- 25 March 2010
The Copenhagen climate conference in December 2009 was a crucial moment in the international fight against dangerous climate change. It did not achieve everything that the UK had hoped for, but significant progress was made. Finance, in particular, was an area of seminal progress, in three crucial ways:
- On “fast-start” (short-term) finance – there was a substantial commitment made in the Copenhagen Accord to provide approaching $30bn of finance for climate action over 2010-2012;
- On a long-term financing goal – the Copenhagen Accord included agreement by developed countries to mobilize $100bn of climate finance by 2020, from a range of public and private sources; and
- On governance – countries agreed in the Copenhagen Accord to create a new Green Fund, potentially taking in specific mechanisms for tackling deforestation and technology.
However, there were two key areas where progress had been called for, but was not possible at Copenhagen. First, while the phrase “new and additional” was repeated in the Copenhagen Accord, and though the UK had been advocating a clear position on this issue, the relationship of climate finance to most donor countries’ Official Development Assistance (ODA) commitments remains substantively unclear. Second, there was very little discussion about which countries will contribute what to international public finance.
So where should work focus over the coming year, to cement the Copenhagen achievements, while also trying to address the gaps? Three areas stand out.
On fast-start, the UK has said it will contribute £1.5bn over the period to the $30bn total, and the EU as a whole has said it will contribute €7.2bn (~$10bn). The EU is now planning how to report on its achievements transparently at the end of this year and annually thereafter, so as to have a positive impact at the Cancun negotiations. It will be important over the coming months for all developed countries to clarify their offers, coordinate their efforts and commit to transparent reporting. In addition, developing countries need to continue to identify their priorities for short-term financing, and work with partners on the ground to direct national and international climate and development finance to their priorities and leverage private sector flows. One initial opportunity for this may be a dialogue that will be hosted by Spain, the Netherlands and CCAP in Germany in April.
On long-term finance, the UK’s Prime Minister will be co-chairing, with PM Meles of Ethiopia, a new High-Level Advisory Group which will examine different sources of climate finance that could help meet the $100bn 2020 target. The Group will meet for the first time in London on 31st March. The Advisory Group will need to narrow down options for mobilizing finance – including climate and non-climate related sources of public finance that are on the table. To do so, they will need to consider their revenue raising potential, as well as their incidence, feasibility, predictability, and relationship (if any) to ODA, in a consistent manner. The Group will also need to explore the role of carbon markets, the private sector more broadly, and International Financial Institutions – not only in ensuring that any public finance raised makes a genuine impact on broader economic activity, but also so that these sources can be leveraged to contribute to low-carbon and climate-resilient growth. To maximize its potential success, it will be important for the Group to consult widely and develop robust recommendations for the UN Secretary General to report to the UNFCCC in Cancun. This should allow developed countries to identify which sources they would support in the context of an ambitious, legally binding climate deal.
Last but not least, the question of what a Green Fund will look like – to robustly be able to deliver a “significant proportion of $100bn”, as signaled in the Copenhagen Accord, should be another focal area this year. There is already some draft legal text on key elements that could be built on. But a process could be put in place to work up the detail, preferably involving country representatives that are experienced in the delivery of international finance. Countries will also need to consider how the Green Fund will work with other bilateral, multilateral, private sector and domestic funding streams, so that climate finance is coordinated behind developing countries own plans and systems and requirements are streamlined as much as possible.
In sum, Copenhagen delivered some strong and decisive achievements on climate finance, realizing many of the commitments which the UK Prime Minister called for in June 2009. But even more progress will be needed this year if finance is to ultimately act as credible incentive to developing countries to grow in a low-carbon and climate-resilient manner.
Hannah Ryder is a senior UK Government Economist and Climate Negotiator in the Department of Energy and Climate Change. She oversees the UK’s short and long-term strategy for financing and governing action on climate change in developing countries, as well as the UK's £800m Environmental Transformation Fund, which has been invested in the Climate Investment Funds, administered by the World Bank.
Hannah was a co-author of the Stern Review on the Economics of Climate Change, and in previous roles worked on the Intergovernmental Panel on Climate Change and the design of Phase I and II of the EU Emissions Trading Scheme. She has an MSc in Economics, and a First Class Honours degree in development economics.