d py .W UNFCCC ud, ssus sus

on the one hand, and governance/policy and ac-

uy/sus sp-

d. T ud sus ds pd

and secure, but can come rom a diverse set o sourc-

es. SSNC suggests the ollowing criteria or assessing

v ss y -

nisms on the table: 1) existence o positive side e-

ects, such as direct environmental benets (e.g.

Levvys on shipping and aviation), 2) equity, 3) eects

ud us w d

su, 4) sy d pdy, 5) sd

on the UNFCCC and on clear princples such as com-

mon but dierentiated responsibility 6) potential or

up-scaling and adjustments over time and 7) benets

ds py d usss.

ransparency and accountability and participa-

tion by civil society in decision-making are key

when establishing new unding arrangements. Tis

is important in order to ensure that the unds are

usd vy d s d ds su-

s d pdus w s ss w-

sp d quy.

We hope you will benet rom the clarity o this report just

s w v u w dvp k d ps-

tions on these tricky but important issues. Te issues on

d w s Ky Issus

. Hpuy, w w v ps dd-ks d uds s d d -

uy pv wys w w s sus

us .

Svante Axelsson

Generalsekreterare Naturskyddsreningen


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Nv 2008 kd 20 vsy -

UN P C C, IPCC. N

years had passed since the United Nations agreed to negoti- y d p

change. In 1992 the countries o the world adopted the

United Nations Framework Convention on Climate Change

(UNFCCC), wk uy usd s -

ternational work against climate change. In 1997 the Climate

Convention was complemented by the Kyoto Protocol,

which amongst other things contains binding commitments

du sss us ss dvpd

countries and general measures rom the other member

us.

Te threatening climate crisis is , in other words, ar rom

s w.

Nss, s y s w ys -

mate issue has suddenly gained weight in the political agen-

da, and suggestions o what should be done about the global

dsussd wdy.

Te most immediate challenge is to limit climate change

as much as possible, principally through reducing emissions

o greenhouse gases. Tis alone demands enormous invest-

s s d du .

But climate change is already upon us and it will getworse beore the trend can be broken, irrespective o the

s w w k. I w ssy pu

great eort into adapting our society to the climatic chang-

s , d ps pp

d w us, spy s

p d vu.

T ss s py usd y qu-

s dxd d sp y

small proportion o humanity that has lived, and continues

v, dvpd us. T py s-

sion source is the combustion o ossil uels. In the past, large

areas o our orests have also been cut down, which has also

contributed to our historic emissions. Te rich countries

continue to emit ar more greenhouse gases per capita than

dvp us.1

T s s uvy ds-

ud u p s pps sss.

Roughly speaking, those that are least to blame or the crisiswill suer worst rom the eects. Poor and vulnerable

groups in developing countries will not just ace the greatest

eects; in contrast to those in richer parts o the world, these

pp k d p ps

adapt to the new climate, or to compensate or the losses that

s w us.

O s ss, s spsy y

us pdy d dsy du u s-

ss us ss. Bu w s v sp-

sy u s d w -

work o the UN Climate Convention to help poor countries

dp d k pss

dvp wu us ss

ssy.

Despite the many years that have passed since the Climate

Convention was passed, it is only recently that any real eort

has been made to estimate the costs o mitigation and adap-

dvp us. Ms

ss v psd s w ys

sus supp dd s s s d

o magnitude as the worlds combined overseas developmentd (ODA) ud 100 US ds uy2. T

sus v d s C

The challenge

It is dicult to imagine an issue with more global

impacts on human societies and the natural environ-

ment than the greenhouse efect. Te signal is unclear

but we may already be witnessing examples, i not

actual greenhouse efects, in Arica.Te ultimate potential impacts o a greenhouse

warming could be catastrophic. It is our considered

judgement that it is already very late to start the

process o policy consideration.

Irving Mintzer, World Resources Institute

at a public hearing with the Brundtland Commission

in Oslo 24-25 June 1985


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Cv uds supp dvp us

ss p s vu. T s, ,

d pd d ssv s ud.

Te plan or the international negotiations is now to reach

an agreement or the period post 2012, when the current

commitments under the Kyoto Protocol run out, at the

Conerence o the Parties in Copenhagen in December

2009. T qus w s dvp-

us dp d

sss w u s. T

dvpd us v dy d u

to these costs as part o the Climate Convention, but results

s v sy s.

During the last ew years a prolieration o new unds

v ud d ppss ud dsus-

sion, all with dierent strategies or how more resourcescould be mobilised. Tere is a clear pattern; proposals rom

dvp us udd spsy

dvpd us u pu uds -

gation and adaptation, whilst proposals rom developed

countries put greater weight on market mechanisms and

vus vv sus w x

w s uds.

Ts du pss vvw s p-

ppss d sus vvd

pu udd dsd ws

change eorts in developing countries. Private investments

w kd y s ws , wv,

dsussd ( s

that organisations and the private sector make, or example,

w wk d s pjs). Ts

ws , us, p, u su dsus-

ss wud d s p wy

ssu:

How are the developed countries going to live up to their

s d wk wu

taking resources rom their equally important commit-ments to increase development aid?

Discussion o this issue is important or several reasons:

Firstly, the two challenges are intimately connected.

Some o the causes o climate change, the eects o them and

even some o the measures that are being taken to deal with

, w p s. Supp v-

ronmentally, economically and socia lly sustainable develop-

s y v s pvy, u s

dp s w

v.

Secondly, both development and climate change work

ud sus ss. Rd

prices or oil in the summer o 2008 quickly lead to demands

or lower climate change taxes but acceptance o higher

taxes does not automatically increase again when the oil

price alls again. Te nancial crisis caused several large EU

countries to immediately demand that the EU should reduce

s v s. N ODA vyet been undermined by new decisions, but even in times o

pspy, s dvpd us v

lived up to their pledges and experience shows that develop-

d sy su w s d.

Te rights o the poor to development and to justice must

s ddd d.

Mitigate or adapt?

Te ultimate objective o the United Nations Framework

Convention on Climate Change, UNFCCC is stabilization o

greenhouse gas concentrations in the atmosphere at a level

that would prevent dangerous anthropogenic intererence

with the cl imate system. Such a level should be achieved with-

in a time rame sucient to allow ecosystems to adapt natu-

rally to climate change, to ensure that ood production is not

threatened and to enable economic development to proceed

in a sustainable manner.

A stabilisation o concentrations in the atmosphere re-

quires the limitation o anthropogenic emissions o green-

house gases, protection o existing sinks and reservoirs and

the creation o new ones (see Box 1). According to the termi-nology o the Climate Convention, measures with these goals

are called mitigation, i.e. aiming to counteract or reduce cli-


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Box 1: Reservoirs, sinks and sourcesThe concentrations o greenhouse gases in the atmosphere are the result o the balance between the emis-sions and absorption o the gases in reservoirs, sinks and sources. For the most important greenhouse gases,carbon dioxide and methane, the balance is dependent on how the carbon that these compounds contain

circulates between the atmosphere and ixed orms. Reservoirs are the existing stores o carbon that are ix-ed, or example in coal, oil and natural gas. Normally, this carbon can only be released into the atmosphere i itis dug or pumped up rom the ground and burnt. Other reservoirs are less stable, not least the carbon stored inliving organisms, in soil and peat, and stored in sea and lake bottoms.

Sinks are reservoirs where the quantity o carbon stored increases gradually over time. This occurs mainly innatural systems which absorb carbon dioxide rom the atmosphere and store them in orms that are more orless permanent and stable. This results in a all in the concentration o carbon dioxide in the atmosphere.Examples o sinks are growing orests and organic material stored in environments where it does not decom-pose, or example by deposition to deep sea beds or by being buried in peat.Sources are the reservoirs rom which there is a net emission o greenhouse gases to the atmosphere. Themain source is combustion o ossil uels. Deorestation, wetland drainage and other changes in land use alsolead to the release o carbon rom reservoirs. Ruminating cattle and rice cultivation are sources o methanegas emissions.

mate change. Te most important way on a global scale to

achieve this is through reducing the use o ossil uels. Major

emission reductions can also be achieved by stemming deor-

estation and by limiting the emissions o nitrous oxide and

methane rom agriculture and livestock.

