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COP23: Countries tussle over climate finance for poor nations

There is lots of talk on how to administer what money is available, unfortunately huge amounts are loans, not grants, and much of it tied up in difficult red tape
<p>When it comes to financing the costs of adaptation money seems to be largely missing for developing countries [image by: UNclimatechange]</p>

When it comes to financing the costs of adaptation money seems to be largely missing for developing countries [image by: UNclimatechange]

As the first week of COP23 in Bonn drew to a close, the European Union, Switzerland and Canada reiterated their commitment to increasing financial help to developing countries to USD 100 billion per year by 2020. But right now, grants given for this purpose since the promise was made in 2009 will not total much beyond USD 45 billion, according to officials in the UN Framework Convention on Climate Change (UNFCCC) secretariat.

The figure given by developed countries is far higher; some estimates put it at around USD 90 billion. But analysts at the Climate Action Network (CAN) – an umbrella group of NGOs that track global climate negotiations – have calculated that around half the advertised amount are loans.

Considering that most of the extra greenhouse gases now warming the atmosphere have been emitted by rich nations since the start of the Industrial Age, “this is like crashing into someone’s car, and then giving them a loan to pay for the repairs”, said a CAN member.

The World Bank and its associates collectively committed USD 27 billion in climate finance last year, according to a recent report. But just 4% of that was in the form of grants.

Governments of some developed countries mention the total climate finance figure in public, ignoring how much of it comes in the form of loans. France reported that only 2% of climate finance was provided as grants, Japan 5%, and Germany 45%. Norway, Sweden, Denmark, Switzerland and Canada are among the countries that say their climate finance consists exclusively of grants.

Given the historical responsibility of developed countries, the UNFCCC and the 1997 Kyoto Protocol are based on the principle that providing finance to developing countries to combat climate change and deal with its effects is an essential aspect of global justice. Developing country governments and most NGOs have held that this implies providing money in the form of grants and not loans.

The main opposition to this has come from the US, Japan, Australia and New Zealand, who point out that, right now, China is the world’s largest greenhouse gas emitter and India is the fourth. Largely due to this opposition, the principle of differentiation between developed and developing countries was ignored in the 2015 Paris Agreement, though it was kept in the text.

How do you count?

The weakness of the UNFCCC system for defining, categorising, tracking and evaluating climate finance adds to this issue. Other UN organisations ,such as UNDP and UNEP, do not report their climate-related activities to UNFCCC, which makes it harder to work out how much money is being spent where, and for what. This topic is under discussion at the summit, but progress has been painfully slow.

Developed countries that give money have always been more keen to fund mitigation projects that would control greenhouse gas emissions, while developing countries want equal amounts for projects that help adapt to climate change impacts. This tussle has seen the virtual death of the UNFCCC’s adaptation fund, which was given hardly any money for a long time. However, the German government has announced a grant of 50 million Euros to the fund, allowing it to survive for another year.

Other funds – such as the LDC fund meant to help the poorest developing countries – are also in intensive care, as most of the money now goes to the Green Climate Fund (GCF). Many observers had welcomed this consolidation instead of having a plethora of funds with little money in their accounts. But now many developing countries are complaining about the detailed and rigid processes of the GCF.

One genuine problem is that the GCF wants to see the extent of co-benefits before financing a project. If a developing country wants to set up a solar power farm, the GCF wants to know the volume of carbon emissions that will be saved by moving away from coal and oil. This approach is good on paper, but small developing countries are finding that their emissions are so little that their proposals are rejected. “We emit almost nothing – how much emission reduction can we show?” asked Thinley Lhamo, the head of Bhutan’s National Environment Commission.

These are among the problems developing countries want to discuss as part of pre-2020 climate action. India’s lead negotiator, Ravishankar Prasad, told thethirdpole.net: “We need to know how much of the money being talked about is public finance,” while senior Chinese negotiator, Chen Zhihua, said that this was a “life and death” issue for developing countries and would impact all other elements under negotiation in the Paris Agreement.

Prasad said: “The issue requires adequate space. We know we are developing guidelines for global stocktake, transparency arrangements and the implementation of nationally determined contributions. Information [on public finance by developed countries] is relevant for developing countries as this would contribute to each and every agenda item listed under negotiations.”

But with developed countries opposing the inclusion of all pre-2020 action in the agenda of this summit, the issue is yet to be resolved. The facilitator of the finance discussions proposed that countries figure out modalities to communicate finance information to the UNFCCC every two years, but there is no consensus on this either. The US delegate said: “No additional matters need to be addressed.”

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