Footing The Bill For Climate Change

Report
Footing the bill for climate change

the duty of the rich and the right of the poor to development
This report was originally published in Swedish in early spring of 2009 as a joint effort by the Swedish Society for Nature Conservation, Forum Syd, Diakonia and the Swedish Cooperative Centre, with Gran Eklf as commissioned author. Apart from a few minor updates this report is essentially a translated version of the original which was published as no 33 of Globala Studier. The Swedish version can be ordered from www.forumsyd.org. Author: Gran Eklf Translation: Emma Henningson Project Manager: Niclas Hllstrm Layout: Carina Grave-Mller, Naturskyddsfreningen Photo: www.sxc.hu Print: tta.45, Stockholm Order No: 9054 ISBN: 978-91-558-0172-4 Produced with economic support from Sida. Sida has not participated in the production of the publication and has not evaluated the facts or opinions that are expressed. 2
Contents
Preface The challenge Current financing mechanisms i. Mechanisms within the climate convention ii.Other existing financing mechanisms Negotiations for new financing mechanisms i. Proposals that primarily deal with how funds can be mobilised ii. Proposals that address the allocation of commitments and the administration of funds iii. Proposals that primarily address emission trading Climate change issues from a development perspective Reference list
4 7 16 17 23 27 27 29 32 35 43
Abbreviations:
AOSIS CCS CDM CIF DAC G77 ing GDR GEF IDA IPCC Alliance of Small Island States Carbon Capture and Storage Clean Development Mechanism Climate Investment Funds Development Assistance Committee Group of 77 a coalition of 130 developof the OECD countries Greenhouse Development Rights Global Environment Facility, (UN) International Development Association, World Banks fund for the poorest countries Intergovernmental Panel on Climate Change JI LDC NAPA ODA OECD Joint Implementation Least Developed Countries National Adaptation Programmes of Action Overseas Development Aid Organisation for Economic Co-operation and Development REDD Reduced Emissions from Deforestation and Forest Degradation Sida The Swedish International Development Cooperation Agency UNDP United Nations Development Programme UNFCCC United Nations Framework Convention on Climate Change
Preface
This report on climate financing was originally published in Swedish in early spring 2009 as a joint effort between four organisations: the Swedish Society for Nature Conservation (SSNC), Forum Syd, Diakonia and the Swedish Cooperative CentreIt serves the primary purpose of clearly mapping this complex issue and provide a factual basis for policy development and advocacy. During the months that have passed since the original report, the issue of finance has become even hotter and more contested, and is certainly one of the Key issues for climate change, the Copenhagen meeting and beyond. Clearly, there will be no prospect for a genuine agreement if there is no substantial financing forthcoming, and as clearly without ambitious financing for developing countries there will be no chance to curb global warming in time. This is not about charity. It is about making up for the Annex-1 countries historic responsibility, but also for the rich countries to do what is needed also in their own selfinterest. As clearly stated in the climate convention, the rich, Annex-1 countries which have largely caused the climate crisis, and keeps claiming a disproportionate part of the little climate space remaining have the obligation to pay the full agreed incremental costs for adaptation and mitigation in developing countries. The principle of common but differentiated responsibility needs to be operationalised into concrete action. Half of the worlds emissions are now coming from the developing countries although their per-capita emissions are much smaller than the rich countries, as is their historical contribution to the problem. To have a chance to avoid dangerous climate change, drastic reductions must also soon take place in developing countries while they at the same time move out of poverty. Adequate financing is therefore a prerequisite although admittedly not the only factor to enable developing countries to embark on such a necessary, historically new, fossil-free, sustainable and equitable development trajectory. Over the many weeks and months of negotiations during 2009, there was very little, if any, progress in the negotia4
tions on finance. When the EU, as the only Annex-1 party at the time of writing, finally announced their views and ambitions in late October 2009 it was not only much in line with their criticised European Commission communication from early in the year, but had rather worsened than improved: the overall needs are seriously underestimated, more burden is placed on the developing countries themselves, both ODA and Annex 1 country investments in offsets are double counted as financial support to developing countries, there is a rejection to create new institutions under the UNFCCC, and there is no strong efforts to mobilise innovative sources of finance such as taxes on shipping and aviation. The EU continues to promote carbon trading as the major policy tool rather than public investments, and imposes this also on developing countries. It is argued that the EU share of public funds should amount to only 2-15 billion euro per year a tiny fraction of the needs and fair share estimated by both SSNC, the UN and many others. The areas of disagreement and conflict identified in this report remain, and we therefore find it well motivated to provide a translated version to the larger, English speaking world of civil society organisations, officials and media. A few notable developments have happened in the months since the report was first published: The estimations of total financing needs have grown several times and are likely to continue to escalate. A study from the International Institute for Environment and Development (IIED) let by former IPCC co-chair Martin Parry concludes that the earlier IPCC study on adaptation underestimated the costs by 2-3 times, and did not even consider many sectors. The total costs for adaptation may therefore easily amount to USD 500 billion a year, or likely even trillions if adequate action to curb emissions is further delayed. The UN World Economic and Social Survey (WESS) 2009 Promoting Development; Saving the Planet estimates the needs for yearly public investments for mitigation and renewable energy in developing countries to several
hundred billion USD, beginning already 2012. The International Energy Agency estimates the global yearly investment needs for energy to be more than USD 1 trillion by 2030, of which a significant share would need to happen in developing countries. In contrast, the EU states in its position that total costs for adaptation and mitigation for all developed countries will amount to Euro 100 billion by 2020, of which only 22-50 USD would be covered by public funds. There is thus at least a ten-fold gap between EU overall cost estimates and these recent assessments. There has been a further polarisation of views on markets vs public investments. While the EU position relies to a large extent on a belief in expanding carbon markets as the driving force for finance and change, there is mounting critique against such an approach. Yet, EU and also other developed countries are pushing heavily for new sectoral trading and policy-CDM. As a contrast, the UN WESS report concludes that a massive, front-loaded public investment approach that integrates climate and development objectives is the only way to effectively and quickly drive the transformation to renewable energy that is needed. SSNC supports this approach, which is gaining increasing traction among both country delegations and civil society organisations. As one concrete example, a system of national feed-in tariff systems for renewable energy could be set up with funds from a global energy fund under the UNFCCC. Over a period of 10-15 years such a system could effectively transform energy investments in developing countries to renewable fossilfree energy, while simultaneously providing affordable energy to the 1.5 billion poor people who today lack electricity. This would also to the benefit of both rich and poor countries - drive the costs for renewable energy down to a level competitive with fossil energy. Such a win-win approach would be in
line with the rich countries obligation under the convention, while yet benefitting both rich and poor countries. It would redefine how we understand costs and create jobs and investments opportunities also in the North, it would drive prices down and it would strengthen a cooperative spirit between rich and poor countries. It would also have the benefit of great transparency funds would only be dispersed in connection with the delivery of the renewable energy. The issue of historical responsibility and climate debt has become articulated in new ways and brought more into the center of debate in the UNFCCC negotiations. By analysing the use of both remaining and past carbon budgets, developing countries are putting numbers on these inequities and beginning to translate these into financial terms. The concept of climate debt has been articulated and supported by more than fifty countries in the negotiations.
It is clear that climate financing goes to the core of the debate and is a make or break issue. Well handled, it can be a basis for real action and unleash unprecedented international cooperation. Wrongly dealt with, it can also lead to further polarisation, distrust and a loss of valuable time for effecitvely tackling climate change. From the point of view of SSNC, most of the responsibility falls on the rich countries, who need to take on a much more forthcoming and constructive approach. Many of the current positions much change and the overall ambition improve many times. To clarify SSNCs current stance on these issues: The overall level of public climate financing for developing countries must increase significantly and likely be, wihtin a few years, in the realm of USD 500 billion yearly. Climate financing must be additional to the 0.7% ODA goal (1% in Sweden) . Any double counting of
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climate funding and ODA goes against the principles of the climate convention, and means taking from the poorest and decreasing the efforts to reach the Millenium Development Goals. Carbon trading can, likewise, not be double counted as financial support for developing countries. These reductions are part of a zero-sum game aimed to make it cheaper for Annex-1 countries to achieve the targets from Kyoto. Climate financing must be governed and set up under the Climate Convention. A global fund under UNFCCC should be set up both for the efficient handling, and to create trust. The World Bank, which is effectively governed by the donor countries with USA in veto power can not have a significant governance and policy role. With a global UNFCCC fund, the issues of sources on the one hand, and governance/policy and accountability/institutions on the other can be separated. The funding sources needs to be predictable and secure, but can come from a diverse set of sources. SSNC suggests the following criteria for assessing the relative strengths of the many financial mechanisms on the table: 1) existence of positive side effects, such as direct environmental benefits (e.g. Levvys on shipping and aviation), 2) equity, 3) effects on the building of trust between the north and the south, 4) stability and predictability, 5) being based
on the UNFCCC and on clear princples such as common but differentiated responsibility 6) potential for up-scaling and adjustments over time and 7) benefits for domestic employment and business. Transparency and accountability and participation by civil society in decision-making are key when establishing new funding arrangements. This is important in order to ensure that the funds are used effectively and also in order to design institutions and procedures where there is a sense of ownership and equity. We hope you will benefit from the clarity of this report just as we have in our own development of thinking and positions on these tricky but important issues. The issues on climate and finance will remain as Key Issues for a long time to come. Hopefully, we will overcome present deadlocks and hurdles sooner rather than later and find genuinly cooperative ways where we can realise real solutions to the benefit of us all.
Svante Axelsson Generalsekreterare Naturskyddsfreningen
The challenge
It is difficult to imagine an issue with more global impacts on human societies and the natural environment than the greenhouse effect. The signal is unclear but we may already be witnessing examples, if not actual greenhouse effects, in Africa. The ultimate potential impacts of a greenhouse warming could be catastrophic. It is our considered judgement that it is already very late to start the process of policy consideration. Irving Mintzer, World Resources Institute at a public hearing with the Brundtland Commission in Oslo 24-25 June 1985 November 2008 marked the 20th anniversary of the forming of the UN Panel on Climate Change, IPCC. Nineteen years had passed since the United Nations agreed to negotiate a global treaty to handle the problem of global climate change. In 1992 the countries of the world adopted the United Nations Framework Convention on Climate Change (UNFCCC), the framework currently used to organise international work against climate change. In 1997 the Climate Convention was complemented by the Kyoto Protocol, which amongst other things contains binding commitments to reduce emissions of greenhouse gases in the developed countries and general measures from the other member countries. The threatening climate crisis is, in other words, far from something new. Nonetheless, it is only in the last few years that the climate issue has suddenly gained weight in the political agenda, and suggestions of what should be done about the global threat are discussed widely. The most immediate challenge is to limit climate change as much as possible, principally through reducing emissions of greenhouse gases. This alone demands enormous investments in the short and medium term. But climate change is already upon us and it will get worse before the trend can be broken, irrespective of the efforts we now make. It will therefore be necessary to put
great effort into adapting our society to the climatic changes that are coming, and into compensating people for the damage that climate change will cause, especially amongst the poor and vulnerable. The climate crisis is primarily caused by the large quantities of carbon dioxide emitted into the atmosphere by the small proportion of humanity that has lived, and continues to live, in the rich developed countries. The primary emission source is the combustion of fossil fuels. In the past, large areas of our forests have also been cut down, which has also contributed to our historic emissions. The rich countries continue to emit far more greenhouse gases per capita than the developing countries.1 The effects of climate change are also unevenly distributed but the pattern is the opposite to that of emissions. Roughly speaking, those that are least to blame for the crisis will suffer worst from the effects. Poor and vulnerable groups in developing countries will not just face the greatest effects; in contrast to those in richer parts of the world, these people lack both the economic and practical capabilities to adapt to the new climate, or to compensate for the losses that the changes will cause. On this basis, it is a moral responsibility chiefly for the rich countries to rapidly and drastically reduce our emissions of greenhouse gases. But we also have a legal responsibility through the commitments made within the framework of the UN Climate Convention to help poor countries to adapt to climate change and to make it possible for them to develop without emitting more greenhouse gases than are necessary. Despite the many years that have passed since the Climate Convention was passed, it is only recently that any real effort has been made to estimate the costs of mitigation and adaptation to climate change in developing countries. Most of the estimates that have been presented in the last two years suggest that the support needed is at least of the same order of magnitude as the worlds combined overseas development aid (ODA) of around 100 billion US dollars annually2. The resources that have been committed so far to the Climate
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Convention funds for support to developing countries are far less than one percent of this value. There is, therefore, a great need for a rapid and massive increase in funding. The plan for the international negotiations is now to reach an agreement for the period post 2012, when the current commitments under the Kyoto Protocol run out, at the Conference of the Parties in Copenhagen in December 2009. The question of how to finance the efforts of developing countries to adapt to climate change and to limit their emissions will be a crucial factor in the negotiations. The developed countries have already committed to contribute to these costs as part of the Climate Convention, but results so far have been meagre to say the least. During the last few years a proliferation of new funds have been launched and more proposals are under discussion, all with different strategies for how more resources could be mobilised. There is a clear pattern; proposals from developing countries are grounded in the responsibility of the developed countries to contribute public funds to mitigation and adaptation, whilst proposals from developed countries put greater weight on market mechanisms and various innovative sources of financing which are external to their own state budgets. This document presents an overview of the most important proposals and the institutions that are involved in the public funded or administered financing flows for climate change efforts in developing countries. Private investments which are not linked into any of these flows are, however, not discussed here (neither are the climate change efforts that organisations and the private sector make, for example, within the framework for different offset projects). These financial flows are, of course, important, but such discussions would lead this report too far away from the central issue: How are the developed countries going to live up to their obligations to finance climate change related work without taking resources from their equally important commitments to increase development aid? Discussion of this issue is important for several reasons:
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Firstly, the two challenges are intimately connected. Some of the causes of climate change, the effects of them and even some of the measures that are being taken to deal with climate change, will affect the poor most. Support for environmentally, economically and socially sustainable development is not only vital in the fight against poverty, but also in the adaptation to the climate change effects that are now inevitable. Secondly, both development and climate change work are under serious threat from the economic crisis. Record prices for oil in the summer of 2008 quickly lead to demands for lower climate change taxes but acceptance of higher taxes does not automatically increase again when the oil price falls again. The financial crisis caused several large EU countries to immediately demand that the EU should reduce its level of ambition in climate negotiations. No ODA have yet been undermined by new decisions, but even in times of high prosperity, most of the developed countries have not lived up to their pledges and experience shows that development aid can easily suffer when times get harder. The rights of the poor to development and to justice must therefore also be defended in the climate change debate.
Mitigate or adapt?
The ultimate objective of the United Nations Framework Convention on Climate Change, UNFCCC is stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic3 interference with the climate system. Such a level should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner.4 A stabilisation of concentrations in the atmosphere requires the limitation of anthropogenic emissions of greenhouse gases, protection of existing sinks and reservoirs and the creation of new ones (see Box 1). According to the terminology of the Climate Convention, measures with these goals are called mitigation, i.e. aiming to counteract or reduce cli-
Box 1: Reservoirs, sinks and sources
The concentrations of greenhouse gases in the atmosphere are the result of the balance between the emissions and absorption of the gases in reservoirs, sinks and sources. For the most important greenhouse gases, carbon dioxide and methane, the balance is dependent on how the carbon that these compounds contain circulates between the atmosphere and fixed forms. Reservoirs are the existing stores of carbon that are fixed, for example in coal, oil and natural gas. Normally, this carbon can only be released into the atmosphere if it is dug or pumped up from the ground and burnt. Other reservoirs are less stable, not least the carbon stored in living organisms, in soil and peat, and stored in sea and lake bottoms. Sinks are reservoirs where the quantity of carbon stored increases gradually over time. This occurs mainly in natural systems which absorb carbon dioxide from the atmosphere and store them in forms that are more or less permanent and stable. This results in a fall in the concentration of carbon dioxide in the atmosphere. Examples of sinks are growing forests and organic material stored in environments where it does not decompose, for example by deposition to deep sea beds or by being buried in peat. Sources are the reservoirs from which there is a net emission of greenhouse gases to the atmosphere. The main source is combustion of fossil fuels. Deforestation, wetland drainage and other changes in land use also lead to the release of carbon from reservoirs. Ruminating cattle and rice cultivation are sources of methane gas emissions. mate change.5 The most important way on a global scale to achieve this is through reducing the use of fossil fuels. Major emission reductions can also be achieved by stemming deforestation and by limiting the emissions of nitrous oxide and methane from agriculture and livestock. Unfortunately, the moment has long since passed when the effects of anthropogenic climate change could be stopped completely. The convention therefore also addresses the need for adaptation to the changes that are to come. Adaptation to climate change will be necessary in many different ways: in planning and building physical protection from storms and floods, in adapting agriculture to new temperature and precipitation conditions, in preparing for the spread of infectious diseases to new areas, and much more. The links between what is being done globally to stop climate change and the need for measures that help society to adapt to a changing climate are both obvious and strong; the less that is done to mitigate climate change, the more need there will be for adaptation. Or, to express it in economic terms: investments which reduce emissions of greenhouse gases lead to lower adaptation costs in the future. The difference between mitigating climate change and adapting to the changes can seem clear, but this is not necessarily always the case. For example, measures that counteract deforestation do not only lead to lower emissions of carbon dioxide, they also contribute to reducing vulnerability to the extreme weather events which can become more common as the climate changes.
The historical responsibility of the developed countries