Unortunately, the moment has long since passed when the

eects o anthropogenic climate change could be stopped

completely. Te convention thereore also addresses the need

or adaptation to the changes that are to come. Adaptation to

climate change will be necessary in many dierent ways: in

planning and building physical protection rom storms and

oods, in adapting agriculture to new temperature and pre-

cipitation conditions, in preparing or the spread o inectious

diseases to new areas, and much more.

Te links between what is being done globally to stop

d d sus p sy

to adapt to a changing climate are both obvious and strong;

ss s d ,

d w dp. O, xpss -nomic terms: investments which reduce emissions o green-

us ss d w dp ss uu.

T d w d

adapting to the changes can seem clear, but this is not neces-

sarily always the case. For example, measures that counter-

act deorestation do not only lead to lower emissions o car-

dxd, y s u du vuy

to the extreme weather events which can become more com-

s s.

The historical responsibility of the developed coun-

tries

Since industrialisation, the minority o the worlds popula-

tion that live in the developed countries have built their

prosperity on a constantly increasing use o ossil uels,

without any consideration or the eects that this may have

. I s d pu x

proportion o historical emissions caused by the developed

us. Ess vy dpd w s y s

chosen and the reliability o statistics varies or dierent

pds d us. Bu spv p-

rameters, the Climate Convention establishes that devel-pd us spsy jy s-

sss us ss, ws sss

p p dvp us s vy w.6


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And we continue to emit ar more per capita than developing

us.

Our emissions are the single most important cause o the

s dxd -

sp ud 280 pp (ps p )

mid 1700s to over 380 ppm today.7 Te modest eciency

improvement measures that have lead to a decrease o emis-

sions per Swedish krona or per kilometre have to a great

extent been cancelled out by our ever increasing consump-

.

Bu dys d s f s sss

rom large countries such as China and India that are raised

s s . O us, ds

k d w sss su ppu-

us s s pdy. Bu sss p p

s us s vy w ps s dvpd us. Fu, s p

s pp sss ,

xp, C ud pdu xp

sus us.

And i the developed countries had not already l led the

atmosphere with so much carbon dioxide, then no one

wud d wy vy u u Cs, v ss

Ids, sss dxd x w d-

ds. Bu u su, dd s

the atmospheric concentration risks potentially catastroph-

ic consequences. Our emissions have created a situation

which limits the possible development options o developing

us.

and their commitment to pay

T s wy dvpd us us . N

y y v up ps, w y dds

s d uud, v 0.7 p GNP

ODA, u s y u ss dvp

us d dp .

T s spsy dvpd usor the emissions o greenhouse gases is one o the strongest

us us p dvp us dp

climate change; we caused the problem and we are thereore

sps k squs.

But the developed nations also have a responsibility to

supp dvp us s

uture impact on climate change. Te convention states that

the share o global emissions originating in developing

countries will grow to meet their social and development

ds d sd us v

economic and social development and poverty eradication

are the rst and overriding priorities o the developing coun-

try Parties.8 We must thereore ensure that it is possible or

these countries to develop, by building up energy, transport

d pdu syss v u w, d

long run almost non-existent, emissions o greenhouse

gases. O course, this must take place alongside domestic

ss dvpd us.

Tis double responsibility has been acknowledged andaccepted, above all by the richer developed nations, through

the Climate Convention (see Box 2). By signing up to the

Climate Convention, these nations have made a binding

commitment to support developing countries (nancially

d u s y) s

d dp .

T C Cv ssss w

must be adequate and predictable, but as we wil l see, this has

s s .9

How much money is needed?

A u ss v d dvp

us vs ds, uu sss

rom these countries and to adapt to the climate changes that

. T su us vy y. Hwv,

u s s u d s s s s

the current total development aid, but is very likely to be less

than the sums o money that the governments o the western

world were able to mobilise during the nancial crisis in the

uu 2008.

T vy dspy ss psds py du d ssups d, u s

d uy d y u -

s.


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Box 2: What does the Climate Convention say about responsibility and inancing?

One o the key paragraphs in the Climate Convention acknowledges that the global nature o climate changedemands the widest possible cooperation by all countries, but that their eorts must be based on their com-

mon but differentiated responsibilities and respective capabilities and their social and economic condition.10

The principle o common but dierentiated responsibilities is applied in the Climate Convention through twoo the central commitments which apply only to a selected group o countries:

Alldevelopedcountries(so-calledAnnexIcountries,listedinAnnexIoftheClimateConvention)shall limit their anthropogenic emissions o greenhouse gases and protect and enhance their greenhouse gas sinks and reservoirs . 11

AnnexIIcountries(thedevelopedcountriesexcludingtransitioneconomiesinCentralandEasternEurope and in the ormer Soviet Union) commit to provide new and additional inancial resourcesto meet the costs incurred by developing countries in complying with some o their obligationswithin the Climate Convention; to assist the developing countries that are particularly vulnerable to

the adverse eects o climate change in meeting costs o adaptation to those adverse eects; andto promote, acilitate and inance the transer o, or access to, environmentally sound technologiesand know-how, particularly to developing countries, to enable them to implement the provisions othe Climate Convention. 12

Furthermore, the Climate Convention explicitly states that the extent to which developing countries will beable to eectively implement their commitments under the Convention is dependent on the eective imple-mentation by developed countries o their commitments under the Climate Convention related to inancialresources and transer o technology. 13

The Climate Convention designates Global Environment Facility (GEF) as the international entity responsibleor the Climate Conventions inancial mechanism. With the signing o the Kyoto Protocol in 1997, the Clean

Development Mechanism (CDM) was accepted as a market based mechanism or inancing o emission reduc-tions in developing countries. GEF and CDM are explained in more detail on pages 17 and 19.

The convention also concedes that inancial resources or the implementation o the Climate Convention mayalso be made available through bilateral, regional and other multilateral channels. 14

The costs o climate change adaptation measures

Tere are at least our levels o uncertainty in the estimation

o the costs o climate change adaptation measures in devel-

p us:

T us ss s-. p y v p ,

Te temperature increase and other climatic changes.

usd y y v us ss,

W sus w ssy dp sy .

s s, d

T (dd) ss udk s sus..

T yss psd y C Cvs s- d susd d-

p ss ky s s ds p

year. According to the estimates in the study, the addi-


12/48


Organisation Billion US dollars per year

Climate Convention 28-58 (year 2030)

UNDP 86 (year 2015)

World BankBank 9-41

Oxam 50

Climate Convention 200-210 (year 2030) 15

Box 3: Estimated costs or mitigation o,

and adaptation to, the eects o climate

change in developing countries.

Adaptation to climate change

Mitigation by 25% compared to 2000

ss dvp us wud up

ds p y (s Bx ).

Human Development Report 2007/2008, published by

the United Nations Development Programme (UNDP) gives

a higher estimate o adaptation costs. Te need or increased

support rom donor countries or investment in adaptation

sus dvp us s sd 86 -

US ds p y, s y s 201517.

Ox, dvp NGO, psd

s s d ud: 50 d-

s p y.

O course, it is hard to calculate these kinds o costs, and

s s sk s ss dp-

tation costs are too low. A comparison with adaptation costs

in some developed countries may contribute a new perspec-

tive. For example, the UK Environment Agency has esti-d ss s pj s

Tames Barrier, which protects the river rom ooding to

8 US ds.18

The costs o climate change mitigation measures

Estimates o the costs or mitigating climate change in

developing countries are built on a dierent set o

us. I s su s dd

cost compared to the cheapest and ofen ossil uel based

alternative, or building a power station, actory or transport

system, which has lower emissions o greenhouse gases.

