Copenhagen Accord: The financial side

Guest commentary by Liane Schalatek

It is ironic, really.

The question about financial transfers from the industrialized to the developing countries – one of the most contentious issues throughout the two weeks’ negotiations in the Bella Center – might be one issue area, where a final Copenhagen declaration could show a clear way forward — albeit in an otherwise weak and watered down political statement by Head of States, a sad remnant of the earlier, grander vision of a comprehensive “Copenhagen Deal”.

Finally, concrete numbers — the most to be expected for a future “Copenhagen Climate Fund” — are on the table. And while they are not as grandios as hoped for, they will, if collected and tranferred speedily, go a long way to improve the lives and livelihoods of men and women in the devleoping world as well as the world’s climate. Over the next three years, industrialized countries commit to transfer some $30 billion in short-term financing to developing countries. Most of these funds over the next three years would probably be delivered through existing (climate) financing mechanisms, including at the multilateral development banks and the GEF. (A reminder: It took seven years from COP decision to the start of operations of the new Adapation Fund). By 2020, a “Copenhagen Climate Fund” under the direct authority of the UNFCCC would then collect some $100 billion per year by 2020.

This at least, is what a three-page outline document for a political declaration, the result of a “green room”-type meeting of 30 countries came up with after a long night of negotiations early Friday morning. But it seems also the outline of what is politically possible as a financing framework, with its baselines seemingly holding throughout the high-level segment of the negotiations and the statements by Obama, Merkel, Lula & Co.

While US President Obama disappointed all those who had expected he would pull a financial trump card out of his sleeve and top the announcement that US Secretary of State Hilary Clinton had made on Thursday, Brazil’s President Silva da Lula surprised pleasantly by indicating that as an emerging economy his country might contribute to providing financial transfers to the poorest and most climatically exposed countries. An interesting side note: in his comments, President Lula’s explicitly warned of putting new climate funding under the control of the World Bank….

As encouraging as these stated intentions sound, a lot of the details are still missing. For example, it remains unclear how much the United States would contribute to such a Fund in the long-term. And nowbody knows how much the US are willing to cough up for the most urgent adaptation and mitigation action in developing countries in next three years. In contrast, the EU and Japan had both put their financial cards already on the table, promising $10 billion (EU) and $15 billon respectively from 2010-2012.

On the sources of financing, there is likewise ambiguity — but that might be a blessing in disguise. While the G30 draft outcome document lists private (carbon-markets) and public bilateral and multilateral sources, it also leaves room for “alternative sources of financing. This opens the door for the development of innovative tax instruments (for air or maritime travel or financial transactions a la Tobin), which a suggested high level panel under the COP could explore. Using (global or regional) sin taxes would go a long way to secure the truly additional and predictable revenue source that the developing countries are holding out for.

(Originally published in: Klima der Gerechtigkeit)