Climate change talks, one would assume, would be driven mainly by environmental concerns. But going by the buzz in Lima, money seems to be an equally big, if not bigger, driver of the way the climate agreement will be shaped. Some, of course, argue that money is the limiting factor and not the driver.
With huge sums of money involved in the kind of actions necessary to effectively deal with climate change, finance has always been an integral part of climate discussions. The order of financial commitments talked about is in tens and hundreds of billions of US dollars per year, sometime even trillions of US dollars.
Only on Friday, a new UN report said the current projected financial costs for adapting to climate change might be a gross underestimate.
The Adaptation Gap report by the UN Environment Programme said the adaptation costs can be at least two to three times higher than the current estimates of about $70-100 billion per year by 2050 even in the best case scenario. It could even reach $500 billion per year by 2050 if adequate steps on cutting greenhouse gas emissions are not taken.
The costs of reducing emissions can be even higher as it has economy-wide impacts. Estimates put that figure in the range of 1 to 2 per cent of global GDP per year under different scenarios. And there are costs associated to a variety of other climate actions as well.
Any talk of climate action, it is evident, is meaningless without huge amounts of money being apportioned for it.
The reason why finance has been dominating discussions at Lima is that for the first time, big money has actually started flowing in climate channels. There is a maze of financial mechanisms through which climate money flows, making exact computations difficult, but some encouraging assessments have come over this week. The most clear is the $10 billion added to the Green Climate Fund, established only recently, in a matter of a few months. It has got everyone excited, even though this money is only a pledge right now and is still to be delivered.
The Secretariat of UN Framework Convention on Climate Change (UNFCCC), the umbrella agreement under which the climate talks take place, put forward a first of its kind assessment which found that hundreds of billions of dollars in climate finance had already started flowing across the globe. Annual average flows were of the order of $340-650 billion, “possibly higher”, in 2011 and 2012. This included between $40-175 billion in climate support to developing countries from the developed world.
“The good news is that money is not an issue. There is plenty of money out there,” Aliz Mazounie of Climate Action Network, a group of climate non-government organisations, said. She said there was a need to further convert “bad” money, like money being used on subsidies for fossil fuels, into “good” money.
At the 2009 Copenhagen climate meet, developed countries had pledged to mobilise $ 100 billion every year by 2020, through public and private sources, and make it available for poorer nations to use it for their climate actions. These countries still swear by that commitment.
However, the scale, and consistency, of the requirement is such that even all this money might not be enough. Christiana Figueres, the topmost official of the UNFCCC, called the $100 billion pledge as “frankly a very, very small sum”.
“We are talking here about trillions of dollars that need to flow into the transformation at a global level,” she said.
Stefan Schwager, co-chair of the standing committee on finance which put out the assessment on climate finance flows, said it was good to know that the money flows were real and not imagined. “Climate finance flows have always been a little bit of sore spot at the negotiations over the last few years because nobody had a clear figure,” he said.
The sudden availability of money, and the prospect of more money being made available in future, has led countries like India to start making preparations to access this money to fund their climate programmes. The Indian government has already begun an exercise to complete all the necessary formalities early so that when the money does start coming in the Green Climate Fund, for example, it can move fast to access it.
“Why not? If money is being made available and we are entitled to tap into it, we should claim it. There would be requirement of thousands of billions of dollars for our climate action programmes and most of it would have to be raised through domestic resources. If we are able to access some money from other resources we would welcome it,” said Susheel Kumar, the head of the Indian delegation at Lima.
# $9.7 billion in Green Climate Fund till now. Contributors include US ($3 billion), Japan, Canda, Spain, Norway, Germany, Australia and some others.
# $100 billion to be raised per year from 2020 by developed countries
# About $650 billion in climate flows annually in 2011-12
# Up to $175 billion in annual support to developing to developed nations
# Climate money flows through a variety of other bilateral, regional and multi-lateral channels as well like the Global Environment Facility of the World Bank or in the form of Overseas Development Assistance
# As much as $500 billion per year might be required just for adaptation by 2050
# About 80% of the funds used for climate action in developed countries is raised at home. In developing countries this figure is 70%
# About 95% of global climate finance is spent on mitigation, or efforts to reduce emissions. Only 5% is utilised for adaptation.
# Subsidies for oil and gas, and investments in fossil fuels are almost double the total global climate finance