E s us s k ssups x

w dds w pd dvp us

k sd. I dd,

is also uncertainty over the pace at which developing

us xpd pv v sdds d

give a larger share o the population access to energy

services, transport and basic consumables. Will the current

su, w s ppu v ss

w ds p dy d d s yconsumption many times over in order to meet basic needs,

suss? O sud s us f

w pp u pvy?

Sources: UNFCCC (2007a), UNDP (2008), Vrldsbanken (2006), Oxam (2007).

* Since this report was written in spring 2009 a number o new studies and reports have been published that indicate signicantly higher costs or bothadaptation and mitigation. An International Institute or Environment and Devleopment study (Parry, 2009) by ormer IPCC co-chair Martin Parry makesthe case that UNFCCC underestimated the costs or adaptation by a actor o two to three, and point out that the study omits many signicant areas. Totalcosts or adaptation likely runs in the many hundreds o billion per year. In the World Bank report 2010, the average estimates o a number o studies onmitigation costs or developing countries is USD 395 billion per year, with several individual studies signicantly higher.

Box 3: Estimated costs or mitigation o, and adaptation to, the eects o climate change in developing countries.*


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Box 4: Climate change adaptation how do they calculate? *

In 2006, the World Bank presented a widely quoted calculation o the costs o climate change adaptation indeveloping countries. The bank estimated that the costs would be likely to be between 9 and 41 billion dollars

per year. The background document does, however, emphasise the high degree o uncertainty in many o thebase assumptions or the calculations, so it is very possible that the real costs could lie outside o this range.

The World Banks method was based on an estimation o the percentage o the investment low to developingcountries that is sensitive to climatic changes. It was estimated that 40 percent o ODA, 10 percent o oreigndirect investments and 2-10 percent o domestic investments are sensitive to climate change. The additionalcost o adaptation o these investments is assumed to be between 10 and 20 percent (purely an estimateaccording to the report).19

The international development NGO Oxam takes the World Bank method as a starting point or its own cal-culations, but also attempts to estimate some costs which the bank has not taken into account. Firstly, thebank estimates only the additional costs over and above the ordinary investment lows rom donors, oreigninvestors and domestic investors . It does not include any estimate o the need or speciic investments in cli-mate change adaptation. Secondly, the bank addresses only the investments rom the private sector and go-vernments. The additional costs that climate change will cause or individual households, local communitiesand civil society organisations (CSOs) are not included. Oxam estimates that the costs or CSOs o meetingthe needs on a local level are 7.5 billion US dollars per year, and the costs or adaptation projects o the kindpresented in National Adaptation Programmes o Action to be between 7.7 and 33 billion dollars (in total, notper year). Oxam also discusses hidden and currently unoreseeable adaptation costs and deliver a inal esti-mate o at least 50 billion US dollars per year. 20

UNDPs Human Development Report 2007/2008 bases its calculations o the additional costs o investmenton The World Banks method, but, based on new data and assumptions, arrives at the conclusion that thecosts will be a minimum o 44 billion dollars per year in 2015. It proposes that at least 40 billion dollars peryear need to be allocated to adapting poverty reduction programmes to climate change (o which the addi-

tional costs or ODA are estimated to be 4.5 billion US dollars per year), and at least 2 billion US dollars will beneeded to strengthen disaster preparedness. UNDPs estimates concluded that the need or additional adap-tation inance will increase by at least 86 billion dollars per year by 2015. 21

The Climate Conventions calculations are considerably more thorough than any o the above studies. Thestudy presents estimates o the costs in dierent sectors (agriculture and ishery, health, inrastructure etc.)or dierent types o costs (investments, research etc.) in dierent regions and with dierent levels o deve-lopment. The estimates o additional costs or investments in new inrastructures are partly based on dataor the actual costs o recent extreme weather events, but also link back to the World Banks methods descri-bed above. The large uncertainty actor remains: or example, the increase in global investment costs is esti-mated to be between 8 and 130 billion US dollars per year. All in all, the studies provide estimates o adapta-tion costs or developing countries o between 28 and 58 billion dollars per year by 2030. 22

* See also the study Assessing the costs o adaptation to climate change: A critique o the UNFCCC es timates which was published late2009 by the International Institute or Environment and Development.


14/48


Tere are ewer comprehensive estimates o climate change

ss dp ss. T y

sd w y y s ss w -

s. T C Cvs s s pvus-

ly estimated that global investment must increase to 200-210

billion US dollars per year by 2030, simply in order to reduce

sss us ss y 25 p pd

2000 vs. (O sud d w us du

concentrations by at least three quarters and very probably

, s x 5 d v s

keeping the global temperature increase below 2 degreesCsus.) As fy p s vs s s-

ed to be necessary in developing countries.23 In updated

us 2008, wv, ss sd

170 p pvus ss. 24

Nss, s p p u sus

to mitigate climate change should not only be seen as a bur-

d. T s j s d

necessary changes in energy and transport systems etc. Te

qus s w pu y sud s usd dv

dvp d ssy vs

s k p. Bu s s u-

tries must shoulder the responsibility and saeguard the

rights o the poor to development and global justice, and qus y.

Box 5: What does the science say?

The ourth report rom the UN Panel or Climate Change, IPCC, which was presented in 2007, is based on con-tributions rom and discussions between thousands o experts with dierent backgrounds and specialisations.

The report relects broad scientiic agreement on the extent and causes o climate change.

According to IPPC, the ollowing things are necessary in order to ensure that the global temperature increasewill not exceed 2-2.4 degrees, compared to preindustrial temperatures: by 2015 at the latest, emissions ogreenhouse gases must begin to all, and they must continue to all by 50-85 percent to 2050 (compared with2000 as a baseline). The targets that are proposed are dependent on which temperature increase is consideredacceptable (there is currently broad agreement that two degrees Celsius is the maximum acceptable tempera-ture increase), and which risks/probabilities are reasonable. The Swedish parliamentary Scientiic Council onClimate Issues drew conclusions rom IPCCs analysis in February 2008 and concluded that emissions inSweden in 2050 must be at least 75-90 percent below the level in 1990.

Since the IPPC report was presented, several leading researchers have declared that the situation is likely to be

more serious than stated by the IPPC. New research and observations show that several important actors be-hind global warming can have been underestimated or not taken into account in the calculations. IPPCs cal-culations are based on the hypothesis that a concentration o 445-490 ppm carbon dioxide equivalents wouldbe enough to limit the temperature increase to 2 degrees or slightly more. More and more voices are now co-ming orward to say that the concentration must all to below 400 ppm carbon dioxide equivalents. For ex-ample, Stockholm Environment Institute, is arguing the case or a maximum o 350 ppm CO2, i.e. a signiicantreduction rom todays 387 ppm CO2.25 To achieve this, global emissions would need to be reduced to zerowithin just a ew decades. 26


15/48


Guiding principles or fnancing

Against a background o the needs, and o the diering

responsibility o countries globally, a number o basic

criteria or nancing o climate change measures in

developing countries begin to emerge. Even i there is

variation in the interpretation o the implications o certain

principles, a number o central principles can be dened. o

ds , sus us :

Nw d dd v ODA d

xs ud d sus.

Predictable, so that plans can be drawn up and

programmes implemented without suddenly suering

d pys.

Appropriate or dierent kinds o eorts. For example,

dp sus, w d vus,

sud d y s.Equitable in the sense that the countries that have bear

the greatest responsibility or emissions and have

s py u sus sud sd

s p ss.

Adqu ds.

S, s us suu

s us k p, sd

sus.

T dvp us, w supp y ps

o civil society, emphasise the importance that new nancing

ows are controlled and managed directly under the Climate

Cv d s suus. A ss pp

equal basis within the Climate Convention. Other channels,

where the developed countries in many cases have a

pvy u, sud p w,

nor undermine, the mechanisms o the Climate

Cv.