Since industrialisation, the minority of the worlds population that live in the developed countries have built their prosperity on a constantly increasing use of fossil fuels, without any consideration for the effects that this may have on the climate. It is hard to get a clear picture of the exact proportion of historical emissions caused by the developed countries. Estimates vary depending on which base year is chosen and the reliability of statistics varies for different periods and countries. But irrespective of the choice of parameters, the Climate Convention establishes that developed countries bear responsibility for the majority of historical emissions of greenhouse gases, whilst the emissions per capita in developing countries are still relatively low.6
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And we continue to emit far more per capita than developing countries. Our emissions are the single most important cause of the increase in the concentration of carbon dioxide in the atmosphere from around 280 ppm (parts per million) in the mid 1700s to over 380 ppm today.7 The modest efficiency improvement measures that have lead to a decrease of emissions per Swedish krona or per kilometre have to a great extent been cancelled out by our ever increasing consumption. But in todays debate it is often the increasing emissions from large countries such as China and India that are raised as the main threat to the earths climate. Of course, it does make a big difference when the emissions from such populous nations increase rapidly. But the emissions per capita from these countries are still relatively low in comparison to most developed countries. Furthermore, it is important to note that a significant proportion of emissions from, for example, China can be attributed to production for export to consumers in richer countries. And if the developed countries had not already filled the atmosphere with so much carbon dioxide, then no one would need to worry very much about Chinas, or even less Indias, emissions of carbon dioxide for the next few decades. But in the current situation, an additional increase in the atmospheric concentration risks potentially catastrophic consequences. Our emissions have created a situation which limits the possible development options of developing countries.
responsible for taking care of the consequences. But the developed nations also have a responsibility to support developing countries in their efforts to limit their future impact on climate change. The convention states that the share of global emissions originating in developing countries will grow to meet their social and development needs and that consideration must be given to the fact that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.8 We must therefore ensure that it is possible for these countries to develop, by building up energy, transport and production systems that have much lower, and in the long run almost non-existent, emissions of greenhouse gases. Of course, this must take place alongside domestic transitions in developed countries. This double responsibility has been acknowledged and accepted, above all by the richer developed nations, through the Climate Convention (see Box 2). By signing up to the Climate Convention, these nations have made a binding commitment to support developing countries (financially and through transfer of technology) in their efforts both to mitigate and adapt to climate change. The Climate Convention stresses that the financial flow must be adequate and predictable, but as we will see, this has not been the case so far.9
How much money is needed?

A number of estimates have been made of the developing countries investment needs, both to limit future emissions from these countries and to adapt to the climate changes that are coming. The resulting figures vary greatly. However, a rough estimate is that the annual need is at least as great as the current total development aid, but is very likely to be less than the sums of money that the governments of the western world were able to mobilise during the financial crisis in the autumn of 2008. The relatively large disparity in the estimates presented is partly due to the different assumptions made, but also to the great degree of uncertainty regarding many crucial factors.
and their commitment to pay

That is why the developed countries must foot the bill. Not only by living up to the promise, which for many decades has remained unfulfilled, of giving 0.7 percent of GNP to ODA, but also by contributing to the costs for developing countries of mitigation and adaptation to climate change. The historical responsibility of the developed countries for the emissions of greenhouse gases is one of the strongest arguments for us to help developing countries to adapt to climate change; we caused the problem and we are therefore
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Box 2: What does the Climate Convention say about responsibility and financing?
One of the key paragraphs in the Climate Convention acknowledges that the global nature of climate change demands the widest possible cooperation by all countries, but that their efforts must be based on their common but differentiated responsibilities and respective capabilities and their social and economic condition.10 The principle of common but differentiated responsibilities is applied in the Climate Convention through two of the central commitments which apply only to a selected group of countries: All developed countries (so-called Annex I countries, listed in Annex I of the Climate Convention) shall limit their anthropogenic emissions of greenhouse gases and protect and enhance their green house gas sinks and reservoirs. 11 Annex II countries (the developed countries excluding transition economies in Central and Eastern Europe and in the former Soviet Union) commit to provide new and additional financial resources to meet the costs incurred by developing countries in complying with some of their obligations within the Climate Convention; to assist the developing countries that are particularly vulnerable to the adverse effects of climate change in meeting costs of adaptation to those adverse effects; and to promote, facilitate and finance the transfer of, or access to, environmentally sound technologies and know-how, particularly to developing countries, to enable them to implement the provisions of the Climate Convention. 12
Furthermore, the Climate Convention explicitly states that the extent to which developing countries will be able to effectively implement their commitments under the Convention is dependent on the effective implementation by developed countries of their commitments under the Climate Convention related to financial resources and transfer of technology. 13 The Climate Convention designates Global Environment Facility (GEF) as the international entity responsible for the Climate Conventions financial mechanism. With the signing of the Kyoto Protocol in 1997, the Clean Development Mechanism (CDM) was accepted as a market based mechanism for financing of emission reductions in developing countries. GEF and CDM are explained in more detail on pages 17 and 19. The convention also concedes that financial resources for the implementation of the Climate Convention may also be made available through bilateral, regional and other multilateral channels. 14
The costs of climate change adaptation measures

There are at least four levels of uncertainty in the estimation of the costs of climate change adaptation measures in developing countries: 1. The concentration of greenhouse gases in the atmosphere at any given point in time, 2. The temperature increase and other climatic changes caused by any given concentration of greenhouse gases,
3. 4.
Which measures will be necessary to adapt society to these changes, and The (additional) costs of undertaking these measures.
The analysis presented by the Climate Conventions secretariat at the end of 2008 suggested that climate change adaptation costs are likely to be tens of billions of dollars per year. According to the estimates in the study, the addi11
Box 3: Estimated costs for mitigation of, and adaptation to, the effects of climate change in developing countries.* Box 3: Estimated costs for mitigation of, Organisation and adaptation to, the effects of climate change in developing countries. Billion US dollars per year
Adaptation to climate change
Climate Convention UNDP World BankBank Oxfam
28-58 (year 2030) 86 (year 2015) 9-41 50 200-210 (year 2030) 15
Mitigation by 25% compared to 2000
Climate Convention
Sources: UNFCCC (2007a), UNDP (2008), Vrldsbanken (2006), Oxfam (2007).
* Since this report was written in spring 2009 a number of new studies and reports have been published that indicate significantly higher costs for both
adaptation and mitigation. An International Institute for Environment and Devleopment study (Parry, 2009) by former IPCC co-chair Martin Parry makes the case that UNFCCC underestimated the costs for adaptation by a factor of two to three, and point out that the study omits many significant areas. Total costs for adaptation likely runs in the many hundreds of billion per year. In the World Bank report 2010, the average estimates of a number of studies on mitigation costs for developing countries is USD 395 billion per year, with several individual studies significantly higher.
tional costs for developing countries alone would be up to 58 billion dollars per year (see Box 4).16 Human Development Report 2007/2008, published by the United Nations Development Programme (UNDP) gives a higher estimate of adaptation costs. The need for increased support from donor countries for investment in adaptation measures in developing countries is estimated to be 86 billion US dollars per year, from as early as 201517. Oxfam, an international development NGO, presented an estimate of the same order of magnitude: 50 billion dollars per year. Of course, it is hard to calculate these kinds of costs, and there is a significant risk that all of these estimates of adaptation costs are too low. A comparison with adaptation costs in some developed countries may contribute a new perspective. For example, the UK Environment Agency has estimated the costs for one single project strengthening the Thames Barrier, which protects the river from flooding to 8 billion US dollars.18
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The costs of climate change mitigation measures

Estimates of the costs for mitigating climate change in developing countries are built on a different set of uncertainties. It is not sufficient to estimate the additional cost compared to the cheapest and often fossil fuel based alternative, for building a power station, factory or transport system, which has lower emissions of greenhouse gases. Each estimate must also make assumptions of the extent to which demands will be placed on developing countries to take climate change into consideration. In addition, there is also uncertainty over the pace at which developing countries can be expected to improve living standards and give a larger share of the population access to energy services, transport and basic consumables. Will the current situation, where half of the earths population live on less than two dollars per day and need to increase their energy consumption many times over in order to meet basic needs, subsist? Or should one base the calculations on lifting one or two billion people out of poverty?
Box 4: Climate change adaptation how do they calculate? *

In 2006, the World Bank presented a widely quoted calculation of the costs of climate change adaptation in developing countries. The bank estimated that the costs would be likely to be between 9 and 41 billion dollars per year. The background document does, however, emphasise the high degree of uncertainty in many of the base assumptions for the calculations, so it is very possible that the real costs could lie outside of this range. The World Banks method was based on an estimation of the percentage of the investment flow to developing countries that is sensitive to climatic changes. It was estimated that 40 percent of ODA, 10 percent of foreign direct investments and 2-10 percent of domestic investments are sensitive to climate change. The additional cost of adaptation of these investments is assumed to be between 10 and 20 percent (purely an estimate according to the report).19 The international development NGO Oxfam takes the World Bank method as a starting point for its own calculations, but also attempts to estimate some costs which the bank has not taken into account. Firstly, the bank estimates only the additional costs over and above the ordinary investment flows from donors, foreign investors and domestic investors. It does not include any estimate of the need for specific investments in climate change adaptation. Secondly, the bank addresses only the investments from the private sector and governments. The additional costs that climate change will cause for individual households, local communities and civil society organisations (CSOs) are not included. Oxfam estimates that the costs for CSOs of meeting the needs on a local level are 7.5 billion US dollars per year, and the costs for adaptation projects of the kind presented in National Adaptation Programmes of Action to be between 7.7 and 33 billion dollars (in total, not per year). Oxfam also discusses hidden and currently unforeseeable adaptation costs and deliver a final estimate of at least 50 billion US dollars per year. 20 UNDPs Human Development Report 2007/2008 bases its calculations of the additional costs of investment on The World Banks method, but, based on new data and assumptions, arrives at the conclusion that the costs will be a minimum of 44 billion dollars per year in 2015. It proposes that at least 40 billion dollars per year need to be allocated to adapting poverty reduction programmes to climate change (of which the additional costs for ODA are estimated to be 4.5 billion US dollars per year), and at least 2 billion US dollars will be needed to strengthen disaster preparedness. UNDPs estimates concluded that the need for additional adaptation finance will increase by at least 86 billion dollars per year by 2015. 21 The Climate Conventions calculations are considerably more thorough than any of the above studies. The study presents estimates of the costs in different sectors (agriculture and fishery, health, infrastructure etc.) for different types of costs (investments, research etc.) in different regions and with different levels of development. The estimates of additional costs for investments in new infrastructures are partly based on data for the actual costs of recent extreme weather events, but also link back to the World Banks methods described above. The large uncertainty factor remains: for example, the increase in global investment costs is estimated to be between 8 and 130 billion US dollars per year. All in all, the studies provide estimates of adaptation costs for developing countries of between 28 and 58 billion dollars per year by 2030. 22 * See also the study Assessing the costs of adaptation to climate change: A critique of the UNFCCC estimates which was published late 2009 by the International Institute for Environment and Development.
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Box 5: What does the science say?

