Day Four: Trading dollars for degrees
In his plenary address today, the representative from St Vincent and the Grenadines spoke about the need to follow through on climate financing. He said that the developing world had been "trading dollars for degrees" with the expectation that climate finance would materialise, but that a lot of the financing had proven to be "empty shells" caught in complex financial mechanisms.
The finance being discussed seems pretty big. A first tranche of "fast start financing" was pledged in Copenhagen in 2010, and was to approach $30 billion over the 2010-2012 period. It's now December 2012, and developed countries self-report that they have pledged $33 billion over that period. Though the degree to which that financing has been "new and additional" and has actually been delivered is unclear. I think it's nevertheless an impressive achievement, especially in a time of such severe austerity. The finance is largely intended to prepare developing countries to make the transition to a low carbon economy and to adapt to the changes in climate that the developing world in particular is already beginning to experience.
From 2020 $100 billion a year in climate finance is supposed be transferred to the developing world. Getting to that sum is seen to be a challenge - a challenge that the representative from St Vincent and the Grenadines lamented. When the distribution mechanisms like the Green Climate Fund and Reduced Emissions from Deforestation and Forest Degradation (REDD) initiative are still in the development and trialling stage, how can transfers reach that scale whilst remaining accountable and effective? And it's not just the uncertainty of the mechanisms that gives developed countries a headache, but where the money will come from, and the absolute size of those transfers...$100 billion is a lot of money!
Or is it?
Between 2010 and 2011, global fossil fuel subsidies leapt from $412 billion to an astounding $523 billion. The $100 billion "empty shell" promise might have depressed the representative, but on Sunday I heard UNFCCC Executive Secretary Christiana Figueres explaining her depression when faced with the more than $100 billion in real cashflows to subsidise fossil fuels. That the world managed to put an extra $100 billion towards a somewhat counterproductive end really put the size of this climate commitment in stark relief.
But again, these bulky numbers hide a lot of important detail. The developed world only spent about 11% of the total fossil fuel subsidy, while the developing world made up the rest, mostly to improve access to fuel where poor people struggle to afford it. Even this limited context starts to make the reality seem a bit more complex.
In general, it's probably wise for developed countries to reorient their subsidies away from fossil fuels and towards renewables, which garnered only about a fifth of the support of oil, coal and gas last year. It's also probably a good idea to make good on the $100 billion climate pledge. Developing countries need the money if they're going to have a chance of managing the severe climate impacts they're already feeling. And the cash will also unlock technology transfer opportunities, which will let developing country governments redirect their own subsidies towards energy efficient and low carbon technologies for their energy-deprived and fuel-poor. In terms of climate finance, it's really not size that counts - it's what you do with it.