I pu, v sy s ssss p

o openness, participation and saeguarding o human

s uu , wy

o unds and planning o strategies, to implementation and

w-up pjs d ps. T s u

learnt rom the mistakes and successes o development aid.

W psvs s d v syare given real inuence in the management, programme

p, p d w-up s

are higher that a greater proportion o the resources also

p d s vu, d ups v

the most diculty in adapting to climate change. In the

s wy, s p

pp w uy sps s-

s sus, d w d ss y d

y svs.


16/48


Current fnancing mechanisms

UNFCCC

The World Bank

EU

Kyoto Protocol

GEF

IDA

CFU

CIF

Adaptation Fund

CDM

General und

LDCF

SCCFIncluding support or developing countries

which are dependent on income om ossil uels

SPALong term initiatives

General und

PCF

CPF

SCF

Investments that are compatible with poverty

reduction and strategies or sustainable development

CTF

Investments in low carbon technologies

GCCA

Specically addressing LDCs

and small island nations

Actor Framework Fund

Adaptation Combating climate change

Despite the act that the resources contributed so ar or

climate change measures in developing countries have been

, y v dvd u y d

channels. And the number o unds and mechanisms is

increasing ast. Te summary below describes rstly the

nancing channels which are administered directly

w C Cv, d s

other initiatives that have been launched by donor coun-

s d sus.


17/48


I. Mechanisms within the Climate Convention

Sv ss v d w C

Cv wk d s sus

implementation o the Climate Conventions goals. Most o

the unds are managed by Global Environment Facility,

GEF, on behal o the Climate Convention. However, the

k sd C Dvp Ms, CDM, d

Adp Fud dsd dy ud

Climate Convention. O the existing mechanisms under the

C Cv, s v uu s w

mechanisms that is debated and is most controversial.

Several o the most dicult issues in the negotiations in

Pz D 2008 w u s ss.

The Adaptation FundT Adp Fud s su s ud

Ky P. T ps d ud

2001, u ws y du C Cv -

Pz 2008 ud d

that will make the Adaptation Fund operational. Developing

us sd Adp Fud s -

portant instrument or unding to support the necessary

comprehensive adaptation measures needed, and they stress

the importance that this unction is administered under the

C Cv.

Te und will nance adaptation measures in developing

us d s 5 US ds s s -

bution. In contrast to the other unds, the Adaptation Fund

s sy dpd ds v d-

s. I s s u vy 2 p

made on Certied Emission Reductions, CER, issued with-

CDM wk (d w; pjs s

dvpd us xpd).

Discussions about the Adaptation Fund have mainly

d w up ssus:

1) How can the und mobilise sufcient resources?

S uu ud s sy dpd

on how CDM develops, which is itsel dependent on the level

o ambition in the commitments or emission reductions in

dvpd us w , s

unclear how large and how stable the income will be.

Ess vy y; xp, su

ss 160 950 US ds 2012. 27

I s s susd vy sud d

J Ip (JI, s w s) d

ss ws w Eup

emissions trading scheme. Many Annex I countries, includ-

Swd, v ppsd s pps d

Climate Conventions meeting in Poznan in 2008 a decision

ws d f y s sp

vy sud wdd.

2) How will the und be managed?

Te control and administration o the und was another

question that led to lengthy negotiations at the Poznan

meeting. In the end, many o G77s demands, which to a

x w u s wsp dvp

countries, were accepted. Te nal agreement was that a

d, w jy d s

represent developing countries, will sign agreements di-

rectly with contractors. GEF will only have a minor admin-

sv .

But beore the und can begin to nance adaptation

measures there are a number o detai ls or the management

d u. Ad ds sd, v-

ernments, including the Swedish government, are not wil l-

dsus uds v pvusy p-

sd (s x 11).

Whether the Adaptation Fund becomes the principal

mechanism or nancing adaptation measures or not re-

mains to be seen negotiations thus ar reect the dierence

in priorities and approaches between developing and devel-pd us.


18/48


GEF other unds within the Climate Convention

Te Global Environment Facility (GEF) is the body that has

administered all o the ocial nancing mechanisms so ar

p UNFCCC. GEF ws d

one year beore the UNFCCC was signed at the Rio meeting.

Te und is run jointly by the UN Development Programme

(UNDP), the UN Environment Programme (UNEP) and

the World Bank, where GEFs secretariat is housed. GEF also

dss ss Cv

on Biodiversity, the Convention to Combat Desertication,

the Stockholm Convention on Persistent Organic Pollutants

d sv v s.

T jy uds GEF s ss-

ated with the international goals o the environmental con-

ventions. GEFs mandate is thereore limited; the unds

us usd u s, u y usd ud s y su pj

s pvs v

dvp s. I C Cv s s x-

pressed through the commitment imposed on Annex II

us d u ss

measures undertaken via GEF. GEFs rules and regulations

d ss s x ss dd s-

pj w s (.. pvd ss

to energy) into one with global environmental benets (e.g.

w sss us ss). 28

In total, GEF has distributed around 7.4 billion US dollars

s 1991, w s ss 500 ds p y.29

GEFs dy vs d u sys

periodic replenishments, in a our yearly negotiation be-

tween member countries regarding the size o their eco-

nomic contribution or each period. Te most recent round

s sud 3 US ds. Jp, UK,

Germany and USA contribute the most, with almost 10

percent each. Other larger donors are France, Holland, Italy,

Cd d Swd.

O uds dsud, GEF vsd 2.2 US dollars between 1991 and 2006 in programmes that mit-

.30 O v, s s 140 -

ds p y uy usd s-

mated need or climate change nancing. Te resources

were used amongst other things or energy eciency, build-

u w y, sus sp d

w s. 31

In addition, GEF manages three specic adaptation

unds: the UNFCCCs Least Developed Countries Fund

(LDCF) and Special Climate Change Fund (SCCF), and

GEFs w S Py Adp (SPA).

LDCF vs supp s dvpd us (LDC)

sdd puy ssv -

mate change and to have least capability or adaptation.

Initially, resources have been used to develop National

Adaptation Programmes o Action (NAPAs) where the most

urgent needs or adaptation are identied. In October 2008,

38 50 LDC us d dvpd NAPAs.T ud w w vs

NAPAs. 24 us v ppd pj ud,

total cost o 77 mil lion US dollars. With an average o 2 mil-

lion US dollars per country, it is clear that these projects are

uky k s d. Bu ud s

y d s 172 ds s 19

donor countries.32 Tis sum includes the unds or develop-

NAPAs.

SCCFhasabroadermandate,butevenlessmoney.SCCF

s dp d y s d

addition, support economic diversication in developing

us w dpd x

ss us y s duss. S ,

SCCF s vd 90 US ds,

y 13 d us.33

SPAisGEFsownpilotprogrammetonancelongterm

vs w supp dp-

d u v s.

50 US ds v d s pp.


19/48


So ar, Sweden has contributed 7 million Swedish kronor to

LDCF34, d 25 k SCCF. T v

budget proposal in autumn 2008 included a total o 4 bil lion

kronor over three years to new climate programmes, a pro-

p w w GEF (s x 11).

Clean Development Mechanism - the market based

mechanism o the Kyoto Protocol

T Ky P ws pssd UNFCCC d C- Ps, COP , D , u y Fuy . T p s ds u y susy w d ud pds d y ps w y d Cv. T w Ky ws ds v pk k sd ss.

Te Kyoto Protocol established three partially intercon-

d k ss: atradingsystemforemissioncredits(whichsofarhas

y pd sss d sys- dud EU),

aprogrammecalledJointImplementation,JI,through

w y Ax I uy vs pjs Ax I us s v dusss dsy

CleanDevelopmentMechanism,CDM,which,ina

s wy ks pss vss A-x I us dd sss dus s s su pjs udk dv-p us.

O s ss, y CDM sus w

investment rom developed countries to developing coun-s.


20/48


CDM was the result o a strange negotiation game in Kyoto.