The fourth report from the UN Panel for Climate Change, IPCC, which was presented in 2007, is based on contributions from and discussions between thousands of experts with different backgrounds and specialisations. The report reflects broad scientific agreement on the extent and causes of climate change. According to IPPC, the following things are necessary in order to ensure that the global temperature increase will not exceed 2-2.4 degrees, compared to preindustrial temperatures: by 2015 at the latest, emissions of greenhouse gases must begin to fall, and they must continue to fall by 50-85 percent to 2050 (compared with 2000 as a baseline). The targets that are proposed are dependent on which temperature increase is considered acceptable (there is currently broad agreement that two degrees Celsius is the maximum acceptable temperature increase), and which risks/probabilities are reasonable. The Swedish parliamentary Scientific Council on Climate Issues drew conclusions from IPCCs analysis in February 2008 and concluded that emissions in Sweden in 2050 must be at least 75-90 percent below the level in 1990. Since the IPPC report was presented, several leading researchers have declared that the situation is likely to be more serious than stated by the IPPC. New research and observations show that several important factors behind global warming can have been underestimated or not taken into account in the calculations. IPPCs calculations are based on the hypothesis that a concentration of 445-490 ppm carbon dioxide equivalents would be enough to limit the temperature increase to 2 degrees or slightly more. More and more voices are now coming forward to say that the concentration must fall to below 400 ppm carbon dioxide equivalents. For example, Stockholm Environment Institute, is arguing the case for a maximum of 350 ppm CO2, i.e. a significant reduction from todays 387 ppm CO2.25 To achieve this, global emissions would need to be reduced to zero within just a few decades. 26
There are fewer comprehensive estimates of climate change mitigation costs than adaptation costs. The only thing that can be stated with any certainty is that the costs will be immense. The Climate Conventions secretariat has previously estimated that global investment must increase to 200-210 billion US dollars per year by 2030, simply in order to reduce emissions of greenhouse gases by 25 percent compared to 2000 levels. (One should bear in mind that we must reduce concentrations by at least three quarters and very probably more, see box 5 in order to have a reasonable chance of keeping the global temperature increase below 2 degrees Celsius.) Almost fifty percent of this investment is estimated to be necessary in developing countries.23 In updated
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calculations from 2008, however, the costs are estimated to be 170 percent higher than the previous estimates. 24 Nonetheless, it is important to point out that measures to mitigate climate change should not only be seen as a burden. There are also major economic gains to be made from necessary changes in energy and transport systems etc. The question is how public money should best be used to drive development and to create the necessary incentives for the changes to take place. But it is also clear that the rich countries must shoulder the responsibility and safeguard the rights of the poor to development and global justice, and that requires money.
Guiding principles for financing

Against a background of the needs, and of the differing responsibility of countries globally, a number of basic criteria for financing of climate change measures in developing countries begin to emerge. Even if there is variation in the interpretation of the implications of certain principles, a number of central principles can be defined. To meet the needs of financing, the resources must be: New and additional above all in relation to ODA and other existing funding and resources. Predictable, so that plans can be drawn up and programmes implemented without suddenly suffering from failed payments. Appropriate for different kinds of efforts. For example, adaptation measures, which do not generate revenues, should not be financed by loans. Equitable in the sense that the countries that have bear the greatest responsibility for emissions and have greatest capacity to contribute resources should stand for the greatest part of the costs. Adequate to meet the needs. Strategic, so that it contributes to the giant structural transition that must take place, rather than isolated or marginal measures.
The developing countries, with the support of many parts of civil society, emphasise the importance that new financing flows are controlled and managed directly under the Climate Convention and its structures. All states participate on an equal basis within the Climate Convention. Other channels, where the developed countries in many cases have a comparatively larger influence, should not compete with, nor undermine, the mechanisms of the Climate Convention. In particular, civil society also stresses the importance of openness, participation and safeguarding of human rights throughout the chain, all the way from management of funds and planning of strategies, to implementation and follow-up of projects and programmes. There is much to be learnt from the mistakes and successes of development aid. When representatives from beneficiaries and civil society are given real influence in the management, programme planning, implementation and follow-up then the chances are higher that a greater proportion of the resources also reach the poor and most vulnerable, and groups that have the most difficulty in adapting to climate change. In the same way, efforts to mitigate climate change can be of help to people who are not currently responsible for large emission sources, and who are in need of access to energy and energy services.
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Current financing mechanisms
Despite the fact that the resources contributed so far for climate change measures in developing countries have been meagre, they have been delivered through many different channels. And the number of funds and mechanisms is increasing fast. The summary below describes firstly the
financing channels which are administered directly within the Climate Convention, and then some of the other initiatives that have been launched by donor countries and international institutions.
Actor UNFCCC
Framework
Kyoto Protocol
Fund
Adaptation Fund CDM
GEF
General fund LDCF SCCF Including support for developing countries which are dependent on income om fossil fuels SPA Long term initiatives
The World Bank
IDA CFU
General fund PCF CPF
CIF
SCF Investments that are compatible with poverty reduction and strategies for sustainable development CTF Investments in low carbon technologies GCCA Specifically addressing LDCs and small island nations
EU
Adaptation
Combating climate change
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I. Mechanisms within the Climate Convention

Several mechanisms have been created within the Climate Convention framework in order to mobilise resources for implementation of the Climate Conventions goals. Most of the funds are managed by Global Environment Facility, GEF, on behalf of the Climate Convention. However, the market based Clean Development Mechanism, CDM, and the Adaptation Fund are administered directly under the Climate Convention. Of the existing mechanisms under the Climate Convention, it is above all the future of these two mechanisms that is debated and is most controversial. Several of the most difficult issues in the negotiations in Poznan in December 2008 were about these mechanisms.
1) How can the fund mobilise sufficient resources?

Since the future income for the fund is strongly dependent on how CDM develops, which is itself dependent on the level of ambition in the commitments for emission reductions in developed countries in a new international agreement, it is unclear how large and how stable the income will be. Estimates of income vary greatly; for example, one source estimates an income of 160 950 billion US dollars in 2012. 27 It has also been suggested that a levy should be charged for Joint Implementation (JI, see following section) and for the allocation of emission allowances within the European emissions trading scheme. Many Annex I countries, including Sweden, have been opposed to this proposal and at the Climate Conventions meeting in Poznan in 2008 a decision was made after lengthy negotiations that the scope of the levy should not be widened.
The Adaptation Fund

The Adaptation Fund is a result of the negotiations under the Kyoto Protocol. The parties agreed to create the fund in 2001, but it was only during the Climate Convention meeting in Poznan in 2008 that an agreement could be reached that will make the Adaptation Fund operational. Developing countries consider the Adaptation Fund to be the most important instrument for funding to support the necessary comprehensive adaptation measures needed, and they stress the importance that this function is administered under the Climate Convention. The fund will finance adaptation measures in developing countries and has 5 million US dollars as a starting contribution. In contrast to the other funds, the Adaptation Fund is not solely dependent on donations from benevolent donors. It also has a regular income from a levy of 2 percent made on Certified Emission Reductions, CER, issued within the CDM framework (read more below; projects in least developed countries are exempted). Discussions about the Adaptation Fund have mainly dealt with a couple of central issues:
2) How will the fund be managed?

The control and administration of the fund was another question that led to lengthy negotiations at the Poznan meeting. In the end, many of G77s demands, which to a great extent were about stronger ownership for developing countries, were accepted. The final agreement was that a management board, where the majority of board members represent developing countries, will sign agreements directly with contractors. GEF will only have a minor administrative role. But before the fund can begin to finance adaptation measures there are a number of details for the management board to iron out. And before the details are finalised, governments, including the Swedish government, are not willing to disburse the funds that have previously been promised (see box 11). Whether the Adaptation Fund becomes the principal mechanism for financing adaptation measures or not remains to be seen negotiations thus far reflect the difference in priorities and approaches between developing and developed countries.
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GEF other funds within the Climate Convention

The Global Environment Facility (GEF) is the body that has administered all of the official financing mechanisms so far for the implementation of the UNFCCC. GEF was created one year before the UNFCCC was signed at the Rio meeting. The fund is run jointly by the UN Development Programme (UNDP), the UN Environment Programme (UNEP) and the World Bank, where GEFs secretariat is housed. GEF also administers the financing mechanisms for the Convention on Biodiversity, the Convention to Combat Desertification, the Stockholm Convention on Persistent Organic Pollutants and several other environmental agreements. The majority of the funds that GEF manages are associated with the international goals of the environmental conventions. GEFs mandate is therefore limited; the funds must be used to further the global benefits, but may not be used to fund local benefits that may result from a project in terms of improvements to the local environment or other development effects. In the Climate Convention this is expressed through the commitment imposed on Annex II countries to finance the agreed full incremental costs of measures undertaken via GEF. GEFs rules and regulations define incremental costs as the extra costs needed to transform a project with national benefits (e.g. improved access to energy) into one with global environmental benefits (e.g. lower emissions of greenhouse gases). 28 In total, GEF has distributed around 7.4 billion US dollars since 1991, which is less than 500 million dollars per year.29 GEFs ordinary activities are financed through a system of periodic replenishments, in a four yearly negotiation between member countries regarding the size of their economic contribution for each period. The most recent round of negotiations resulted in 3 billion US dollars. Japan, UK, Germany and USA contribute the most, with almost 10 percent each. Other larger donors are France, Holland, Italy, Canada and Sweden. Of the total funds distributed, GEF invested 2.2 billion US dollars between 1991 and 2006 in programmes that mitigate climate change.30 On average, that is almost 140 mil18
lion dollars per year roughly one thousandth of the estimated need for climate change financing. The resources were used amongst other things for energy efficiency, building out renewable energy, sustainable transport and other low carbon technologies. 31 In addition, GEF manages three specific adaptation funds: the UNFCCCs Least Developed Countries Fund (LDCF) and Special Climate Change Fund (SCCF), and GEFs own Strategic Priority on Adaptation (SPA). LDCF gives support to least developed countries (LDC) that are considered to be both particularly sensitive to climate change and to have least capability for adaptation. Initially, resources have been used to develop National Adaptation Programmes of Action (NAPAs) where the most urgent needs for adaptation are identified. In October 2008, 38 of 50 LDC countries had developed NAPAs. The fund will now begin to finance the initiatives in the NAPAs. 24 countries have applied for project funding, to a total cost of 77 million US dollars. With an average of 2 million US dollars per country, it is clear that these projects are unlikely to make a significant difference. But the fund has only managed to mobilise 172 million dollars so far from 19 donor countries.32 This sum includes the funds for development of NAPAs. SCCF has a broader mandate, but even less money. SCCF finances both adaptation and technology transfer and in addition, support economic diversification in developing countries which are dependent for income on the extrac tion of fossil fuels or energy intense industries. So far, SCCF has received a total of 90 million US dollars, from only 13 donor countries.33 SPA is GEFs own pilot programme to finance long term initiatives which both support local climate change adaptation and contribute to global environmental benefits. 50 million US dollars have been committed to this pilot programme.
So far, Sweden has contributed 7 million Swedish kronor to LDCF34, and 25 million kronor to SCCF. The government budget proposal in autumn 2008 included a total of 4 billion kronor over three years to new climate programmes, a proportion of which will go to GEF (see box 11).
Clean Development Mechanism - the market based mechanism of the Kyoto Protocol
The Kyoto Protocol was passed at the UNFCCC third Conference of the Parties, COP 3, in December 1997, but only came in to force in February 2005. The protocol itself does not contribute anything substantially new regarding the funding pledges agreed by the parties when they ratified the Convention.35 The main new element from Kyoto was the decision over a packet of market based mechanisms.
The Kyoto Protocol established three partially interconnected market mechanisms: a trading system for emission credits (which so far has mainly been implemented in the emissions trading system introduced in the EU), a programme called Joint Implementation, JI, through which any Annex I country can invest in projects in other Annex I countries as an alternative to reducing emissions domestically Clean Development Mechanism, CDM, which, in a similar way makes it possible for investors from Annex I countries to be credited for emissions reductions that arise as a result of projects undertaken in developing countries. Of these three mechanisms, only CDM results in a flow of investment from developed countries to developing countries.
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Box 6: Emissions trading

