Paris climate talks-Money: what the fight needs, what it is about

Paris climate talks-Money: what the fight needs, what it is about

Climate change cannot be fought without an enormous monetary commitment by developed nations. And this is precisely what they are shy of doing.

At the venue of COP21 outside Paris, French mounted police patrol beside a ‘Wind Tree’, each of whose leaves functions like a mini wind turbine. (Source: AP)
At the venue of COP21 outside Paris, French mounted police patrol beside a ‘Wind Tree’, each of whose leaves functions like a mini wind turbine. (Source: AP)

As the inevitable fight over money broke out at the climate change talks, an angry South African representative said developing countries were not seeking “charity”, but only asking that rich nations fulfill their legal commitments under the UN Framework Convention on Climate Change, or UNFCCC.

The lament of the South African negotiator Nozipho Mxakato-Diseko came amidst continued reluctance from developed countries to commit to raising at least US $ 100 billion every year beyond 2020. Developed countries had themselves promised this sum at the 2009 conference in Copenhagen.

The principle that developed countries must provide money to help developing nations deal with the impacts of climate change, goes back to 1992, when the UNFCCC was agreed upon. It came into effect in 1994.

So, why should the developed countries pay for the clean-up?


The UNFCCC divided the world into those who were responsible for causing the problem of climate change, and those who were not. Those who were held responsible — a group of 37 industrialised countries that had emitted most of the greenhouse gases present in the atmosphere at that time — were named in an annexure, “Annex I”, of the UNFCCC, and were asked to start reducing their GHG emissions.

But since climate change is a global problem, it was acknowledged that other countries too would have to act, at least to adapt themselves to the impact of climate change. It was also clearly understood that the most vulnerable countries were also the poorest.

It was, therefore, agreed, in accordance with the ‘Polluter Pays’ principle that had just been acknowledged at the global level, that the countries that had caused the problem must provide financial resources to those who had to deal with its impact.

Some Annex I countries, essentially those in the East European bloc whose economies were closely aligned with the former Soviet Union that had collapsed in 1991, were, however, not economically stable at that time. They were exempted from the burden of providing financial resources — even Russia was exempted. A separate annexure, Annex II, contains a list of 25 countries that are obligated to provide climate finance to developing countries.

The UNFCCC does not say which countries are eligible to receive this money. Therefore, every country outside of Annex I is equally eligible for climate finance without distinctions.

How much money?

The UNFCCC also did not specify the quantum of financial resources that needed to be made available. Nor did the Kyoto Protocol, that was agreed upon three years later, and which assigned specific emission reduction targets to Annex I countries.

No figure on climate finance was, in fact, put forward until Copenhagen 2009, where then US Secretary of State Hillary Clinton, on the penultimate day of a conference heading towards a failure, promised to “mobilise” $ 100 billion in climate finance every year from the year 2020. The same year, developed countries offered to raise $ 30 billion between 2010 to 2012 in “fast-start finance” to fund the immediate needs of the developing countries. How much of the fast-start fund actually materialised and was disbursed is not clear.

In the run-up to the Lima conference last year, the developed countries promised to put together $ 10 billion over a four-year period from 2015 to 2019. Untill now, only about half of that money has actually flowed in.

How much is enough?

There are different estimates of the money that is needed to deal with the impacts of climate change. All of them agree that costs rise substantially for every year that action is delayed. An often-talked-about figure puts this sum in the range of 1 to 2 per cent of the global GDP every year. This will translate into several hundreds of billions of US dollars, and in any case, far more than $ 100 billion every year.

Christina Figueres, the top official of the UNFCCC, had some time ago said that the $ 100 billion pledge was “frankly a very, very small sum”. “We are talking here about trillions of dollars that need to flow into the transformation at the global level,” she had said.

Public funding or private?

It is clear that the developed countries are nowhere close to delivering that scale of financial resources. Even to meet the commitment of $ 100 billion, the developed countries are relying on contributions from the private sector. Hillary Clinton, after all, had talked about “mobilising” the funds, and not necessarily providing from public finances.

Developing countries have been demanding that climate finance be new, additional and predictable. Existing funds flowing as overseas development money, or bilateral aid, cannot be categorised as climate finance, and nor can investments. But it is very clear that a lot of double-counting is already happening, and a recent OECD report that said nearly $ 62 billion climate finance had already flowed until last year, angered many developing nations.

Post 2020

Developed countries will most likely be able to show the mobilization of $ 100 billion by 2020. They would have had 11 years to raise this money since the promise was made in 2009. What happens beyond 2020 is what is of concern to developing countries. The past record is no source of confidence for them.


What is complicating matters is the attempt of the developing world to widen the donor base beyond the Annex II countries. New phrases are being coined, and developed countries say that countries in a “position to do so” or which are “willing to do so” should also contribute to climate finance, a position that is rejected by India and other developing countries.