April 4, 2009 10:48:40 pm
This week the G-20 leaders met in London to discuss the global financial crisis,which is set to dominate the international agenda for some time. A parallel debate has been under way here in Bonn on another financial question,which affects an even greater systemic crisis: the funding required to tackle global climate change.
Climate negotiators are in the middle of the first of three major meetings scheduled for this year,before a fourth one at Copenhagen in December brings together 192 countries to secure a global deal on climate change.
Developed countries insist that major developing countries should also reduce their greenhouse gas emissions to mitigate climate change. Poor countries,in turn,demand compensation for the costs imposed by a problem they played no part in creating.
Climate change is a real threat. Relative to 1990,global emissions must fall 50 per cent by 2050 to restrict average temperature increases to 2 degrees. Breaching that level would risk large-scale human development setbacks,of which the poorest countries and the poorest people would bear the brunt. Countries also have to adapt to an already changing climate: changing agricultural practices,building flood defences,preparing for water shortages,and so forth.
Major developing countries have already announced unilateral actions: China is spending $200 billion on ecology-friendly investments; Brazil promises a 70 per cent reduction in Amazonian deforestation (a major source of emissions) by 2017; and Indias national action plan on climate change has a bold vision for renewable energy.
In principle,the UN Framework Convention on Climate Change and the Bali Action Plan guiding the current negotiations recognises the obligation of developed countries to provide financial,technological and capacity building support for poor countries efforts. But the consensus ends there.
The first contentious issue is the amount of funding required. Estimates vary wildly. For mitigation technologies,current spending is anywhere between $77 billion and $164 billion a year; and additional annual funding of $262 billion to $670 billion would be needed by 2030. Note,even the higher estimate is a fraction of the $3 trillion being spent on the financial crisis. Spending on climate adaptation is about $1 billion annually when some estimates suggest up to $86 billion would be needed. Thanks to such wide ranges,developing countries hesitate to put a specific estimate in their proposals,calling instead for covering the full incremental costs of low-carbon technologies. Fair enough; but that makes getting a concrete commitment from developed countries harder. And it reinforces the challenge of enforcing compliance,one of the biggest problems with the climate regime so far.
Secondly,where will the money come from? There is a major debate about private versus public financing. Developed countries argue that,like current spending on low-carbon technologies,the private sector would lead on funding mitigation and adaptation in developing countries as well. Poor countries strongly disagree. They note that private investment flows into projects only when profits are expected. If the higher capital,operational and intellectual property costs make projects commercially unviable in a developing country or divert resources from other development priorities,then public financing support is needed. In their proposal for a new financing mechanism,developing countries demand this public financing from rich-country governments. But the economic crisis complicates the challenge: getting public financing guarantees for the developing world when rich countries are busy priming fiscal pumps at home will not be easy.
A third point of contention are the conditions under which funding would be made available. There is a fear that developing countries would be treated like aid recipients,subject to donor-imposed conditionalities. Developed countries are keen to ensure that money sent abroad is accounted for. The developing world insists the process cannot be top-down. They want a financing mechanism that is demand-driven to support climate policies over which they have ownership.
A new Adaptation Fund offers balanced representation for developed,developing,least-developed and small-island states. It avoids replicating the World Banks historical model of fewer votes for developing countries. Yet,past experience offers reasons for caution. Despite greater representation of poor countries in regional development banks,dominant developed country players have continued to have de facto veto power. On climate,the World Banks Clean Technology Fund has been hostage to US politicians and organisations opposed to transferring coal-based technologies,even if the potential efficiency gains for developing countries are large. Formal representation and voting rights alone cannot ensure real voice and ownership.
In the end,the debate boils down to the purpose of climate funding. A clock ticker in the plenary chamber reminds delegates that 247 days are left on the road to Copenhagen. The prospect looks dim unless there are enforceable commitments on financing,and poor countries are equal partners in the governance of funds. We now know the price of responding to the financial crisis: already 3-4 per cent of global income. What price the future of the planet?
The writer is an Oxford-Princeton Global Leaders Fellow
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