All developed countries that have ratified the Kyoto Protocol have made a commitment to limit their emissions. This commitment specifies by how many percent each country will reduce (or in a few cases, is allowed to increase) its emissions during the period 2009-2012 compared to the base year 1990. Each country is responsible for achieving its commitments (EU countries, however, have one joint commitment), but through the Kyoto Protocols flexible mechanisms they can achieve their commitment through cooperation with other countries. The EU established a trading system for emission credits in 2005. The system encompasses emissions of carbon dioxide from 13 000 energy intensive industrial plants within the EU. The member countries allocate an agreed number of emission credits to the plants, according to national plans which must be approved by the EU Commission. Businesses that receive more permits than they need can sell them to other businesses within the EU that need more than their allocation. The idea is that the costs of reducing emissions will be minimised because the companies that can cheaply reduce their emissions can sell their permits to others for whom the reduction would be more expensive. During the first EU trading scheme period, however, the emission credits were allocated so generously that in the end there was hardly any demand for them. In the next period, a small number of emission credits, at least, will be auctioned. Countries and individual companies can also credit themselves with emission reductions undertaken in other countries (in the case of EU countries these emissions must be in non-EU countries) with the help of the project based mechanisms Joint Implementation, JI, and Clean Development Mechanism, CDM. In the case of JI, the emission reductions are deducted from the quantity of emissions allocated to the host country in the Kyoto Protocol, and transferred in the form of Emission Reduction Units, ERUs. Similarly, CDM projects result in Certified Emission Reductions, CERs. Since CDM projects are undertaken in countries that do not have emission reduction commitments in the Kyoto agreement, these CERs are not reported within the framework as part of the national emissions for the host country. They therefore do not lead to any emission reduction within the systems framework, and require stricter rules to ensure that the emission reduction would not have been achieved anyway. Both ERUs and CERs can be converted into emission credits to be bought and sold within the EU trading scheme.
CDM was the result of a strange negotiation game in Kyoto. The mechanism has its origin in a proposal for a Clean Development Fund, which Brazil put forward at a Latin American workshop a few months earlier. In Kyoto, the aims and functions of the fund were modified out of all recognition, without everybody involved really understanding what was going on during the intense closing stages of the negotiations.
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Brazils original proposal aimed to ensure that the developed countries would live up to their commitments to reduce emissions of greenhouse gases. Countries that did not achieve their commitments would be forced to pay a penalty to a fund, and the money would be used to finance technology transfer to developing countries.36 The Clean Development Mechanism, on the other hand, does not aim to penalise those who fail to reduce their emis-
sions far enough. On the contrary, CDM aims to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments (italicised by the author).37 This assistance consists of allowing developed countries to credit themselves with emission reductions from investments in projects undertaken in developing countries. Instead of the sanctions proposed by Brazil, which would ensure a transition in the high-emitter countries, resources are now diverted to measures in the countries where they are cheapest in the short term. Where in the world the quickest and cheapest emissions reduction opportunities are found can be seen clearly from the investment flow so far. In the period up to March 2005, 166 project had been identified which were expected to result in total emission reductions equivalent to 329 million tons of carbon dioxide up to and including 2012. More than half of these reductions result from only three projects for destruction of so-called industrial gases: fluorinated HFC-23 and nitrous oxide. Many similar projects have sprung up and more stand in line. The cost for these reductions can be as low as 0.5 US dollars per ton, while the equivalent emission reductions in autumn 2008 were sold for around 20 euros on the European market.38 On January 1st 2009, the quantity of emission reductions for the period 2008-2012 within existing CDM projects had increased to more than 1 500 million tons. As more projects in other sectors have emerged, the proportion of industrial gas projects has fallen, but still corresponds to 26 percent of the expected emission reductions.39 Although there are positive trends, and it can appear reasonable not to pay more than necessary to reduce emissions of greenhouse gases, there are several strong reasons why CDM does not deliver what it promises. Some of the most important are: CDM was not only designed to achieve emission reductions; it also has the objective of helping developing countries to achieve sustainable development.40 There are, however, no criteria of any kind specified for this and the assessment of whether a
project is sustainable is made by the authorities in the country in which the project will be undertaken that is, the country selling the emission reduction. The system does not work, and this is illustrated by the industrial gas projects, which do not have any other positive effect than emission reduction (but may in the worst case undermine efforts within the Montreal Protocol to reduce the production of ozone depleting gases). The Kyoto Protocol requires emission reductions to be additional to any that would occur in the absence of the certified project activity.41 This demand is central to ensuring that trade in emission credits between countries which have a commitment to reduce their emissions and those countries that do not have any such commitments will work. If projects that would have been undertaken anyway are approved as CDM projects then no new emission reductions are achieved. Furthermore, the purchaser of the certified reductions from the project is allowed to continue to emit more. If additionality is not guaranteed this will result in a directly negative effect for the climate. And very few serious observers do not concede that CDM has problems with the demand for additionality. Assessments vary about the extent of the problem, but one study from the end of 2007 estimated that as much as 40 percent of all registered projects are nonadditional.42 Several suggestions have been made to try to redefine or circumvent additionality, but they all risk undermining the potential gains of CDM. CDM projects are almost always implemented as freestanding projects, with minimal or no links to national development strategies. (China is probably the main exception to this, because the authorities have greater control over the economy and the means to control investment and income flows; it can be considered paradoxical, to say the least, that this can be an advantage to help the market based mechanism to work). The decision is controlled by profitability for the
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buyer and, in the best case, the seller of emission credits. National goals, priorities and strategies have little influence on the decisions. Almost two thirds of the emission reductions from all CDM projects that have so far been registered are undertaken in China, India or Brazil, whilst the 50 least developed countries (LDCs) together correspond to only 0.3 percent. Looking at projects in the pipeline, the proportion of projects in LDCs is increasing marginally, to around 1 percent.43 The logic is also quite clear: countries that already have low emissions have difficulty in selling any reductions. It is therefore clear that CDM will not help the poorest countries with vital investments in sustainable energy, transport and production systems.
In the lead up to the Copenhagen meeting, CDM will undoubtedly generate more controversy and difficult negotiations (see, Broadened CDM, page 32). In Poznan, the issue of whether CCS projects (carbon capture and storage) would qualify as CDM was one of the most controversial issues. The EU and Saudi Arabia, amongst others, argued strongly for this to be accepted, but met hard opposition from, amongst others, Brazil.
Are the Climate Conventions funds and mechanisms effective?

One objection that is often raised to GEF and CDM, which are managed to varying degrees within the framework of the UN system, and that will certainly be raised against any proposals to channel more money through the Climate Convention, is that their effectiveness is hampered by UN bureaucracy. This argument is raised not least by donor countries as a reason to contribute money to the World Bank and other funds which are independent from the structures of the Climate Convention. There may be some good reasons for this criticism. The UN system is certainly not known to be fast and flexible. But the inefficiency of the UN system can in this case to a great
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extent be blamed on the rules that guide the two mechanisms. The donor countries were themselves involved in deciding that GEFs ordinary funds would only be used to finance the incremental costs for the global environmental gains of each individual project (these rules do not apply to the special funds). The projects must therefore go through a complicated and often hypothetical calculation of these costs. According to GEFs own evaluation, project owners often see this process as a black box, and conflict often arises between local and global interests. GEF has to some extent tried to get around the problem by introducing the possibility of using a standardised sliding scale, but the basic problem, that GEF only pays for incremental costs, remains. The concept of incremental costs can be seen as a rational way to limit the costs in a fund with very limited resources whereas this concept would lose its meaning in a well financed fund. And since its creation in 1991, GEF has not had more money to dispose of than the World Banks new Climate Investment Funds, CIF, received when it started up (see the section on The World Banks climate funds below). Most GEF projects are therefore dependent on cofinancing and coordination with other sources of finance. The most common criticism of CDM is the complicated and resource intensive process for calculating the emission reductions that each project results in, and the requirements to ensure the projects additionality. This has nothing to do with the fact that CDM is managed within the UN system. It is a result of the essential requirement on a system that allows the emissions from developed countries to be written off against emission reductions in developing countries. If and when these guarantees do not work, the system leads to increased net emissions of greenhouse gases, compared to the case where the developed countries had themselves fulfilled their domestic commitments; this is counterproductive. In both cases, the problems would to a great extent be avoided if the funding for climate mitigation and adaptation were channelled through officially financed programmes
with broad aims encompassing both climate change and development.
II. Other existing financing mechanisms

As already mentioned, the Climate Convention states that financial resources for fulfilment of the Climate Convention can also be made available through bilateral, regional and other multilateral channels.44 In addition to the usual development aid channels, new financing mechanisms have emerged; since 2000, The World Bank has assisted in the setting up of at least 14 different climate funds, and in 2007 alone, 13 new initiatives were launched from the World Bank, GEF, EU, Australia, Japan, Norway, Spain, UK and Germany.45 Together, these initiatives display two clear trends: Financing of climate change efforts is becoming increasingly fragmented, and In the new funds, the donors have stronger influence than in the funds initiated by the UNFCCC. Some of the initiatives that are of the greatest general interest, and for Sweden as a member of the World Bank and EU, are presented below.
The World Bank climate funds

Through a leading role in the creation of GEF during the year before the Climate Convention was signed, the World Bank took an early initiative to gain control over the financial flows that would be needed to implement the goals of the Climate Convention. In addition to the climate change components within its ordinary activities, the World Bank has been very productive since the turn of the century in creating new funds to finance programmes and investments which focus on climate change. In 2005, the bank was given explicit support in its ambitions by the leaders of the G8 countries, who, at the Gleneagles meeting, encouraged the World Bank to take a leadership role in creating a new framework for clean energy and development, including investment and financing.46
In April 2000 the Prototype Carbon Fund, PCF, was launched. It was the first in a string of funds for investment and emission trading within the framework of CDM and other mechanisms. The banks Carbon Finance Unit lists no less than twelve such funds, of which the newest are still in the planning stage. 47 The eleventh fund on the list is Forest Carbon Partnership Fund, FCPF, which the bank launched at the UNFCCC meetings in Bali in December 2007. FCPF can be seen as yet another example of how the World Bank forestalls the negotiations in the Climate Convention. FCPF aims to support efforts to reduce emissions of greenhouse gases from deforestation and forest degradation in developing countries. In the negotiations, such programmes are called REDD (read more on page 33). FCPF plans to support around 20 countries in their preparations to participate in REDD programmes when the programmes are established as a part of a new agreement. FCPF will also sign contracts with a small number of countries for the purchase of emission credits from the projects established. At the beginning of 2008 the World Bank presented plans for yet another cluster of climate funds, known jointly as Climate Investment Funds (CIF). Two of the funds were set up through a decision by the Board of Directors on the 1st July 2008: Clean Technology Fund, CTF, and Strategic Climate Fund, SCF. There are also plans to set up a Forest Investment Fund. By the end of September 2008 the different donors had, according to the bank, already pledged more than 6.1 billion US dollars in funding to CIF. Sweden was amongst the first countries to respond and promised an initial contribution of 600 million kronor to CTF.48 This was sufficient to give Sweden one of the eight posts available to donor countries in CTFs Trust Fund Committee. The aim of CTF is to stimulate the conversion to an economy with limited emissions of greenhouse gases by investing in the demonstration, deployment and transfer of low carbon technologies using both private and public channels. According to the bank, the project will also lead to other
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environmental and developmental gains, and thereby show that low carbon technologies can contribute to sustainable development and to the realisation of the UN Millennium Development Goals. 49 The vice president for sustainable development at the World Bank confirmed in October that CTF may also invest in coal fired power stations, on the condition that the plants are designed to be able to use carbon capture and storage (CCS) technology. 50 SCF will finance both adaptation and mitigation efforts, all of which have to be consistent with poverty reduction and strategies for sustainable development. Programmes to preserve, restore and strengthen forests and other ecosystems that act as carbon sinks will also be included. SCF will invest in a Pilot Program for Climate Resilience as the first programme. 51 Money from the funds will be channelled through the multilateral development banks: the World Bank itself (including funds such as FCPF), and the regional development banks such as the African (AfDB), Asian (AsDB) and Interamerican (IDB) Development Banks. The resources will be paid out primarily in the form of loans, and to a lesser extent as grants. The World Banks role in managing all these funds is questioned for several reasons:
The banks own loan portfolio is anything but climate friendly (see box 7). Some of the World Banks funding is provided in the form of loans rather than grants. For example, the majority of the resources available through CIF. Critics claim that this poses a conflict with the principle of common but differentiated responsibility; financing through loans means that it is the developing country that pays for the initiative in the end. How the World Bank funds are governed is controversial because in most cases the degree of influence of a country is linked to the amount of money it contributes.52 This principle has long been the subject of criticism also with regards to how the World Bank itself is managed. With regards to the climate funds, this model can be considered even more inappropriate because the commitments of the developed countries to finance climate measures are regulated in an international agreement where all countries are equal parties. Indias Department of the Environment made reference to the undemocratic governance of the funds when, in October 2008, the department made it announced that it would not be interested in any financing through CIF. 53
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Box 7: Should the fox be allowed to guard the hens?