Te mechanism has its origin in a proposal or a Clean

Development Fund, which Brazil put orward at a Latin

American workshop a ew months earlier. In Kyoto, the aims

and unctions o the und were modied out o all

recognition, without everybody involved really under-standing what was going on during the intense closing stages

s.

Brazils original proposal aimed to ensure that the developed

countries would live up to their commitments to reduce

emissions o greenhouse gases. Countries that did not

achieve their commitments would be orced to pay a penalty

to a und, and the money would be used to nance

y s dvp us.

Te Clean Development Mechanism, on the other hand,

does not aim to penalise those who ail to reduce their emis-

Box 6: Emissions trading

All developed countries that have ratiied the Kyoto Protocol have made a commitment to limit their emis-sions. This commitment speciies by how many percent each country will reduce (or in a ew cases, is allowed

to increase) its emissions during the period 2009-2012 compared to the base year 1990.

Each country is responsible or achieving its commitments (EU countries, however, have one joint commit-ment), but through the Kyoto Protocols lexible mechanisms they can achieve their commitment through co-operation with other countries.

The EU established a trading system or emission credits in 2005. The system encompasses emissions o car-bon dioxide rom 13 000 energy intensive industrial plants within the EU. The member countries allocate anagreed number o emission credits to the plants, according to national plans which must be approved by theEU Commission. Businesses that receive more permits than they need can sell them to other businesses withinthe EU that need more than their allocation. The idea is that the costs o reducing emissions will be minimisedbecause the companies that can cheaply reduce their emissions can sell their permits to others or whom the

reduction would be more expensive. During the irst EU trading scheme period, however, the emission creditswere allocated so generously that in the end there was hardly any demand or them. In the next period, a smallnumber o emission credits, at least, will be auctioned.

Countries and individual companies can also credit themselves with emission reductions undertaken in othercountries (in the case o EU countries these emissions must be in non-EU countries) with the help o the pro-

ject based mechanisms Joint Implementation, JI, and Clean Development Mechanism, CDM. In the case o JI,the emission reductions are deducted rom the quantity o emissions allocated to the host country in theKyoto Protocol, and transerred in the orm o Emission Reduction Units, ERUs. Similarly, CDM projects resultin Certiied Emission Reductions, CERs. Since CDM projects are undertaken in countries that do not haveemission reduction commitments in the Kyoto agreement, these CERs are not reported within the rameworkas part o the national emissions or the host country. They thereore do not lead to any emission reductionwithin the systems ramework, and require stricter rules to ensure that the emission reduction would not have

been achieved anyway.

Both ERUs and CERs can be converted into emission credits to be bought and sold within the EU trading scheme.


21/48


sions ar enough. On the contrary, CDM aims to assist

Ps udd Ax I v p w

their quantied emission limitation and reduction commit-

s (sd y u).37 Ts sss sss

w dvpd us d svs w

emission reductions rom investments in projects under-

taken in developing countries. Instead o the sanctions pro-

posed by Brazil, which would ensure a transition in the

high-emitter countries, resources are now diverted to meas-

us us w y ps s

. W wd quks d ps s-

sions reduction opportunities are ound can be seen clearly

vs w s . I pd up M

2005, 166 pj d dd w w xpd

su ss dus quv 329 -

s dxd up d ud 2012. Mthan hal o these reductions result rom only three projects

or destruction o so-called industrial gases: uorinated

HFC-23 and nitrous oxide. Many similar projects have

spu up d sd . T s s du-

tions can be as low as 0.5 US dollars per ton, while the equiv-

alent emission reductions in autumn 2008 were sold or

ud 20 us Eup k.38

On January 1st 2009, the quantity o emission reductions

or the period 2008-2012 within existing CDM projects had

increased to more than 1 500 mil lion tons. As more projects

ss v d, pp dus

gas projects has al len, but still corresponds to 26 percent o

xpd ss dus.39

Although there are positive trends, and it can appear

s py ssy du s-

ss us ss, sv s ss

wy CDM ds dv w pss. S

s p :

CDM was not only designed to achieve emission

reductions; it also has the objective o helping

developing countries to achieve sustainabledvp. T , wv, y

kd spd s d ssss w

pj s sus s d y us

uy w pj w udk

is, the country selling the emission reduction. Te

system does not work, and this is illustrated by the

industrial gas projects, which do not have any other

positive eect than emission reduction (but may in the

worst case undermine eorts within the Montreal

P du pdu z dp

ss).

T Ky P qus ss dus

dd y wud u s

the certied project activity. Tis demand is central

to ensuring that trade in emission credits between

countries which have a commitment to reduce their

emissions and those countries that do not have any such

commitments will work. I projects that would havebeen undertaken anyway are approved as CDM projects

then no new emission reductions are achieved.

Furthermore, the purchaser o the certied reductions

rom the project is al lowed to continue to emit more. I

additionality is not guaranteed this will result in a

directly negative eect or the climate. And very ew

serious observers do not concede that CDM has

problems with the demand or additionality.

Asssss vy u x p, u

one study rom the end o estimated that as much

as percent o all registered projects are non-

dd. Sv suss v d

try to redene or circumvent additionality, but they all

sk ud p s CDM.

CDM projects are almost always implemented as

reestanding projects, with minimal or no links to

national development strategies. (China is probably the

main exception to this, because the authorities have

greater control over the economy and the means to

control investment and income ows; it can be

considered paradoxical, to say the least, that this can be dv p k sd s

work). Te decision is controlled by protability or the


22/48


buyer and, in the best case, the seller o emission credits.

National goals, priorities and strategies have little

u dss.

As w ds ss dus

CDM projects that have so ar been registered are

undertaken in China, India or Brazil, whilst the least

developed countries (LDCs) together correspond to

only . percent. Looking at projects in the pipeline, the

proportion o projects in LDCs is increasing marginally,

to around percent. Te logic is also quite clear:

countries that already have low emissions have diculty

in selling any reductions. It is thereore clear that CDM

will not help the poorest countries with vital

investments in sustainable energy, transport and

pdu syss.

In the lead up to the Copenhagen meeting, CDM will

undoubtedly generate more controversy and dicult

s (s, Bdd CDM, p ). I Pz,

the issue o whether CCS projects (carbon capture and

storage) would qualiy as CDM was one o the most

controversial issues. Te EU and Saudi Arabia, amongst

others, argued strongly or this to be accepted, but met hard

pps , s s, Bz.

Are the Climate Conventions unds and mechanisms

eective?

O j s f sd GEF d CDM, w

d vy ds w wk

the UN system, and that will certainly be raised against any

proposals to channel more money through the Climate

Cv, s vss s pd y UN

bureaucracy. Tis argument is raised not least by donor

countries as a reason to contribute money to the World Bank

and other unds which are independent rom the structures

C Cv.

T y s d ss s s. TUN system is certainly not known to be ast and exible. But

the ineciency o the UN system can in this case to a great

extent be blamed on the rules that guide the two mecha-

ss.

T d us w svs vvd dd-

ing that GEFs ordinary unds would only be used to nance

the incremental costs or the global environmental gains o

dvdu pj (s us d ppy sp-

uds). T pjs us u -

pd d f yp u s ss.

Ad GEFs w vu, pj ws f

s s pss s k x, d f ss

w d ss. GEF s s x

tried to get around the problem by introducing the possibil-

y us sddsd sd s, u s p-

, GEF y pys ss, s.

T p ss s s -

wy ss ud w vy d -sus ws s p wud s s

w d ud. Ad s s 1991, GEF s

d y dsps Wd Bks

new Climate Investment Funds, CIF, received when it start-

d up (s s T Wd Bks uds

w). Ms GEF pjs dpd -

d d w sus .

T s s CDM s pd

and resource intensive process or calculating the emission

reductions that each project results in, and the requirements

su pjs ddy. Ts s d

with the act that CDM is managed within the UN system.

