Climate finance
June 19, 2012
There's no dearth of ideas and initiatives to lower the emission of greenhouse gases and protect the climate. But one thing in short supply, especially in much of the developing world, is the all-important cash to back those climate-friendly projects and contribute to the global battle against climate change.
So in 2009, world leaders agreed to set up the Green Climate Fund (GCF) - a commitment to raise $100 billion by the year 2020 to finance climate protection and adaptation measures.
The GFC was formally created during the course of the COP-16 UN climate talks in Cancun in 2010, but it was not until last year’s conference in Durban, South Africa, where the plan finally began to take shape. After a marathon round of talks that stretched over three days and nights, delegates agreed to a basic structure for the fund, which will see industrialized countries funnel financial support to developing ones.
“It has been a long time in the making,” said Stefan Krug, a climate expert from Greenpeace. He pointed out that the founding of the GCF can be traced back to the Copenhagen climate conference in 2009. Though world leaders have hammered out a structure for the GFC, there's still plenty of wrangling over the details.
Filling up the Fund
The biggest problem, critics say, is that the Fund is still empty. Participating countries have agreed to the amount that the fund will hold by 2020, but there's still no agreement on how the GCF will be funded, especially in the long-term. “The financing process cannot be allowed to be hostage to changing political fortunes and the budgetary situation in the (participating) countries,” Stefan Krug said. “That would make the Fund unreliable.”
Most agree that the fund, in addition to financial aid from nations, will require the help of private investors too.
“Innovative sources of financing and regular state funds are meant to feed the Climate Fund,” German Minister of Economic Cooperation and Development Dirk Niebel said. “We want to come up with a mechanism for financing the GCF that starts early and can be sustained over several years – and where industrialized countries all bear a fair share of the load,” he added.
“Public funds are also meant to create incentives to mobilize private investment,” Niebel added. But it's still unclear how much money is needed from the private sector to get the Fund afloat.
There have also been discussions about raising global taxes on shipping and aviation emissions - or even on financial transactions – to raise money to the GCF. But financing remains a major sticking point among the various participating countries. China and the US, for instance, resist the idea of governments funding climate aid and want the private sector instead to shoulder the burden. Both remain firmly opposed to global taxes to be funneled into the Fund.
Several European countries including Germany, on the other hand, argue that such taxes could work, pointing to the air traffic emissions trading scheme as a model. Stefan Krug says it would be sensible to slash additional subsidies for fossil fuels like coal, freeing up more money for the GCF.
Channeling climate efforts under one roof
One of the purposes of the GCF was to present a unified front in battling climate change. Up until the fund was established, climate investments came from a series of scattered sources, from the Adaptation Fund to the Global Environment Facility to various individual projects in bilateral development initiatives. The Green Climate Fund is meant to bring together all these disparate financing efforts and know-how under one roof.
The GCF is also intended to bring about a landmark change in development work and engage a variety of fields. Instead of focusing on isolated development projects such as setting up one single windpark, every sector in a country – from the economy to politics and civil society – is expected to get involved.
Developing countries, too, are expected to participate in preparing and adapting to climate change impacts.
“They will need the help of industrialized countries for that,” German Minister Dirk Niebel said. “We consider the GCF a new and central building block in the architecture of international climate protection financing. (The GFC) has the potential to create a paradigm shift in developing and emerging countries towards a low-carbon, climate-resistant development.”
Cooling tensions between rich and poor
The GCF also presses industrialized countries to stick to their promise of contributing more to the fight against climate change. It's an important step in defusing ongoing tensions between industrialized nations and developing ones over the question of who should pay to combat climate change.
The Fund is to be headed by a 24-member board made up of an equal number of representatives from developing and developed countries. “That’s a very important improvement the Green Climate Fund is introducing: parity on the board of directors,” said Henning Wüster, a senior manager at the GCF’s Interim Secretariat. “All sides agreed on that.”
Still, the board has not been without controversy. Various countries are jockeying for the responsibility of representing their region of the world. The wrangling over positions has delayed nominations and pushed back the group’s first meeting even further. But Henning Wüster says that is a positive sign. “Interest in the GCF is very high, all the countries want to participate. That in turn makes the nominations harder.”
The hunt for a permanent home
Even the question of where the Green Climate Fund’s operations should be located has sparked debate. Six countries are vying for the headquarters - Mexico, South Korea, Switzerland, Poland, Namibia and Germany. The German government has put the former capital, Bonn, in the running.
“We’re convinced that the GCF needs a top notch environment and facilities in order to maximize global efforts to fight climate change,” German Minister Dirk Niebel said. “As the host country, Germany can make a significant contribution to a fast, effective introduction of the GCF.”
That decision is expected to be reached at the next UN climate conference in Qatar.
Author: Brigitta Moll /ss
Editor: Sonia Phalnikar