Objections have been raised about the credibility of the World Bank for financing measures to fight climate change. The organisation has been criticised for many years because almost all its investments in the energy sector have gone to projects based on fossil energy. Environmental organisations and other civil society groups have demanded that support for fossil based energy sources should be stopped and that the resources should instead be used to fund ambitious initiatives for renewable energy. The Extractive Industries Review, one of The World Banks own initiatives, recommended in 2004 that all investments in the oil sector should be phased out from 2008 and the temporary ban that was then in place for investments on coal based projects should be retained. It was proposed that loans for renewable energy sources, which represented only 6 percent of energy investments at the time, should be increased by at least 20 percent per year.54 Nonetheless, loans to fossil energy projects increased heavily; in the financial year 2007/08 alone the approved funding increased by 60 percent on the previous year. The increase was 165 percent for IFC, the branch of the bank that lends money to the private sector. Between 2006/07 and 2007/08 the loans designated to renewable energy increased marginally, but three quarters of the increase went to large scale hydroelectric power projects. Large dams can result in significant emissions of greenhouse gases in the tropical regions,55 and also often result in heavily negative social and environmental impacts. If these projects are excluded from the statistics then the funding for renewable energy projects fell by 42 percent in one year.56 Demands for the World Bank to stop lending money to energy projects based on fossil fuels have been met by objections from some organisations in developing countries. The Indian Centre for Science and Environment, CSE, argues for example that the developed countries should, as a matter of principle, not exert their power over international institutions and their aid in order to force the developing countries into a transition that the developed countries themselves are not pushing for and which the UNFCCC does not require them to do.57 At the same time, other organisations convey the view that the public funds which the World Bank handles will lead to greater gains if used to support the transition which must eventually take place, to renewable energy sources. 58
The EUs Global Climate Challenge Alliance

The EU initiative Global Climate Challenge Alliance (GCCA) was launched in September 2007 and presented by the EU Commissioner for the Environment, Stavros Dimas, and the Swedish Minister for the Environment, Andreas Carlgren, at the Climate Convention meeting in Bali. The aim of the initiative is to create a platform for political dialogue between the EU and the developing countries that are most at risk from climate change, in particular the least developed countries and the small island nations. Within the framework of the initiative,
technical and economic support will be given to adaptation, reducing emissions from deforestation, increased participation in CDM and integration of climate change issues in national development strategies. The EU Commission proposed an initial budget of 60 million euros for the years 2008-2010, which will mainly come from funds for the Commissions Thematic Programme for Environment and Sustainable Management of Natural Resources.59 So it is not new money. The European Parliaments Development Committee welcomed the initiative, but considered the level of ambition
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to be far too low. In September 2008 the committee proposed that 2 billion euros should be committed in 2010 and increased to between 5 and 10 billion euros per year by 2020. The committee proposed that 25 percent of the profits from the auctioning of emission credits within the EU trading system should be put aside for measures in developing countries.60
In 2006 the Commission launched the Global Energy Efficiency and Renewable Energy Fund (GEEREF) to mobilise private investment in projects for sustainable energy in developing countries and transition economies. The fund received an allocation of 80 million euro for the first 4 years. The Commission hopes that the fund will be able to mobilise risk capital in the region of one billion euros in the future.61
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Negotiations for new financing mechanisms
There is little doubt that the resources that can be mobilised through the existing mechanisms are by no way sufficient to meet the current and coming needs both for adaptation and mitigation measures in developing countries. Something new must be developed and fast so that action can be taken quickly and the deadlocks that exist in the negotiations between developing and developed countries can be broken. It is only when G77 and China really have reason to believe that sufficient resources will be allocated that some of them can be expected to agree to binding commitments to emission limits. The Bali Action Plan, which guides negotiations on a new climate agreement after 2012, identifies the issues of financing and access to technology as important items on the negotiation agenda. It states that the need to improve access for developing countries to adequate, predictable and sustainable financial resources and financial and technical support, and the provision of new and additional resources. In the section about mitigation measures it is stated that greater efforts in developing countries should be supported and enabled by technology, financing and capacity-building in a measurable, reportable and verifiable manner.62 The most immediate question is how to the completely insufficient resources that so far have been delivered or promised can be expanded manyfold to reach the scale of magnitude that is needed. In addition, a number of other issues remain to be resolved: How can new, additional, stable and predictable resource flows be guaranteed? Where will the money come from? How should the financial burden be divided? How will the funds be governed? What types of measures will the funds be used for? Through which channels will they be distributed? How can the different funds and programmes coordinate to ensure that the money matches the needs and plans of developing countries, and the administrative burden is minimised? During the negotiations a number of ideas and proposals have been put forward. The different proposals are not always comparable, and often deal with only one or two parts
of the problem. Some of the most interesting proposals are described below. They are divided into three areas: proposals for how funds can be mobilised, proposals that also address the allocation of commitments and the administration of funds, and proposals that primarily address emission trading.
I. Proposals that primarily deal with how funds can be mobilised

International taxes and levies
There is a strong belief among many leading economists that taxes on carbon dioxide and similar levies are amongst the most effective instruments for reducing emissions of greenhouse gases. Sir Nicholas Stern, author to the widely quoted Stern Report63 which assesses the costs of curbing global warming, advocates this approach. Jeffery Sachs, special advisor to the UN Secretary General, believes that a tax on the extraction of fossil fuel is a much simpler way to limit carbon dioxide emissions than a complicated system with emission caps and trading schemes. Having a lot of people engineer financial instruments for carbon when there are much more direct ways to do this strikes me as not really a great investment. says Sachs. 64 Sweden is one of the few countries in the world that has already introduced a carbon dioxide tax65 , but the incomes from the tax are not earmarked for any specific purpose. In the international negotiations, however, several proposals are discussed where taxes and levies are used both as a tool to reduce emissions and to generate resources for climate initiatives. Several different proposals have been put forward regarding taxes and levies on international transport. The proposals are attractive for several reasons: they tackle a strongly growing sector with high impacts on climate change which the introduction of levies can help to reduce; the levies can generate a significant income; and the levies would have a positive distribution profile because most of
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the money would come from a limited group of relatively rich people. Some people raise the objection that international transport levies could compete with similar levies which a number of countries have already introduced, and which finance development initiatives targeting the UN Millennium Development Goals. The most commonly cited proposal is that of an international aviation levy that could be used to finance adaptation programmes in developing countries, presented by two British researchers. If the levy were 5 euro per flight then current air travel would generate around 10 billion euros per year.66 The small island nation of Tuvalu has proposed a differentiated levy on international air and sea freight. The levy on transport operated by companies from Annex I countries would be 0.01 percent and the levy on transport operated by the other countries would be 0.001 percent. Transport to and from the least developed countries and the small island nations would be exempt from the levy. 67 At the Climate Convention meeting in Bonn in June 2008, Switzerland presented a proposal mainly to finance adaptation with the help of a compulsory international carbon dioxide tax. Switzerland referred to the polluter pays principle and suggested a uniform tax of 2 US dollars per ton of carbon dioxide emitted from the combustion of fossil fuels. In accordance with the principle of common but differentiated responsibilities, however, it also proposed a tax exemption of 1.5 tons carbon dioxide per inhabitant.. Thus low-emission countries would not pay any tax, and highemission countries would generate most of the income. Switzerland does not appear to have pushed for its proposal since the Bonn meeting and it is unclear whether the proposal of an international carbon dioxide tax will be part of the continued negotiations.
Auctioning of emission credits

So far, all emission allowances issued within the framework of the EUs emission trading scheme have been issued free
of charge to the companies in the system. But in preparation for the next trading period the EU has decided to auction off a small number of emission allowances. It is, however, unclear whether this will generate any significant income for climate initiatives in developing countries. 68 The auctioning of emission credits allowances, however, generate very large sums of money. The emission credits for the power generation sector alone would generate eight billion euros annually if they were sold at the market price of around 20 euros per ton. Germany has already decided of its own accord to auction off nine percent of the emission allowances that are allocated in the country, and estimate that this will bring in to around 400 million euro per year. Of this sum, Germany plans to use 120 million for international measures, including adaptation.69 Many environmental movements and some countries see earmarking of the income from the auction of emission credits as an attractive financing mechanism. Other countries, including Sweden, consider such an arrangement to be constitutionally impossible. They fear that earmarking for specific causes can lead to a scramble for the state budget from many different actors. One of the proposals that has received most interest was put forward by Norway and launched at the Climate Convention meeting in Bali. The idea is that a small proportion (e.g. around two percent) of the emissions that countries are allowed to emit as part of the coming climate agreement should be excluded from the national allocations and instead be auctioned off by a suitable international institution. The income from this sale should then be used to support adaptation and other causes in developing countries.70 Norway believes that their proposal could easily lead to an annual income of 15 -25 billion US dollars. The proportion of emission allowances that are sold could, however, be adjusted according to the need for income and the current permit price. 71 The proposal is still very vaguely formulated and Norway welcomes further discussion at the coming negotiations
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about how the idea could be made to work. Another variation on the theme is the proposal to auction off emission credits for aviation and shipping, which are not included in the current national commitments of the Kyoto Protocol because of their mainly international nature. Based on predicted emissions in 2010, the UNFCCC Secretariat calculates that such an auction could result in 22 billion US dollars if all the permits were sold for a price of around 23 US dollars each. 72 One weakness in these proposed mechanisms is that they all assume and are built upon emission trading as a cornerstone of climate cooperation. For those who would like to give emission trading a less prominent role this is, of course, problematic.
II. Proposals that address the allocation of commitments and the administration of funds
G77 and Chinas proposal for a new fund
A strong driving force for the proposal of a strengthened financing mechanism under the Climate Convention, proposed by G77 and China at the negotiations in Bonn in 2008, was the need to ensure new and additional funding. The proposal can also be seen as an attempt to counter the emergence of many new separate funds and initiatives, by building a mechanism with substantial resources, controlled directly under the Climate Convention. In the proposal, a new fund would be established directly under the Climate Conventions control, ultimately by the Conference of the Parties (COP) which is the UNFCCCs supreme decision-making body. The fund would be financed by new and additional funds, not be part of aid budget of donor countries. The proposal suggests that the funds should be of the order of magnitude of 0.5 to 1 percent of the developed countries total GDP. The majority of the funds should be distributed without any requirement for repayment. The proposal also stipulates that any funding pledged outside of the UNFCCC
should not be regarded as contributions towards the fulfilment of commitments by developed countries under the Climate Convention and the Bali Action Plan.73 G77 and China have also put forward a proposal for a special mechanism to meet the commitments in the Climate Convention to develop and deploy environmentally sound technologies, and to make available the technology to developing countries. The proposal includes a Multilateral Climate Technology Fund, MCFT, which would cover the financing of all activities and projects agreed and approved within the mechanism. MCTF is proposed to be part of the strengthened financial mechanism proposed by G77 and China, and should operate under the management of the UNFCCC. 74 The Alliance of Small Island States, AOSIS, has put forward a proposal for a Convention Adaptation Fund, which would supplement the Kyoto Protocols Adaptation Fund. This fund is also proposed to operate as part of the new mechanism suggested by G77 and China. In October 2008, China made a move to support the G77 and China proposal. China declared that developing countries were prepared to contribute to meeting the challenges of climate change, but the developed countries must also take responsibility by contributing 1 percent of their GDP to financing technology transfer and other measures in poorer countries.75 The fact that neither the EU nor other Annex I countries chose to comment on the proposal during the Accra meeting was a source of irritation amongst delegates from developing countries. At the Conference of the Parties in Poznan in December 2008, China and G77 put forward their proposal again. It was not commented by Annex I countries this time either. When, in January 2009, the European Commission finally presented its proposal of an EU position in the lead up to the Copenhagen meeting, the G77 and China proposal was not mentioned.
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Box 8: The proposals of the European Union*

Late in the run-up towards the climate change meeting in Copenhagen in December 2009, the European Commission presented a communication that proposed a blueprint on financing. The Commissions estimate of the needs in 2020 100 billion euro per year for mitigation and adaptation combined is clearly below all other recent estimates. Furthermore, the proposal suggests that domestic public and private finance in developing countries themselves should cover 20-40 percent of this amount, and carbon markets another 40 percent. International public finance could contribute to cover the remainder76. The communication goes on to suggest that the EU should be prepared to contribute between 2 and 15 billion euro per year, depending on whether the burden sharing will be based on current emissions or on GDP. The political leadership of the EU have not been able to agree on much more than welcoming the commissions proposals. In addition to the very obvious insufficiency of the amounts discussed, the EUs proposals are also fraught with some very major problems: There is no legitimate reason why the costs to developing countries should be included in the estimate of the financial requirements. Domestic finance will no doubt be an important source for investments in energy, transportation and other sectors, but should not be counted as contributions towards financing efforts under the convention. The same applies to contribution from carbon markets. Financing that is provided for mitigation projects in developing countries through the Clean Development Mechanism (CDM) does not add to global mitigation efforts. The CDM helps industrialised countries at a lower their mitigation cost by investing in developing countries instead of investing at home. These flows are thus to be accounted as the cost for industrialised countries to meet their own mitigation commitments, and not to meet their entirely separate commitment to assist developing countries in the implementation of mitigation measures. The proposal argues that governance of the future international financial architecture should respect agreed standards for aid effectiveness. Developing countries rightly object that climate financing is not aid. But even so: few of the existing institutions that the EU wants to use live up to these aid effectiveness principles. And the new climate financing mechanisms almost all of which involve EU member states have very little developing country ownership, which is the cornerstone of the aid effectiveness principles. To add insult to injury, there is not even a mention in the EU documents of the key proposal, by the developing countries themselves, for a new financial mechanism under the UNFCCC. * This text was written in late 2009 to reflect updated positions of the EU.
Greenhouse Development Rights

