Some three hundred government officials, representatives of think thanks, civil society and the private sector recently gathered at the regal Paris headquarters of France’s Ministry of Finance for three days. They were there to continue down the rocky road of launching a UN institution, the Green Climate Fund (GCF), intended to mysteriously collect, then spend $100 billion a year on climate change efforts worldwide.
The GCF has been four years in the making yet I heard at its Paris meeting that it still doesn’t know what it actually does. But climate action cannot wait: according to the World Bank, the earth is set to warm by four degrees and according to the International Energy Agency (IEA), we need $1 trillion a year between 2012 and 2050 to finance a low-emissions transition. Compared to a global GDP of $70 trillion and to our current spending of $2 trillion per year on fossil fuel subsidies, $100 billion is peanuts, yet you wouldn’t be able to tell by attending the GCF meetings.
The problem? The GCF joins a cacophony of parallel climate support vehicles, including the Global Environment Facility (GEF), the Climate Investment Funds (CIF), the World Bank Group, the UN climate talks Adaptation Fund and another thirty five organizations listed as “UN partners on climate change,” none of which are decisively tackling climate risks.
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A case in point: The UN climate talks set up an Adaptation Fund for the same purpose as the GCF, but it was let down by a lack of ambition when its funding dried up after the Kyoto Protocol’s Clean Development Mechanism (or CDM) was neglected because it wasn’t the “new thing”. The same people pop up at the GCF, at the UN climate talks and at related meetings, so it would have been simple enough to spend the four years correcting the course we were on through increased ambition.
The GCF joins a cacophony of parallel climate support vehicles, including the Global Environment Facility (GEF), the Climate Investment Funds (CIF), the World Bank Group, the UN climate talks Adaptation Fund and another thirty five organizations listed as “UN partners on climate change,” none of which are decisively tackling climate risks
Furthermore, the record of existing institutions isn’t comforting. The GEF currently invests $800 million (0.8 per cent of $100 billion) a year in climate change. The CIF, doing pretty much the same thing as the GEF, disbursed a total of $343 million this year (0.34 per cent of $100 billion). The World Bank lent $12.2 billion in climate change funding in 2012 (12 per cent of $100 billion).
Trying to mobilise an additional $100 billion through a brand new international institution is neither wise, nor conducive to results. What’s needed is the courage to kill the Green Climate Fund and the leadership to get climate action decisively underway.
The GCF should be merged with one or more of the GEF, the CIF and the Adaptation Fund. This would allow the effective use of existing resources and procedures. The GEF and the CIF are not accountable to the UN climate talks (whereas the Adaptation Fund is), but this can be easily fixed to address concerns of developing countries that wealthier members have too much influence. Collectively, these could form an effective “Climate Change Action Bank” able to mobilize $100 billion a year or more. Here’s how.
First, developing countries on the front lines of suffering from climate change – China and India – backed by oil producing countries and others, would lead the funding via direct contributions from their national budgets. Importantly, this would greatly increase pressure on developed economies to at least match the developing world. In addition, as should be very clear by now to developing countries’ negotiators at the UN climate talks, developed economies won’t stump up the necessary cash otherwise. This is not in fact a big ask: a recent study by the Climate Policy Initiative shows that 76 per cent of all climate financing already comes from the country it is spent in.
Second, the Adaptation Fund could be replenished were serious efforts made to fix the sputtering Clean Development Mechanism; a UN scheme to encourage private sector investment in clean energy projects a levy on which finances the fund. Private sector investment through the CDM has all but dried up because of a nosedive in the value of the carbon credits around which the system is based; were a stable price set for these credits, private sector money would start flowing again. At one stage the CDM had unleashed more than $356 billion in green investments and was on track to deliver $1 trillion in financing – a level of private sector investment in climate spending which has never been paralleled. Restoring this level of investment, along with a gradually increasing levy, could provide the Adaptation Fund with $10 billion per year from the private sector (which the CPI study shows was responsible for 62% of global climate spending in 2012).
Third, the existing funding of the merged institutions (i.e. the Climate Change Action Bank) should be supplemented by one or more of a range of financing tools. For example, they would regulate a carbon tax paid by polluters on the $2 trillion of fossil fuel subsidies they receive, or emissions from shipping and aviation via levies or the sale of allowances.
The responsible outcome of November’s UN climate talks in Warsaw is to ensure that we can immediately finance climate mitigation and adaptation. Courage and leadership: Enter, stage right.