I s su ss qu sys

allows the emissions rom developed countries to be written

s ss dus dvp us. I

and when these guarantees do not work, the system leads to

sd sss us ss, pd

the case where the developed countries had themselves ul-

d ds s; s s updu-

v.

I ss, ps wud x avoided i the unding or climate mitigation and adaptation

were channelled through ocially nanced programmes


23/48


with broad aims encompassing both climate change and

dvp.

II. Other existing fnancing mechanisms

As dy d, C Cv ss

nancial resources or ullment o the Climate Convention

s d v u , d

u s.

I dd usu dvp d s, w

nancing mechanisms have emerged; since 2000, Te World

Bank has assisted in the setting up o at least 14 dierent

climate unds, and in 2007 alone, 13 new initiatives were

ud Wd Bk, GEF, EU, Aus, Jp,

Nwy, Sp, UK d Gy.45

, s vs dspy w ds:Financing o climate change eorts is becoming

sy d, d

I w uds, ds v s u

uds d y UNFCCC.

S vs s -

est, and or Sweden as a member o the World Bank and EU,

psd w.

The World Bank climate unds

Tu d GEF du

y C Cv ws sd, Wd

Bank took an early initiative to gain control over the

nancial ows that would be needed to implement the goals

C Cv.

I dd ps w s

ordinary activities, the World Bank has been very productive

since the turn o the century in creating new unds to nance

programmes and investments which ocus on climate change.

I 2005, k ws v xp supp s s

by the leaders o the G8 countries, who, at the Gleneagles

, ud Wd Bk k dsp w wk y d dv-

p, ud vs d .46

In April 2000 the Prototype Carbon Fund, PCF, was

ud. I ws s s uds vs

d ss d w wk CDM d

ss. T k s C F U ss

ss wv su uds, w ws s

p s. 47

Te eleventh und on the list is Forest Carbon Partnership

Fund, FCPF, which the bank launched at the UNFCCC

meetings in Bali in December 2007. FCPF can be seen as yet

xp w Wd Bk ss -

gotiations in the Climate Convention. FCPF aims to support

eorts to reduce emissions o greenhouse gases rom deor-

s d s dd dvp us. I

the negotiations, such programmes are called REDD (read

p 33). FCPF ps supp ud 20 u-

tries in their preparations to participate in REDD pro-grammes when the programmes are established as a part o

a new agreement. FCPF will also sign contracts with a small

number o countries or the purchase o emission credits

pjs ssd.

At the beginning o 2008 the World Bank presented plans

y us uds, kw jy s

Climate Investment Funds (CIF). wo o the unds were set

up u ds y Bd Ds 1s

July 2008: Clean echnology Fund, CF, and Strategic

C Fud, SCF. T s ps s up Fs

Ivs Fud.

By d Sp 2008 d ds d,

according to the bank, already pledged more than 6.1 billion

US ds ud CIF. Swd ws s s

us spd d psd u

600 k CF.48 Ts ws su v

Swd pss v d us

CFs us Fud C.

Te aim o CF is to st imulate the conversion to an econ-

y w d sss us ss y vs-

ds, dpy d s wcarbon technologies using both private and public channels.

Ad k, pj w s d


24/48


25/48


Box 7: Should the ox be allowed to guard the hens?

Objections have been raised about the credibility o the World Bank or inancing measures to ight climatechange. The organisation has been criticised or many years because almost all its investments in the energy

sector have gone to projects based on ossil energy. Environmental organisations and other civil societygroups have demanded that support or ossil based energy sources should be stopped and that the resourcesshould instead be used to und ambitious initiatives or renewable energy. The Extractive Industries Review,one o The World Banks own initiatives, recommended in 2004 that all investments in the oil sector shouldbe phased out rom 2008 and the temporary ban that was then in place or investments on coal based pro-

jects should be retained. It was proposed that loans or renewable energy sources, which represented only 6percent o energy investments at the time, should be increased by at least 20 percent per year.54

Nonetheless, loans to ossil energy projects increased heavily; in the inancial year 2007/08 alone the appro-ved unding increased by 60 percent on the previous year. The increase was 165 percent or IFC, the branch othe bank that lends money to the private sector. Between 2006/07 and 2007/08 the loans designated to re-newable energy increased marginally, but three quarters o the increase went to large scale hydroelectric po-

wer projects. Large dams can result in signiicant emissions o greenhouse gases in the tropical regions,

55

and also oten result in heavily negative social and environmental impacts. I these projects are excludedrom the statistics then the unding or renewable energy projects ell by 42 percent in one year.56

Demands or the World Bank to stop lending money to energy projects based on ossil uels have been met byobjections rom some organisations in developing countries. The Indian Centre or Science and Environment,CSE, argues or example that the developed countries should, as a matter o principle, not exert their powerover international institutions and their aid in order to orce the developing countries into a transition thatthe developed countries themselves are not pushing or and which the UNFCCC does not require them todo.57 At the same time, other organisations convey the view that the public unds which the World Bankhandles will lead to greater gains i used to support the transition which must eventually take place, to rene-wable energy sources. 58

The EUs Global Climate Challenge Alliance

Te EU initiative Global Climate Challenge Alliance

(GCCA) was launched in September and presented

y EU Css Ev, Svs

Ds, d Swds Ms Ev,

Ads C, C Cv

in Bali. Te aim o the initiative is to create a platorm or

political dialogue between the EU and the developing

us s sk , particular the least developed countries and the small

sd s. W wk v,

technical and economic support will be given to adaptation,

reducing emissions rom deorestation, increased participa-

tion in CDM and integration o climate change issues in

national development strategies. Te EU Commission pro-

posed an initial budget o million euros or the years

-, which will mainly come rom unds or the

Csss T P Ev d

Sustainable Management o Natural Resources. So it is

w y.Te European Parliaments Development Committee

welcomed the initiative, but considered the level o ambition


26/48


to be ar too low. In September 2008 the committee pro-

psd 2 us sud d 2010 d

increased to between 5 and 10 billion euros per year by 2020.

T ppsd 25 p ps

the auctioning o emission credits within the EU trading

system should be put aside or measures in developing coun-

s.60

In the Commission launched the Global Energy

Ey d Rw Ey Fud (GEEREF) -

s pv vs pjs sus y

in developing countries and transition economies. Te und

received an allocation o million euro or the rst years.

Te Commission hopes that the und will be able to mobilise

risk capital in the region o one billion euros in the u-

u.


27/48


Negotiations or new fnancing mechanisms

Tere is little doubt that the resources that can be mobilised

u xs ss y wy su

u d ds dp

and mitigation measures in developing countries. Something

new must be developed and ast so that action can be

k quky d ddks xs -

s w dvp d dvpd us

broken. It is only when G and China really have reason to

v su sus w d s

xpd d s

ss s.

Te Bali Action Plan, which guides negotiations on a new

climate agreement afer 2012, identies the issues o nanc-

d ss y s p s -

d. I ss d pv ss

or developing countries to adequate, predictable and sus-tainable nancial resources and nancial and technical sup-

port, and the provision o new and additional resources. In

the section about mitigation measures it is stated that great-

s dvp us sud suppd d

enabled by technology, nancing and capacity-building in

su, p d v .62

T s d qus s w py

insucient resources that so ar have been delivered or

psd xpdd yd s

ud s dd. I dd, u

ssus svd: Hw w, dd, s-

d pd su ws ud? W

w y ? Hw sud u-

den be divided? How will the unds be governed? What

types o measures wi ll the unds be used or? Trough which

channels will they be distributed? How can the dierent

unds and programmes coordinate to ensure that the money

s ds d ps dvp us, d

dsv ud s sd?

During the negotiations a number o ideas and proposals

v pu wd. T d ppss -ways comparable, and ofen deal with only one or two parts

p.

Some o the most interesting proposals are described

w. Ty dvdd s: ppss w

uds sd, ppss s ddss -

s d ds uds,

d ppss py ddss ss d.