The proposal for Greenhouse Development Rights, GDR, is different from other proposals in several ways. It is mainly developed as a tool to try to solve the intrinsic conflicts between the need to rapidly limit greenhouse gas emissions whilst simultaneously allowing developing countries to
continue to develop. The proposal, which has gained significant attention over a short period of time, has not explicitly been discussed in the negotiations, but some elements are similar to the Mexican proposal (page 32). GDR could be the basis for the formulation of new financing mechanisms. It could also act as a model or a moral bench-
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mark against which to judge other proposals on the extent to which they take into consideration central development and allocation issues. The GDR proposal attempts to take a comprehensive approach to addressing inequalities in the current burden of greenhouse gas emissions, the acute lack of funds to meet the needs of developing countries to mitigate and adapt to climate change, and the right of the poor to development. The proposal has been developed by the think-tank EcoEquity in collaboration with Stockholm Environment Institute (SEI) and a number of other organisations.77 GDR is grounded in the assumption that it is mainly the richer parts of the world population that have created the current situation - whereby there is very little scope for developing countries to grow economically in a way that results in greater greenhouse gas emissions. Nonetheless, the inhabitants of developing countries have the same right to development as we do. The GDR model attempts to quantify the degree of responsibility each country has for the current situation (in the form of greenhouse gas emissions) and their capacity to do something about it. But instead of simply using the national averages, the model also takes into consideration the income gaps and different consumption levels within each country. GDR first defines a development threshold, the global income level above which all basic needs can be met. According to the latest assumptions, this level is around 7 500 US dollars per year, which is the equivalent of 20 US dollars per day. People with an income above this level are assumed to have responsibility due to their consumption, for the majority of their emissions, and furthermore, to have the capacity to contribute and pay. This is assumed to be the case irrespective of where in the world they live. People with an income below this threshold are considered to have the right to prioritise their own needs for development and do not need to be involved in paying the costs of climate measures. These calculations of responsibility and capacity are then applied to an allocation of responsibility to contribute
to emission reductions and costs for adaptation. According to the model, in 2020 almost 30 percent of the global responsibility will lie with people living in the USA, and almost 23 percent will lie with people living within the EU. Calculations have also been done for Sweden.78 The results show that Sweden has responsibility for measures corresponding to emission reductions by 122 percent to 2020, compared with our emissions in 1990. Therefore, even if Sweden achieves major reductions in domestic emissions it must also contribute to the costs of major reductions in other countries. Conversely, China is only calculated to have responsibility for 5.5 percent of the global efforts, and India for 1.2 percent. That means that these countries have the right to resources from the richer countries of the world to pay for the emission reductions which sooner or later must be achieved in these countries. The GDR report does not make any estimations of the costs of such mitigation and adaptation measures. Instead, the model presents a clear method of calculation, where the values are up for discussion, debate and negotiation. Assuming an average cost of 1 percent of the worlds GNI, then the cost for each Swedish citizen in 2020 would be around 424 US dollars per year. India would be responsible for contributing 58 US dollars per year for each Indian whose income is above the development threshold. If the global need were instead 2 percent of the global GNI then the costs per capita would naturally be doubled. Objections have, of course, been raised against both the concept and the details of the GDR proposal. Several organisations that support the idea question the choice of 1990 as the base year (which works in favour of the developed countries; the base year could equally well be set at the beginning of industrialisation in the 1800s). Some claim that the proposal could be risky if it leads to differentiation between the developing countries, with binding commitments for some of them, without any guarantees being made for financial and technological transfer.
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Mexicos proposal
At the Climate Conventions meeting in Bonn in June 2008, Mexico presented a proposal for a new global fund a World Climate Change Fund or Green Fund under the Climate Conventions control, as a complement to the existing mechanisms. The fund would finance mitigation, adaptation and technology transfer measures in developing countries and thereby contribute to the implementation of a new climate agreement. In contrast to both the existing mechanisms and the fund proposed by G77 and China, the fund that Mexico proposes would also be used for measures in developed countries, and developing countries should contribute to the financing according to their capacity.79 Mexico proposes that all countries should contribute to the fund, which should have an initial annual turnover of around 10 billion US dollars. The size of each individual countrys contribution should be based on their emissions, population and gross domestic product, in agreement with the principle of common but differentiated responsibilities. The proposal suggests that auctioning of allowances or aviation taxes could mobilise new financial resources for the fund. The fund should be used to finance projects that lead to real and measureable results to limit greenhouse gas emissions. But because emission reductions would not be used to compensate for emissions in Annex I countries, there is not the same need for strict evidence of additionality as there is with CDM. Mexico claims that this is one of the proposals strengths; in its written proposal Mexico states that While the CDM only relocates mitigation efforts ... the fund would expand the overall scale of mitigation.80 The fund should also provide targeted support to adaptation measures when these are undertaken as separate programmes. Money from the fund could be used, amongst other things, to significantly strengthen the Kyoto Protocols Adaptation Fund, which so far is being financed only through a small levy put on CDM certificates. The EU has expressed interest in Mexicos proposal,
which it hopes will foster a new form of collaboration between developed and developing countries and can increase the interest in developing countries, amongst others, for reducing emissions. 81
III. Proposals that primarily address emission trading

Extending CDM
Over the past few years, a number of proposals to extend CDM from its current project-based focus into a broader programme based or sectoral function, have been presented. The proposals are motivated for several, widely differing reasons. Initially, perhaps, the proposals were driven by the desire to increase the volume of funding and to reduce the transaction costs by avoiding the need for an assessment of the additionality of each individual project. More recently, the EU amongst others, has started to describe a sectoral CDM as a step towards the acceptance of emission reduction commitments for developing countries, agreed in exchange for the increased financial flows that it is hoped will result from a sectoral CDM.82 However, critics fear that extending the CDM could lead to further compromises with requirement for additionality. South Korea notes that so far CDM has mainly worked as a mechanism to help the developed countries to achieve their commitments, and is mainly targeted at the private sector. At the same time, the developing countries are finding it difficult to mobilise capital and gain access to technologies with which to implement national action plans for mitigation. Korea has therefore put forward a proposal that emission reductions carried out within the framework of the Bali Action Plan should be converted to credits that can be sold on international emission markets. The profits from the sales should be used to implement more such measures.83 However, such a system could in principle mean that almost all emission reductions in poor countries could be cancelled out by emissions in developed countries.
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REDD
At the Conference of the Parties in Bali in December 2007, it was decided that the negotiations for a new climate agreement would consider the possibility of increased international collaboration for reduced emissions from deforestation and forest degradation, (REDD) in developing countries.84 The REDD issue is likely to be one of the hottest and most controversial issues in the negotiations in the lead up to Copenhagen 2009. The loss of forests is responsible for up to 20 percent of carbon dioxide emissions globally. A reduction in deforestation would therefore have great significance for the climate. But within the current system, there is only one way for developing countries to receive compensation for planting trees: through CDM. However, this option has proved difficult to use, and so far only a small number of tree planting projects have been approved for CDM. At the Conference of the Parties in 2005, Papua New Guinea and Costa Rica, as representatives for the Coalition for Rainforest Nations, proposed that the possibility of funding for measures that reduce deforestation should be explored. Several proposed solutions have since been discussed.85 Several of them are linked to emissions trading, and are more or less based on the CDM model to allow emission reductions from reduced deforestation. Brazil has opposed such market based mechanisms; amongst other things, Brazil argues that the resulting increase in available emission credits would reduce the pressure on developed countries to cut their own emissions. Instead, Brazil suggests a model where developing countries receive money from a fund financed by Annex I countries.86 The extent to which financing should come through funds or be directly linked to emissions trading is likely to be one of the harder questions to agree upon. The concept of paying countries remuneration for reducing deforestation raises a number of issues, not least because developing countries with low current rates of deforestation would not benefit economically. A methodological problem that has so far made reduced deforestation unacceptable in
CDM is the problem of leakage; the fact that reduced deforestation in one country can easily lead to increased deforestation in another country. Organisations working with forestry issues have therefore pointed out the importance of tackling the driving forces behind deforestation. Representatives for indigenous and local communities of the tropical forests question how their interests will be taken into consideration and who it is that will receive money from the programme.87 The Annex I countries have so far been sceptical to all proposals in the negotiations that refer to the UN Declaration on the Rights of Indigenous Peoples.
Ecuadors proposal
In June 2007, Ecuadors president Rafael Correa presented a proposal with clear similarities to REDD, but which instead deals with oil extraction. In contrast to REDD, which is only about changing the balance in the carbon cycle between the atmosphere and the biosphere, Ecuadors proposal aims to reduce the flow of fossil carbon into the atmosphere. The very specific proposal addresses the IshpingoTambococha-Tiputini (ITT) oil field, in the Yasun national park in the Ecuadorian Amazon. Ecuador offers to leave the oil in the ground, in exchange for a payment of 350 million US dollars per year from the rest of the world. This sum is equivalent to about half the value of the income that oil extraction would lead to.88 The proposal has, according to media reports, been met with positive interest, not least in Norway and Germany, and by politicians in Spain, Italy and the European Parliament.89 Objections have been raised to the proposal because it would not lead to a net reduction in oil extraction; other countries provide the market with all the oil that it demands. This objection can, to a certain extent, be relevant, but in that case the objection is equally relevant for REDD. The proposals strengths lie in putting focus on the linchpin of the climate problem (consumption of fossil fuels), in the fact that it could be used to protect other values (biodiversity, the rights of indigenous peoples) from the oil industry and
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to a certain extent to put a price on that protection. Ecuadors president Rafael Correa has also proposed the introduction of a 3 percent tax on oil exports from the OPECs member countries. The aim of the tax would be to reduce oil sales and thereby also emissions of carbon dioxide from the oil sector. Income from the tax would go to a Global Sustainable Development Fund, and be used for alternative energy sources, economic diversification in oil exporting countries and support to sectors in developing countries that are affected by high oil prices. The proposal is called the Daly-Correa Eco-Tax, because it is inspired by a suggestion from the environmental economist Herman Daly. 90
***
So there are many ideas and proposals for how the issue of financing could be solved, and more ideas are certain to be developed both before and during the Copenhagen meeting in December 2009. The proposals range from directly state financed solutions where nations in the developed world take responsibility for ensuring that the necessary funds are made available and channelled through funds, to more market based models where the responsibility rests to a great extent on the market actors. So far, Sweden has pleaded strongly for emissions trading to constitute a greater part of the solution and advocates a global trade in emission credits.91 However, not all of the proposals are incompatible with each other. It is therefore possible to choose to implement several proposals at the same time or to creatively borrow elements from different proposals to build something new.
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Climate change in a development perspective
Developing countries are striving, quite rightly, for increased prosperity. Three billion people live on less than two dollars per day. Almost two billion people depend on firewood, agricultural waste and animal dung for their energy needs. In many countries, only a small share of the rural population has access to mains electricity; the rest rely on expensive and dirty power from diesel generators, or they quite simply have to live without electricity. There are almost no limits to the needs of developing countries. Many countries attempt to meet these needs by following our development pattern, with increasing energy and resource consumption as a consequence. But the developed countries are more than a model that some developing countries aspire to. Through their political influence, economic power and ownership, the developed countries also directly influence which political alternatives and which technological solutions are available for consideration when poor countries draw up their development strategies. If the developed countries are to play their part in ensuring the rights of the poor to development and prosperity, whilst also taking responsibility for the earths climate, then we must show that we can do more than just maintain our own prosperity whilst radically reducing domestic greenhouse gas emissions. We must also reduce our overall load on the earths resources, invest in research and development of low carbon technologies; contribute to vital reforms in everything from international institutions to trade agreements and agricultural policies so that they benefit developing countries instead of our own interests; and so on. These are the main concepts in Swedens Policy for Global Development (PGU), which was adopted by the parliament in 2003. To complement the changes needed in the policies of each developed country, we must also give financial support both through development aid and to adaptation and to mitigation measures. The use of the word complement does not in any way imply that these measures are not important, only that they will have little effect if they take place in iso-
lation. Instead we must aim high; many people talk about a Marshall plan 92 to meet the global climate crisis. In order to meet the aid commitments already promised by the developed countries, the current flow of ODA must be doubled. In addition, at least as much funding is required to meet the estimated costs of the climate change measures! The threat of climate change is not just an environmental issue; it is equally much an issue of global justice. In order to reduce the burden on those who are both most vulnerable and also least to blame for the problem, the rich countries must address the issue in its entirety, taking into consideration all of the relationships between developing and developed countries and putting focus on the needs of those living in poverty. The climate change issue is also an issue of our own future. With the minimal time that we have left to act we need to see rapid and comprehensive reduction in emissions both in rich countries and in the developing countries, where emissions are currently increasing rapidly, as a result of increasing economic prosperity. We must all start rapidly reducing emissions towards zero now whilst allowing energy use to increase by several hundred percent for the worlds poorest people in order to achieve a reasonable standard of living. The energy use amongst the worlds poorest people will grow in coming year irrespective of what we do. It is therefore in our interests (both common and national interests) to effectively contribute to ensuring a comprehensive transition to renewable energy systems also in developing countries.93 If we do not succeed with this, then the global average temperature increase is likely to accelerate far beyond 2 degrees even if the rich countries were to reduce their emissions to zero at record speed.
Development is adaptation
Poverty is more than just an issue of lack of money and other resources. The lack of capacity and means to meet and adjust to changes and stresses in the financial, social and ecological systems are important dimensions of poverty. Poor people, in particular in rural areas, are considerably more directly dependent on natural resources and ecosys35
tems than others and are therefore more vulnerable to any changes in these resources. In addition, many of the worlds poorest people live in regions that are particularly exposed or sensitive to climate change and its effects: areas that already suffer from water shortages; areas of eroded, dry or poor quality soil; on river banks, coastal strips or on mountainsides, where inhabitants are particularly exposed to flooding, cyclones and landslides; in areas with poor sanitary conditions and little access to healthcare, where climate changes can more easily lead to an increased spread of disease. As several of the above examples indicate, in many cases climate change does not primarily lead to new problems; instead it leads to a worsening of problems that already exist for poor people. Climate change increases adversity, vulnerability and insecurity: storms and floods become more frequent and more powerful; diseases spread to new areas; agricultural production becomes less predictable; and women are forced to walk even further to collect water. It will be more difficult and more expensive to find solutions. It is therefore impossible to draw a clear distinction between efforts aimed at adaptation to climate change and efforts aimed at strengthening adaptation to the climates current variability. Nor is it possible to draw a clear distinction between mitigation measures and efforts to reduce poverty or promote development. On the contrary, from the developing countrys perspective, it is important to integrate these processes in practical development work. Development and poverty reduction are probably the two most important components in effective climate change adaptation; when the income and options available to a household or community increase, so does its ability to mitigate or parry the negative effects of climate change on livelihood, security and health. It is therefore important that work to analyse climate change and its expected effects should be integrated into all processes where national and local development strategies and plans are developed. Efforts which increase the resil36
ience both in vulnerable groups and in society as a whole must be strengthened and prioritised. It is essential to involve all relevant public authorities and institutions in this work from day one. But so far, planning for adaptation within the framework of National Adaptation Programmes of Action, NAPAs, financed by the Climate Convention has mainly been considered a matter for the environmental authorities. It is also vital that representatives for all parts of civil society are involved in identifying needs, priorities and measures. Many organisations and representatives for local communities have been involved in the consultations regarding the NAPAs, and several representatives from civil society report that the consultations have in general worked quite well. There are, however, question marks over the extent to which the groups that are most vulnerable to climate change have really been identified and consulted.94 The development of national adaptation plans is also influenced by how narrowly one defines adaptation and by how flexible or specific the aims are of the mechanisms are that will finance the plans. Applying a narrow perspective, adaptation efforts can only be motivated by climate changes and should only address the adaptation of society to these changes (but not to the climates natural variability). It could be assumed that donors that allocate money specifically for adaptation ideally wish that the funds are used for such efforts, (a hypothetical example is the building of flood defences which are not currently needed, but may be needed as a result of the changing climate). However, such needs are often both hard to identify and hold very low priority for the local communities and authorities in the recipient country. Naturally, they prioritise measures that also provide immediate benefits and/or protect against the extremes of the current climate for example, improvements to the water supply built with consideration for the effects of climate change, or adaptation of agricultural practices which provide greater food security even from the current extremes of weather.95 A broader perspective on adaptation also takes into con-
sideration the needs caused by the current climate and any positive effects that are not related to the climate. One example could be the installation of a sewage system which leads to immediate health benefits and is also designed to withstand the extremes of both the current and future climate. Another example could be a project that aims to increase a communitys control over its local environment. Such projects are obviously much closer to the vision of integrating consideration for climate change into all development work, and can be expected to play an important role in most climate change adaptation plans. But these projects do create issues for funds allocated specifically to narrowly defined adaptation measures. A strict definition of adaptation therefore runs the risk of creating a gap between the supply and the demand for measures. It may be possible to fill this gap to some extent by defining smaller adaptation projects, with separate financing, within a bigger project that has broader aims. However, there is a risk that these adaptation projects end
up with the same issues for delimitation as GEFs incremental costs.
ODA and climate change

