Financing & Addressing Climate Change: Root Problems with Climate Finance

by Bogdan Zymka

Whether you like it or hate it with every atom in your being, money is what makes the world go-round these days.  It is the same with climate finance; you can’t have implementation without the means to do so.

Climate change has already caused billions of dollars’ worth of damage and is likely to cause billions more in the coming years. Besides the damage that has already been done, countries are negotiating how to fund future climate change initiatives like adaptation, mitigation, tech-transfer, and capacity building. According the South Centre’s Dr. Manuel Mantes, the costs of mitigation and adaptation alone could cost between $600 billion and $1 trillion in the coming years, 5-10 times more than the agreed $100 billion per annum by 2020.

The mandate for climate finance is that climate finance is new and additional. This was reaffirmed in the Cancun Agreements under 1.CP16. There are quite a bit of issues with this, as new and additional is often defined by the country of origin of the finance. One of the biggest issues is that most finance thus far has been redirected Official Development Assistance (ODA). ODA as defined by the Organization of Economic Co-operation and Development is ”Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries (“bilateral ODA”) and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions…” ODA is supposed to be focused on economic development and welfare of developing countries, not climate.

So what happens when a developed country counts its committed climate finance toward its ODA? Less money is funneled into development and welfare projects in the name of meeting an arbitrary, far less than adequate, commitment to climate finance. In the case of some OECD countries, the same ODA that was classified as climate finance was going toward development projects in oil, gas, and coal fired power plants, over 114 million in the past 5 years.

This directly goes against the principles of the UNFCCC and is outlined in Article 4(7): “The extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology and will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.” This means that developed parties must take into consideration the development situation in recipient countries when committing climate finance. This highlights the importance of additionally.

Climate finance must be new and additional. Countries who have “adhered” to the Fast-Start Finance period (2010-2012) always shout about how they’ve effectively met their goal of mobilizing $30 billion in climate financing. Off the provided data, a majority of origin countries classified their climate finance as contributing to their 0.8% GNI of ODA.

If there’s every going to be any hope of paying for the $600 billion to $1 trillion needed to address climate change, developed countries are going to have to stop lying through their teeth. They owe it to the developing world. Climate finance isn’t charity. It’s repaying a debt that’s owed to the developing world, a principle of the convention itself.  

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