I. Proposals that primarily deal with how funds can

be mobilised

International taxes and levies

Tere is a strong belie among many leading economists that

xs dxd d s vs s

most eective instruments or reducing emissions o green-

house gases. Sir Nicholas Stern, author to the widely quoted

S Rp w sssss ss u warming, advocates this approach. Jeery Sachs, special

dvs UN Sy G, vs x

x ss u s u sp wy

dxd sss pd sys w

emission caps and trading schemes. Having a lot o people

sus w

u d wys d s sks s y

vs. sys Ss.

Swd s w us wd s

already introduced a carbon dioxide tax65 , but the incomes

rom the tax are not earmarked or any specic purpose. In

s, wv, sv ppss

dsussd w xs d vs usd s

du sss d sus

vs.

Several dierent proposals have been put orward re-

garding taxes and levies on international transport. Te

proposals are attractive or several reasons: they tackle a

strongly growing sector with high impacts on climate

w du vs p du;

vs s ; d vswud v psv dsu p us s


28/48


y wud d up vy

pp. S pp s j -

tional transport levies could compete with similar levies

w u us v dy dud, d

which nance development initiatives targeting the UN

Mu Dvp Gs.

Te most commonly cited proposal is that o an interna-

tional aviation levy that could be used to nance adaptation

programmes in developing countries, presented by two

Bs ss. I vy w 5 u p

current air travel would generate around 10 billion euros per

y.66

T s sd uvu s ppsd d-

d vy d s . T vy

on transport operated by companies rom Annex I countries

would be 0.01 percent and the levy on transport operated bythe other countries would be 0.001 percent. ransport to

and rom the least developed countries and the small island

s wud xp vy. 67

At the Climate Convention meeting in Bonn in June

2008, Swzd psd pps y

adaptation with the help o a compulsory international car-

dxd x. Swzd d pu pys

pp d susd u x 2 US ds p

ton o carbon dioxide emitted rom the combustion o ossil

us. I d w pp u d-

erentiated responsibilities, however, it also proposed a tax

exemption o 1.5 tons carbon dioxide per inhabitant.. Tus

w-ss us wud py y x, d -

ss us wud s .

Swzd ds pp v pusd s p-

ps s B d s u w

proposal o an international carbon dioxide tax will be part

ud s.

Auctioning of emission credits

So ar, all emission allowances issued within the ramework EUs ss d s v ssud

o charge to the companies in the system. But in preparation

x d pd EU s ddd u

s u ss ws. I s, wv,

u w s w y s

vs dvp us. 68

Te auctioning o emission credits al lowances, however,

generate very large sums o money. Te emission credits or

the power generation sector alone would generate eight bil-

us uy y w sd k p

ud 20 us p . Gy s dy ddd

s w d u p ss

ws d uy, d s

s w ud 400 u p y.

O s su, Gy ps us 120 -

tional measures, including adaptation.69 Many environ-

vs d s us s k u ss ds s -

v s. O us, ud

Swd, sd su su-

ally impossible. Tey ear that earmarking or specic caus-

es can lead to a scramble or the state budget rom many

d s.

O ppss s vd s s ws

put orward by Norway and launched at the Climate

Convention meeting in Bali. Te idea is that a small propor-

(.. ud w p) sss u-

tries are allowed to emit as part o the coming climate agree-

sud xudd s d

instead be auctioned o by a suitable international inst itu-

tion. Te income rom this sale should then be used to sup-

port adaptation and other causes in developing countries.70

Nwy vs pps ud sy d

u 15 -25 US ds. T pp

ss ws sd ud, wv, d-

justed according to the need or income and the current

p p. 71

Te proposal is still very vaguely ormulated and Norwaywelcomes urther discussion at the coming negotiations


29/48


u w d ud d wk.

Another variation on the theme is the proposal to auc-

ss ds v d spp, w

udd u s

Ky P us y

nature. Based on predicted emissions in 2010, the

UNFCCC Secretariat calculates that such an auction could

su 22 US ds ps w sd

p ud 23 US ds . 72

O wkss s ppsd ss s

y ssu d u up ss d s

cornerstone o climate cooperation. For those who would

k v ss d ss p s s,

us, p.

II. Proposals that address the allocation ofcommitments and the administration o unds

G77 and Chinas proposal for a new fundA s dv pps sd

nancing mechanism under the Climate Convention, pro-

psd y G77 d C s B

2008, ws d su w d dd ud-

ing. Te proposal can also be seen as an attempt to counter

the emergence o many new separate unds and initiatives,

by building a mechanism with substantial resources, con-

d dy ud C Cv.

I pps, w ud wud ssd d-

y ud C Cvs , u-

ly by the Conerence o the Parties (COP) which is the

UNFCCCs supreme decision-making body. Te und

wud d y w d dd uds,

p d ud d us. T pps su-

ss uds sud d ud

0.5 1 p dvpd us GDP.

T jy uds sud dsud wu

y qu py. T pps s spu-s y ud pdd usd UNFCCC

sud dd s us wds u-

ment o commitments by developed countries under the

C Cv d B A P.73

G77 and China have also put orward a proposal or a

special mechanism to meet the commitments in the Climate

Cv dvp d dpy vy sud

s, d k v y d-

veloping countries. Te proposal includes a Multilateral

C y Fud, MCF, w wud v

nancing o all activities and projects agreed and approved

w s. MCF s ppsd p

strengthened nancial mechanism proposed by G77 and

C, d sud p ud

UNFCCC. 74

T A S Isd Ss, AOSIS, s pu -

wd pps Cv Adp Fud, wwud supp Ky Ps Adp Fud.

Tis und is also proposed to operate as part o the new

s susd y G77 d C.

In October 2008, China made a move to support the G77

and China proposal. China declared that developing coun-

s w ppd u s

o climate change, but the developed countries must also

k spsy y u 1 p GDP

to nancing technology transer and other measures in

p us.75 T EU

Annex I countries chose to comment on the proposal during

A ws su s d-

s dvp us.

At the Conerence o the Parties in Poznan in December

2008, C d G77 pu wd pps . I

ws d y Ax I us s .

W, Juy 2009, Eup Css y

psd s pps EU ps d up

Cp , G77 d C pps ws

d.


30/48


Greenhouse Development Rights

Te proposal or Greenhouse Development Rights, GDR, is

d ppss sv wys. I s y

developed as a tool to try to solve the intrinsic conicts

between the need to rapidly limit greenhouse gas emissionswhilst simultaneously allowing developing countries to

continue to develop. Te proposal, which has gained

signicant attention over a short period o time, has not

explicitly been discussed in the negotiations, but some

elements are similar to the Mexican proposal (page ).

GDR could be the basis or the ormulation o new nancingss. I ud s s d -

Box 8: The proposals o the European Union*

Late in the run-up towards the climate change meeting in Copenhagen in December 2009, the EuropeanCommission presented a communication that proposed a blueprint on inancing. The Commissions estimate

o the needs in 2020 100 billion euro per year or mitigation and adaptation combined is clearly below allother recent estimates. Furthermore, the proposal suggests that domestic public and private inance in deve-loping countries themselves should cover 20-40 percent o this amount, and carbon markets another 40 per-cent. International public inance could contribute to cover the remainder

76. The communication goes on to

suggest that the EU should be prepared to contribute between 2 and 15 billion euro per year, depending onwhether the burden sharing will be based on current emissions or on GDP.