The comprehensive effects that climate change will have on development assistance are amongst several good reasons why development must take climate change into consideration. The long term results of many development efforts will be affected; they can be directly undermined or even wiped out. But there are already many development aid initiatives today that, in one way or another, help to strengthen countries resilience to climate change, or to increase the capacity to adapt. Unfortunately there are also aid efforts that contribute to the opposite result, for example by increasing the use of fossil fuels or by driving deforestation (see the example about the World Banks financing of fossil energy in box 7). It is also clear that on national and local levels the same institutions and organisations must often be involved both
Box 9: The Commission for Climate and Development

The Commission for Climate and Development, CCD, was appointed in spring 2008 as a Swedish government initiative. It was headed by Gunilla Carlsson, the Swedish Minister for International Development Cooperation. The Commission comprised 13 members representing a variety of experience, sectors and global regions and had the task of considering ways for poor countries to cope with the challenge of climate change, whilst simultaneously reducing poverty. The conclusions and recommendations were presented in spring 2009, shortly before Sweden took over the presidency of the EU. The Commission mainly focuses on the needs of developing countries to adapt to climate change, and how adaptation and risk minimisation can be integrated into broader development work. Some of the conclusions from the Commission were: the need for deeper understanding of what adaptation involves, better integration of climate issues in national development plans, and more resources additional to the 0,7 percent aid goal, and more flexibility in the channels through which resources are delivered.96 The Commissions website: www.ccdcommission.org
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in planning and carrying out ODA programmes and climate change mitigation or adaptation measures. Experience from aid programmes tells us that it is important to avoid fragmentation and the creation of parallel structures for the different financing flows; we should strive for as much integration as possible. Better coordination and harmonisation of the different efforts are central aims of the Paris Declaration on Aid Effectiveness (to which donor and developing countries agreed in 2005) and the decisions agreed at a follow-up meeting in Accra in September 2008. At the UNFCCC negotiations in August 2008 held at the same venue in Accra several donor countries proposed that the principles of the Paris Declaration could also guide the financing for climate change measures. However, representatives from several developing countries raised objections that it was inappropriate or irrelevant to apply the Paris Declaration to these flows, mainly based on the argument that the declaration had been developed and adopted with other aims and in a forum outside of the UNFCCC.97 These are, however, mostly objections of principle. The specific proposals presented by developing countries are in line with most of the Paris Declarations aims for stronger ownership by the developing country, alignment with national priorities and plans, harmonisation between donors etc. It is therefore reasonable that the principles of aid effectiveness and the experience that exists within the aid community can enrich the ongoing discussions over how to shape the system for financing climate change measures. This is the case irrespective of the extent to which the efforts are financed via development aid budgets or via separate appropriations and channels.
New money in addition to development aid

The objections to applying the principles of the Paris Declaration to climate change resource flows stem from the pledge given by developed countries in the UNFCCC to provide new and additional resources to help developing countries confront the challenge of climate change. The fact
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that the developed countries bear the greatest responsibility for emissions of greenhouse gases, and therefore for climate change, justifies the view that our contribution to climate change adaptation should be seen as payment for the damages we have caused rather than as ODA. However, the difficulties in differentiating the aims of different measures makes it problematic to define what is new and additional in the funding flows which must be mobilised to reduce emissions and promote adaptation to climate change. The problem is further complicated by the failure of the developed countries to live up to the UN goal agreed in 1970 to give 0.7 percent of GDP in ODA to developing countries. The same is true of the commitments from Monterrey in 2003 and from the G8 countries in 2005 to increase aid by 50 billion US dollars by 2010. In 2007, the actual share of the developed nations GDP given in aid was only 0.28 percent, which is actually a reduction by three hundredths from the previous year.98 As long as a these clear pledges of increased ODA are not fulfilled it is difficult to regard funds allocated for climate change efforts as new and additional in the sense intended by the UNFCCC and the Bali Action Plan. The Swedish government does not appear to have any objections to financing climate change efforts with ODA funds. In the latest budget proposal, 4 billion Swedish kronor were set aside for climate change measures over a three year period via the development assistance budget. The government maintains, however, that this is new money and is not a reallocation of existing ODA resources.105 The allocation of resources (see Box 11) is, of course, a point for debate, as is the question of how the investment affects the governments ambitions to reduce Swedish greenhouse gas emissions. The initiative emphasises the need for greatly increased contributions to international climate change work, but at the same time it sends signals that Sweden endorses the use of ODA for all conceivable sorts of work with climate change in developing countries. The Norwegian government has also sent these signals through
Box 10: What can be reported as aid?

OECDs Development Assistance Committee, DAC, develops the criteria which define the forms of aid that can be reported as Official Development Assistance. DACs current criteria do not, however, give much specific guidance regarding which climate change related efforts can be reported as aid. The general rules and definitions are nevertheless clear on the point that each development aid transaction should have promotion of the economic development and welfare of developing countries as its main objective.99 Financial contributions to the UNFCCC and the IPCC scientific panel can be reported as development aid to a varying degree, depending on the aim of the contribution and on how it is administered.100 DACs criteria also state that 96 percent of all contributions to GEF can be reported as aid, despite the fact that this is in clear conflict with the criterion for promotion of development as the main objective. It is expressly defined that contributions to GEF may not be used for this objective. GEF funding can only be used to finance the incremental costs of transforming a project with national benefits into one with global environmental benefits.101 With regards to CDM projects there are, however, several explicitly formulated limitations for how development aid resources can be used. In 2004, it was agreed that the value of all Certified Emissions Reductions, CERs, which donor countries receive from development aid financed projects must be deducted from the amount that is reported as ODA.102 In 2006, the development and environment ministers of the OECD member countries adopted a joint declaration on integrating climate change adaptation into development cooperation, but the declaration does not address the boundary issues between ODA and other climate change initiatives.103 The issue was also discussed at DACs high level meeting in May 2008,104 but no decisions were taken. The issue is still the subject of intense discussions, complicated by the fact that the development ministers of the OECD member countries do not want to interfere with the Climate Convention negotiations (which involve a wider group of environment ministers).
an even larger new investment of 3 billion Norwegian kronor annually for a climate change programme in the forestry sector financed through ODA. Government representatives may claim that it doesnt matter whether the resources are allocated via ODA or not; both Sweden and Norway more than fulfil the international aid targets of 0.7 percent and in both cases it is new money that is pledged. So why does it matter which account the money goes through? Firstly, Sweden and Norway are members of a very small
club of countries that actually do meet the ODA target. For almost all other countries, counting climate change funds as an increase in development aid would mean double bookkeeping, where the same money gives the impression of honouring two separate undertakings. Furthermore, the 0.7 percent target is a mutually agreed minimum level rather than a ceiling. The Swedish national target is 1 percent, and the governments new climate change commitments are not above this level. This sets an unfortunate precedent at a time when the
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Box 11: The 2009 Swedish climate change allocation

