How to bridge the climate funding gap for developing nations?
Editor's note: The following piece by Fellow David Ciplet first appeared on the Thomson Reuters Foundation website.
“Finance is the bedrock of this agreement. It is through commitment of finance that the confidence and the trust that has always been debated in this process is strengthened.”
These words of Pa Ousman, Minister of the Environment and Climate Change for the Gambia, reflect a strong sentiment of developing country representatives at the Paris climate negotiations this week: a just climate deal necessitates predictable public flows of money to support the most vulnerable countries in the face of escalating climate disasters, and to enable low-carbon development.
Despite a collective promise made by wealthy to developing countries of $100 billion annually by 2020, there is a Grand Canyon sized gap before us in reaching that goal. Adaptation costs alone in developing countries may rise to $150 billion or more by 2025, so $100 billion should be viewed as a basement, not a ceiling, to be scaled up over time. Vulnerable countries didn’t create this problem, but they are suffering most.
Ousman explained, “We need a clear pathway toward meeting this $100 billion by 2020 and also a signal that there will be resources for post 2020. So a clear commitment for the provision of new and additional, adequate and predictable finance is paramount for all diplomatic areas for us.”
Given that public funds from governments are inherently unpredictable year to year, an international mechanism that automatically generates a pool of funding each year is desperately needed to leap the finance gap and provide a means for wealthy countries to fulfill their promises. In the United Nations climate negotiations, this is known as innovative public finance.
Even basic public climate finance promises are currently not being met. The United States, due to opposition in Congress, has yet to deliver on it’s promised $500 million contribution to the Green Climate Fund in this budget year, as part of President Obama’s larger $3 billion pledge to the fund over a four-year period.
As the case of the United States reveals, it is essential that we don’t completely rely on obstinate governments to meet the growing climate needs of the developing world. They have a history of not following through on their promises, and have often relied on “creative accounting” to inflate their actual contributions, fueling ill will and a lack of trust in the international climate negotiations.
Adaptation needs, which will largely not be addressed by private finance and market forces, have been particularly neglected. An estimated $4.2 billion has been delivered to meeting adaptation needs in developing countries annually, more than one hundred times less than that which goes to subsidizing fossil fuel production globally. Despite more than a decade of planning, only one fifth of the $5 billion needed to support the most urgent needs identified in adaptation plans conducted by the 49 Least Developed Countries has been provided. These countries are experiencing deaths from climate-related disasters at five times the global average, despite having contributed far less than 1 percent of historical greenhouse gas emissions.
A high level advisory group report commissioned by the UN Secretary General in 2010 revealed several promising means to provide predictable and scaled up climate finance including a levy on international air passengers and maritime transport, redeploying fossil fuel subsidies in developed countries, and a levy on financial transactions. The revenue generated from these taxes could be pooled and distributed from a collective fund to enable developing countries to develop and carry out long-term plans to meet pressing development and adaptation needs with certainty.
Particularly promising is a tiny levy on international financial transactions, what is often called the Tobin tax or Robin Hood tax. Eleven member states of the European Union have agreed to move forward with a levy on financial transactions. Oxfam estimates that it will generate $35 billion a year in Europe and $400 billion a year if implemented globally, which could be scaled up over time. Civil society organizations are asking that at least 50 percent of these funds in the European Union be directed to climate change activities, including adaptation in the global South.
Another proposal would put a levy directly on the main contributors to climate change, what are known as the “carbon majors.” These include the 90 companies that are responsible for nearly two-thirds of historical greenhouse gas emissions. These and other fossil fuel companies should no longer have the right to pollute without paying for the climate damages for which their products are responsible.
Julie-Anne Richards with the Climate Justice Programme points out that the top two historical polluters alone, Chevron and ExxonMobil, made $50 billion in profits in 2014. This is roughly the same amount as the estimated costs needed to fund the worst climate impacts in the Least Developed Countries (what is called “loss and damage” in the negotiations). These are the impacts like rising sea levels and desertification that go beyond peoples’ ability to cope or adapt to climatic disruptions.
The draft text for the United Nations decision in Paris currently provides an option for considering new and alternative sources of finance, with a view towards taking a decision on the issue in two years. It is critical that this remains in the final decision.
As Richards explained, “We’re all talking about the finance gap now. It is very, very obvious that it is significant no matter how you want to try and measure it and that we are going to have to do something to address it. The innovative alternative new sources of public finances look more appealing the more evident the gap is.”
Paris is indeed a moment to mind the finance gap. Trust between countries and addressing rampant climate change inequality depends on it.
David Ciplet, Ph.D., is Assistant Professor of Environmental Studies, University of Colorado Boulder. He is author of "Power in a Warming World: The New Global Politics of Climate Change and the Remaking of Environmental Inequality", available through MIT Press at: https://mitpress.mit.edu/books/power-warming-world