The political leadership o the EU have not been able to agree on much more than welcoming thecommissions proposals.In addition to the very obvious insuiciency o the amounts discussed, the EUs proposals are also raughtwith some very major problems:

There is no legitimate reason why the costs to developing countries should be included in the estimate o

the inancial requirements. Domestic inance will no doubt be an important source or investments in en-ergy, transportation and other sectors , but should not be counted as contributions towards inancing e-orts under the convention.The same applies to contribution rom carbon markets. Financing that is provided or mitigation projectsin developing countries through the Clean Development Mechanism (CDM) does not add to global mitiga-tion eorts. The CDM helps industrialised countries at a lower their mitigation cost by investing in deve-loping countries instead o investing at home. These lows are thus to be accounted as the cost or indu-strialised countries to meet their own mitigation commitments, and not to meet their entirely separatecommitment to assist developing countries in the implementation o mitigation measures.The proposal argues that governance o the uture international inancial architecture should respectagreed standards or aid eectiveness. Developing countries rightly object that climate inancing is notaid. But even so: ew o the existing institutions that the EU wants to use live up to these aid eecti-veness principles. And the new climate inancing mechanisms almost all o which involve EU member

states have very little developing country ownership, which is the cornerstone o the aid eectivenessprinciples. To add insult to injury, there is not even a mention in the EU documents o the key proposal, bythe developing countries themselves, or a new inancial mechanism under the UNFCCC.

* This text was written in late 2009 to relect updated positions o the EU.


31/48


k s w jud ppss x

w y k sd dvp

d ssus.

Te GDR proposal attempts to take a comprehensive ap-

p ddss qus u ud

us s sss, u k uds

ds dvp us d dp

, d p dvp.

Te proposal has been developed by the think-tank

EEquy w Sk Ev

Isu (SEI) d u ss.77

GDR s udd ssup s y

ps wd ppu v d

u su - wy s vy sp d-

vp us w y wy -

sults in greater greenhouse gas emissions. Nonetheless, thes dvp us v s

dvp s w d. T GDR d ps qu-

tiy the degree o responsibility each country has or the

current situation (in the orm o greenhouse gas emissions)

d py d s u . Bu sd

simply using the national averages, the model also takes into

sd ps d d sup

vs w uy.

GDR rst denes a development threshold, the global

income level above which all basic needs can be met.

Ad s ssups, s v s ud 7

500 US ds p y, w s quv 20 US

ds p dy. Pp w v s v

ssud v spsy du sup,

or the majority o their emissions, and urthermore, to have

the capacity to contribute and pay. Tis is assumed to be the

case irrespective o where in the world they live. People with

w s sd sdd v

ps w ds dvp d d

not need to be involved in paying the costs o climate meas-

us. Ts us spsy d py then applied to an allocation o responsibility to contribute

to emission reductions and costs or adaptation. According

to the model, in 2020 almost 30 percent o the global respon-

sy w w pp v USA, d s 23

p w w pp v w EU.

Cus v s d Swd.78 T -

sults show that Sweden has responsibility or measures cor-

spd ss dus y 122 p 2020,

compared with our emissions in 1990. Tereore, even i

Sweden achieves major reductions in domestic emissions it

must also contribute to the costs o major reductions in

other countries. Conversely, China is only calculated to have

spsy 5.5 p s, d Id

or 1.2 percent. Tat means that these countries have the

sus us wd

py ss dus w s us

vd s us.T GDR p ds k y ss

ss su d dp sus. Isd,

the model presents a clear method o calculation, where the

values are up or discussion, debate and negotiation.

Assu v s 1 p wds GNI,

then the cost or each Swedish citizen in 2020 would be

ud 424 US ds p y. Id wud sps

or contributing 58 US dollars per year or each Indian whose

income is above the development threshold. I the global

need were instead 2 percent o the global GNI then the costs

p p wud uy dud.

Ojs v, us, sd s

concept and the details o the GDR proposal. Several or-

ganisations that support the idea question the choice o 1990

as the base year (which works in avour o the developed

us; s y ud quy w s -

duss 1800s). S

pps ud sky ds d -

tween the developing countries, with binding commitments

s , wu y us d

d s.


32/48


Mexicos proposal

At the Climate Conventions meeting in Bonn in June ,

Mexico presented a proposal or a new global und a World

C C Fud G Fud ud C

Conventions control, as a complement to the existing

mechanisms. Te und would nance mitigation, adaptation

d y s sus dvp us

and thereby contribute to the implementation o a new

climate agreement. In contrast to both the existing

mechanisms and the und proposed by G and China, the

und that Mexico proposes would also be used or measures

in developed countries, and developing countries should

u d py.

Mx ppss us sud u

ud, w sud v u uv

around 10 billion US dollars. Te size o each individualuys u sud sd sss,

ppu d ss ds pdu, w

the principle o common but dierentiated responsibilities.

Te proposal suggests that auctioning o al lowances or avi-

xs ud s w sus

ud.

T ud sud usd pjs d

d su sus us s s-

ss. Bu us ss dus wud usd

ps sss Ax I us, s

not the same need or strict evidence o additionality as

there is with CDM. Mexico claims that this is one o the

ppss ss; s w pps Mx ss

that While the CDM only relocates mitigation eorts ... the

ud wud xpd v s .80

Te und should also provide targeted support to adapta-

sus w s udk s sp p-

grammes. Money rom the und could be used, amongst

other things, to signicantly strengthen the Kyoto Protocols

Adaptation Fund, which so ar is being nanced only

u s vy pu CDM s.Te EU has expressed interest in Mexicos proposal,

w ps w s w -

tween developed and developing countries and can increase

the interest in developing countries, amongst others, or

du sss. 81

III. Proposals that primarily address emissiontrading

Extending CDM

Ov ps w ys, u ppss xd

CDM rom its current project-based ocus into a broader

programme based or sectoral unction, have been presented.

Te proposals are motivated or several, widely diering

reasons. Initially, perhaps, the proposals were driven by the

ds s vu ud d du

s ss y vd d ssss ddy dvdu pj. M y,

EU s s, s sd ds s

CDM as a step towards the acceptance o emission reduction

commitments or developing countries, agreed in exchange

sd ws s pd w su

rom a sectoral CDM. However, critics ear that extending

the CDM could lead to urther compromises with

qu ddy.

Su K s s CDM s y wkd

s s p dvpd us v

their commitments, and is mainly targeted at the private

sector. At the same time, the developing countries are nd-

du s p d ss -

nologies with which to implement national action plans or

mitigation. Korea has thereore put orward a proposal that

ss dus d u w wk

the Bali Action Plan should be converted to credits that can

be sold on international emission markets. Te prots rom

the sales should be used to implement more such meas-

ures.83 However, such a system could in principle mean that

s ss dus p us ud d u y sss dvpd us.


33/48


REDD

A C Ps B D ,

it was decided that the negotiations or a new climate

agreement would consider the possibility o increased

international collaboration or reduced emissions rom

deorestation and orest degradation, (REDD) in developing

countries. Te REDD issue is likely to be one o the hottest

and most controversial issues in the negotiations in the lead

up Cp .

T ss ss s sps up 20 p

carbon dioxide emissions globally. A reduction in deor-

s wud v s -

. Bu w u sys, s y wy

or developing countries to receive compensation or plant-

s: u CDM. Hwv, s p s pvd

dicult to use, and so ar only a small number o tree plant- pjs v ppvd CDM.

At the Conerence o the Parties in 2005, Papua New

Guinea and Costa Rica, as representatives or the Coalition

or Rainorest Nations, proposed that the possibility o

ud sus du ds sud

xpd. Sv ppsd sus v s ds-

ussd.85 Sv kd sss d,

and are more or less based on the CDM model to allow emis-

s dus dud ds. Bz s p-

posed such market based mechanisms; amongst other

things, Brazil argues that the resulting increase in available

ss ds wud du pssu dvpd

us u w sss. Isd, Bz su-

gests a model where developing countries receive money

ud d y Ax I us.86 T x

w sud u uds dy

kd sss d s ky d

quss up.

Te concept o paying countries remuneration or reduc-

ing deorestation raises a number o issues, not least because

developing countries with low current rates o deorestationwould not benet economically. A methodological problem

s s d dud ds up

CDM s p k; dud d-

s uy sy d sd d-

orestation in another country. Organisations working with

sy ssus v pd u p

o tackling the driving orces behind deorestation.

Representatives or indigenous and local communities o

the tropical orests question how their interests will be taken

into consideration and who it is that will receive money

Documents

Footing the bill for climate change