Why rich states can’t meet the 2020 climate aid goal alone

An international commitment to provide $100 billion a year by 2020 to help vulnerable countries tackle climate change is unlikely to be met if only government funding from rich nations is counted towards it, researchers said.

At U.N. climate negotiations, some developing countries have argued the annual $100 billion should come entirely from developed nations’ treasuries, even though the original promise called for funding from a range of sources.

Climate finance from wealthy states’ coffers alone would not hit the target unless it grew at 25 percent each year from 2012, the World Resources Institute (WRI) said in a paper.

“It’s not an impossibility if there is enough ambition but there’s nothing in the recent past that would indicate we could grow at those rates,” said WRI finance expert Michael Westphal, lead author of the paper outlining scenarios to get to $100 billion.

The researchers suggested a combination of climate finance sources could be counted towards the goal, including support from multilateral development banks, private-sector investment mobilised by public money, and development aid relating to climate change.

If that were to happen, climate finance could total $109 billon to $155 billion in 2020 under projections of low to medium increases across all the sources, the paper said.

Westphal said progress should be made this year on defining how to reach the annual $100 billion, ideally with a formal decision at December’s U.N. conference in Paris, where leaders are due to agree a new global deal to tackle climate change.

When the non-binding climate finance commitment was made in Copenhagen in 2009, the accord said the $100 billion would come from “a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance”.

Since then, little headway has been made on clarifying what can be counted towards the goal and deciding how to achieve it.

To agree on this, “countries will have to find a middle ground”, said the WRI paper, released during June 1-11 climate negotiations in Bonn.

“This is important not only to resolve accounting issues, but also to demonstrate progress in scaling up climate finance and to build confidence in a future climate regime,” it added.

Adaptation loses out

Figures in the paper show that, in 2012, developed countries contributed $17 billion in climate finance, while development banks gave $15 billion and other climate-related development assistance was $10 billion.

Leveraged private-sector investment was between $26 billion and $42 billion, depending on the ratio applied.

If all those four types of finance were counted, the $100 billion goal could be reached with a low growth rate in public finance sources, and low leverage for private-sector investment, the WRI said.

If any were excluded, higher growth rates and leverage would be needed. “But under every projection an increase in public finance is required for balance,” the paper added.

Developed countries could potentially find additional public money to meet the goal by using new and innovative sources of finance such as carbon market revenues, financial transaction taxes, export credits, debt relief and redirection of fossil fuel subsidies, the paper noted.

Westphal said it was a “concern” that under all four scenarios in the paper, finance for adaptation – measures to adjust to more extreme weather and rising seas – was projected to be far lower than for mitigation, or activities to reduce greenhouse gas emissions.

The new Green Climate Fund, set up under the U.N. climate talks, plans to help correct this funding imbalance, which troubles vulnerable countries.

Westphal said governments should increase their ambition on adaptation, and areas like making agriculture and infrastructure more resilient to climate change could attract private-sector finance.

He said governments should aim to resolve in Paris how the $100 billion promise would be met because it was an “integral trust-building mechanism” between rich and poor countries for the new deal, which is not scheduled to kick in until 2020.

This article is published in collaboration with Thomson Reuters Foundation. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Megan Rowling covers aid and climate change issues, with a focus on social, economic and environmental justice.

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