1.56 billion Swedish kronor of ODA resources was to be invested in an adaptation programme through the UNFCCC and Kyoto Protocols adaptation funds, and through climate projects managed by the International Development Association, IDA (the World Banks ordinary fund for financing mainly through loans to the poorest countries). An additional 1.15 billion kronor was set aside for adaptation measures through Sida. For investments that focus on emissions abatement, 1 billion kronor was to be channelled through GEF and through World Banks new Clean Technology Fund, CTF. Finally, smaller sums of money would be allocated for work on land and agricultural issues and to disaster prevention measures via a string of international organisations.106
issue is the object of sensitive discussions, both within OECDs Development Assistance Committee and the UNFCCC and the need to build trust between the G77 and developed countries is greater than ever. The Swedish policy should instead be to be push for a system where the resources to meet the different commitments are clearly separated even if this is merely an issue of how the accounts are kept and the resources are nonetheless distributed through aid channels. Perhaps these two Nordic countries can pioneer an international climate financing target of a magnitude that matches the estimated needs: approximately one percent of the developed countries joint GNI almost 400 billion dollars107.
A path to Copenhagen
One of the key pieces in the puzzle for reaching a new agreement at the Conference of the Parties in Copenhagen in December 2009 is to find a solution that secures substantially increased resource flows to the developing countries for mitigation and adaptation. This holds both promise and danger: The attempts of the EU, USA and other countries to get China and other developing countries to agree to some kind of commitment are doomed to fail if the developed countries do not show greater willingness to live up to
their promises. The urgency to reach an agreement is dangerous. In the current lead up to Copenhagen, no agreement has so far been reached about how the financial flows could be managed, administered and coordinated. At the same time, influential operators, with the World Bank as the most obvious example, are not just standing ready in the starting blocks, but are already underway with their own initiatives, in exactly the same way as they were in the lead up to the adoption of the UNFCCC. The same is true of the rapidly expanding trade in emission credits. Experience gained from CDM, which suddenly emerged in Kyoto from - almost nothing, urges caution. In this situation there is a risk that prevailing trends are simply strengthened and cemented, rather than that the system is analysed and developed based on a well considered plan.
And the current emerging trends are almost all worrying: A rapid and powerful fragmentation, with new funds and mechanisms which lack even basic coordination. A shift in control and influence away from the UNFCCCs own mechanisms within the UN system and towards mechanisms initiated by the World Bank and individual donor countries. The
40
recipient countries have more limited influence in these mechanisms. Market driven mechanisms which undoubtedly contribute to purely economic resource transfers to a limited number of developing countries, but which are also fragmented and function in complete isolation from any form of planned adaptation. They are very limited in the extent to which they fulfil the commitments to technology transfer and sustainable development. A growing use, at least in our part of the world, of ODA for climate change efforts, in a situation where the issue of which resources are new and additional has not in any way been resolved.
Amongst the proposals that have been submitted in the negotiations leading up to Copenhagen, it is, perhaps not surprisingly, principally the developing countries that are most clearly trying to counter these trends. The proposal from G77 and China for a new financial mechanism clearly goes against most of the trends above. The proposal includes: One unified fund under the control of the UNFCCC. An open and efficient management structure where developing countries are strongly represented. Strengthened ownership for developing countries by enabling direct access to funding without the resources passing through any intermediaries, and by giving them a central role in all stages of the process for developing and implementing programmes. Direct financing with public resources from the developed countries, at a proposed level that is close to the amount needed to meet the identified needs. G77 and China also try to ensure that the resources are new and additional by proposing that no resources that are allocated via other channels can be counted as contributing
to their commitments under the UNFCCC. The downside of this is that the proposed mechanism may seem to be completely isolated from all the other resource flows, including those that are financed through ODA. The question is whether the proposed solution would nonetheless be better than the situation that is currently developing: a profusion of different funds and mechanisms, headed by different organisations and with different aims and management. Of course, a huge global fund also has every opportunity to coordinate its efforts with other financing mechanisms. A single coordinated fund under the UNFCCC would handle resource flows of the same magnitude as ODA assuming that the donor countries actually agree to use it. The fund would be the most important source of finance (in addition to domestic resources) for climate change initiatives within the framework of plans and programmes developed by the developing countries. These plans and programmes, with basic funding secured through the UNFCCC, could then function as a platform for coordination of other bilateral or multilateral efforts. They should also be a point of reference for better assessment of the extent to which market driven mechanisms such as CDM contribute to the national efforts and to sustainable development. Using the terminology of the Paris Declaration, this solution would meet three of the most central principles for aid effectiveness: strong ownership by the developing countries, alignment with national priorities and plans and harmonisation between donors. If the proposal were accepted, then the very fact that the international community and donor countries chose to channel resources through a mechanism proposed by G77 and China would be a powerful expression of the developing countries ownership of the programme. A coordinated effort such as the one proposed would improve, perhaps even maximise, the efficiency of the resource flow, which is currently completely fragmented. But, of course, the proposal is not without its problems. The lengthy negotiations regarding the new Adaptation
41
Fund, which is still not up and running after seven years, provides a hint of the difficulties of even establishing a large fund under the Climate Convention. The concept of a fund that allocates tens of billions of dollars or more each year immediately raises issues of results and effectiveness, corruption and bureaucracy. These are always burning issues for all ODA flows, and the choice of mechanism does not necessarily have to be the crucial factor for the extent to which the issues are addressed. There are, however, many lessons to draw on: openness, transparency and participation create opportunities for efficient monitoring and accountability. Civil society, including parliaments, local authorities and the media has an important role to play in ensuring that resources reach the purposes for which they are intended, and that they are used in programmes that make a difference. And there is absolutely nothing to suggest that it would be easier to monitor separate programmes financed by countless different funds than to monitor the coordinated interventions of one huge fund. Naturally, global civil society has an important role to play. Irrespective of which financial mechanism is chosen, it is vital that previous lessons and experiences are taken seriously, not least from ODA programmes. The new mechanisms, functions and institutions that are created must be based on in the principles of justice, openness, participation and democracy. The document Towards a Global Climate Fund: Principles for Poznan and Beyond was formulated in the weeks leading up to the Poznan meeting and rapidly gained support from hundreds of different organisations in both developed and developing countries. It argues for a global fund in line with the proposal from G77 and China, with the condition that a number of important principles are integrated from the very beginning. The global fund should: Be substantial in volume, with substantial, obligatory and automatic funding. Be democratically governed, with equitable
42
representation for developing countries and with civil society groups, social movements and indigenous peoples, from developing and developed nations represented in all governance structures. Assist countries with financial and technical support to carry out national climate action plans, with participation from different parts of the population and assist them in developing capacity building initiatives. Enable access to funds not only for government agencies, but also for social movements, NGOs, community-based groups and indigenous people organisations. Underscore key global agreements, such as the UN Universal Declaration of Human Rights and the UN Declaration on the Rights of Indigenous Peoples; it must uphold the right to sustainable development with full cost support for truly renewable energy for impoverished and vulnerable people. Address the root causes of the climate crisis, for example by sharing information on best practices and techniques, and education in developed countries regarding sustainable lifestyles and how to reduce global inequality.108
The challenge of allocating the resources and mobilising them, in order to meet the climate crisis in an effective and fair way are enormous. It seems almost impossible to develop and agree to the details of a mechanism within less than one year. But this issue is urgent and the negotiations leading up to the Copenhagen meeting make it necessary that a broad outline is carved out. Civil society and responsible governments hopefully including both Sweden and the EU therefore have an extremely important role to play. The challenge is not only to reach agreement in Copenhagen or soon afterwards, but also to ensure that the decisions that are taken lead to wellfunctioning, sustainable and fair solutions.
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SOU (2007). Vetenskapligt underlag fr klimatpolitiken. Rapport frn Vetenskapliga rdet fr klimatfrgor. Miljrdsberedningens rapport 2007:03. Stern, Nicholas (2006): The Economics of Climate Change the Stern Review. Cabinet Office HM Treasury. Third World Network (2008a): G77 and China Propose Enhanced Financial Mechanism for UNFCCC. TWN Accra News Update 6, 26 August 2008. http://www.twnside.org.sg/title2/climate/fullpdf/accraforwebsite.pdf Third World Network (2008b): Heated Debates on Technology and Finance at UNFCCC. TWN Accra News Update 8, 29 August 2008. http://www.twnside.org.sg/title2/climate/fullpdf/accraforwebsite.pdf Tuvalu (2007): International blueprint for adaptation. Submission from Tuvalu. FCCC/CP/2007/MISC.2. http://unfccc. int/resource/docs/2007/cop13/eng/misc02.pdf UNDP (2008): Fighting climate change: Human solidarity in a divided world. Human Development Report 2007/2008, page 169. http://hdr.undp.org/en/reports/global/hdr2007-2008/ UNEP Ris Centre (2008): CDM Pipeline Spreadsheet, 1 October 2008. http://cdmpipeline.org/publications/CDMpipeline. xls UNFCCC (1992): United Nations Framework Convention on Climate Change. http://unfccc.int/resource/docs/convkp/ conveng.pdf UNFCCC (1997): Kyoto Protocol to the United Nations Framework Convention on Climate Change, Kyoto 11 December 1997 (S 1993:13). http://unfccc.int/resource/docs/convkp/kpeng.pdf UNFCCC (2007a): Investment and financial flows to address climate change. http://unfccc.int/files/cooperation_and_support/financial_mechanism/application/pdf/background_paper.pdf UNFCCC (2007b): Bali Action Plan. Decision 1/CP.13. http://unfccc.int/resource/docs/2007/cop13/eng/06a01. pdf#page=3 UNFCCC (2007c): Reducing emissions from deforestation in developing countries: approaches to stimulate action. Decision 2/CP.13. http://unfccc.int/resource/docs/2007/cop13/eng/06a01.pdf#page=3 UNFCCC (2008): Investment and financial flows to address climate change: an update. http://unfccc.int/resource/ docs/2008/tp/07.pdf World Bank (2006): Clean Energy and Development: Towards an Investment Framework. http://go.worldbank.org/ BEUCQN31A0 World Bank (2008a): Clean Technology Fund. Accessible via http://go.worldbank.org/58OVAGT860 World Bank (2008b): Strategic Climate Fund. Accessible via http://go.worldbank.org/58OVAGT860 World Bank (2009) World Developoment Report 2010: Development and Climate Change. http://siteresources.worldbank. org/INTWDR2010/Resources/5287678-1226014527953/WDR10-Full-Text.pdf
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Footnotes
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8 9 10 11
12 13 14 15 16 17 18 19 20 21 22 23 24 25
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27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
53 54
USA, Canada and Australia emitted around 20 tons of carbon dioxide per person and year in 2005, China emitted 4 tons (which is the global average), India emitted 2 tons, and many other developing countries emitted much less than 1 ton per person and year. On average, a Swede emits 5.6 tons per person and year. http://unstats.un.org/unsd/environment/air_co2_ emissions.htm OECD (2008c). Anthropogenic means caused by man. UNFCCC (1992), Article 2. http://unfccc.int/resource/docs/convkp/conveng.pdf The term mitigation is not alway used consistently, even within the UNFCCC. Article 3.3 talks of mitigate adverse effects (of climate change), which rather puts in mind adaptation. UNFCCC (1992), introduction. The current concentration of greenhouse gases in the atmosphere is around 450 ppm carbon dioxide equivalents (sum of the greenhouse effect of all greenhouse gases), of which around 380 ppm is carbon dioxide, see SOU (2007). UNFCCC (1992), Article 4.7 UNFCCC (1992), Article 4.3. UNFCCC (1992), Introduction. UNFCCC (1992), Article 4.2(a). In the Climate Convention itself these commitments are not quantified. The quantified commitments to emission reductions were first introduced in the Kyoto Protocal in 1997. UNFCCC (1992), Articles 4.3, 4.4 and 4.5. UNFCCC (1992), Article 4.7. UNFCCC (1992), Article 11.5. UNFCCC (2007a), in an updated calculation (UNFCCC, 2008) the total cost is estimated to be 170 percent higher. UNFCCC (2008). This paper is an update of UNFCCC (2007a). UNDP (2008). Ibid, page 169. World Bank (2006). Calculations are found in Annex K. Oxfam (2007). UNDP (2008). UNFCCC (2007a). Ibid. UNFCCC (2008). See, for example the appeal for 350 signed by 150 researchers, politicians and business leaders, including NASA researcher James Hansen and the head of Stockholm Environment Institute, Johan Rockstrm. http://www.tallbergfoundation.org/ T%C3%84LLBERGINITIATIVES/350/tabid/429/Default.aspx The current level of greenhouse gases in the atmosphere is around 450 ppm carbon dioxide equivalents (the sum of the greenhouse effect of all the greenhouse gases), of which a little over 380 ppm is carbon dioxide, see SOU (2007). Le Goulven, Katell (2008). http://www.gefweb.org/interior.aspx?id=80 GEF (2007). Ibid. GEF (2006). GEF (2008a). GEF (2008b). GEF (2008b). UNFCCC (1997). Agarwal och Narain (1999). UNFCCC (1997), Article 12.2. Statistics from www.cdmwatch.org 11 March 2005 (now closed down), quoted by Eklf (2005). UNEP Ris Centre, http://cdmpipeline.org/overview.htm 21st January 2009. UNFCCC (1997), Article 12.2. UNFCCC (1997), Article 12.5(c). Schneider, Lambert (2007). UNEP Ris Centre (2008). UNFCCC (1992), Article 11.5. UNFCCC (1992), Article 11.5. Ibid.?? http://www.number10.gov.uk/Page7881 http://carbonfinance.org http://go.worldbank.org/58OVAGT860 World Bank (2008a). Point Carbon (2008). World Bank (2008b). The CIF funds have an equal representation from donor and donee countries in the managing board, and also representatives for The World Bank and development banks. Even this gives a disproportionate influence to the donor countries. Additionally, decisions must be made unanimouslywhich in practice gives the World Bank the right of veto on all decisions. Sethi, Nitin (2008). Extractive Industries Review (2004).
55 56 57 58
Eklf, Gran (2006). Bank Information Center (2008). Agarwal and Narain (1999). Communicated through the NGO campaign Put your money where your mouth is, www. worldbankcampaigneurope.org 59 European Commission (2007). 60 European Parliament (2008). 61 European Commission (2008c). 62 UNFCCC (2007b). 63 Stern, Nicholas (2006). 64 Gardner, Timothy (2008). 65 Le Goulven, Katell (2008). 66 Mller och Hepburn (2006). 67 Tuvalu (2007). 68 At the Convention meeting in Accra in August 2008, the EU stated that a part of the income from auctioning of 15 percent of aviation emission credits will be used to mitigate climate change in the EU and other countries, in particular developing countries. Europeiska Unionen (2008b). 69 Harmeling and Bals (2008). 70 http://www.regjeringen.no/en/dep/fin/The-Ministry/The-Minister-of-Finance/Speeches-andarticles/2007/A-Global-Contract.html?id=493748 71 Norway (2008a) and Norway (2008b). 72 UNFCCC (2007a). 73 G77 och Kina (2008a). Se ven Third World Network (2008a). 74 G77 och Kina (2008b). 75 Buckley, Chris (2008). 76 Stepping up international climate finance: A European blueprint for the Copenhagen deal. COM(2009) 475, 10 September 2009. 77 Baer, Athanasiou and Karta (2007). 78 Karta, Baer, Athanasiou and Kemp-Benedict (2008). 79 Mexico (2008). 80 Ibid, page 5. 81 Third World Network (2008b). 82 See, e.g. European Union (2008a). 83 Korea (2008). 84 UNFCCC (2007b) and UNFCCC (2007c). 85 For an overview, read e.g. Pirard and Karsenty (for publication in 2009). 86 Griffiths, Tom (2008) and Friends of the Earth International (2008). 87 Ibid. 88 Ecuador (undated). 89 Carroll, Rory (2007). 90 Gallardo och Christian (odaterat) 91 This was underlined by Fredrik Reinfeldt amongst others, during his address at the Climate Convention meeting in Poznan, 11 December, 2008. http://www.regeringen.se/ sb/d/7391/a/117419 92 The Marshall plan was an American initiative to contribute to the rebuilding of Western Europe after the Second World War. The US spent 12 billion dollars on the programme between 1948 and 1951. 93 These types of energy are usually several times more expensive than coal and oil; therefore a significant proportion of the money that must be generated will [most likely] have to be used to subsidise non-fossil fuel energy so that it can be sold at prices which are affordable to poor people. As sales volumes increase, costs decrease - and additionally, with increasing purchasing power over time after a transition period a new market will emerge where the non-fossil fuel alternatives compete against each other on equal terms. 94 Read, for example, Bread for the World and Church Development Service, (2008). 95 Examples and reasoning come principally from Hallegatte, Stphane (2008). 96 Secretariat to the Commission on Climate Change and Development (2008). 97 Third World Network (2008b). 98 Aid Targets Slipping Out of Reach? OECD, undated. http://www.oecd.org/datao ecd/47/25/41724314.pdf 99 OECD (2007), paragraph 35.ii(a). 100 OECD (2008a). 101 http://www.gefweb.org/interior.aspx?id=80 102 OECD (2004). 103 OECD (2006). 104 OECD (2008b). 105 The government also allocates around 600 million kronor to continued investment in CDM, but this money cannot, of course, be reported as development aid. 106 Regeringskansliet (2008a). 107 IMF (2008). 108 Towards a Global Climate Fund: Principles for Poznan and Beyond. http://www.choike.org/ campaigns/camp.php?3
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Humanity is confronted by its perhaps largest challenge ever to prevent catastrophic climate change while simultaneously overcoming global inequality and poverty. Within a very near future the emissions of greenhouse gases must decrease radically, while societies all over the world must adapt to the changing climate that is already a fact. The costs for tackling climate change and adapt societies will be enormous. A large share of these costs will be in the developing countries. According to the climate convention, it is primarily the rich countries, with their historical responsibility and capacity to pay, that needs to foot the bill. But how should the resources be mobilised? How should decisions on allocation of responsibility be made? How much money is needed? What institutions should play key roles? This report provides a clear overview of both existing and proposed climate finance arrangements, and also outlines views of the Swedish Society for Nature Conservation on these challenging issues.
Naturskyddsfreningen. Box 4625, SE116 91 Stockholm. Phone + 46 8 702 65 00. info@naturskyddsforeningen.se www.naturskyddsforeningen.se The Swedish Society for Nature Conservation is an environ mental organisation with power to bring about change. We spread knowledge, map environmental threats, create solu tions, and influence politicians and public authorities, at both national and international levels. Moreover, we are behind one of the worlds most challenging ecolabellings, Bra Miljval(Good Environmental Choice). Climate, the oceans, forests, environmental toxins, and agriculture are our main areas of involvement. www.naturskyddsforeningen.se

Footing The Bill For Climate Change

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Footing the bill for climate change

Footing the bill for climate change

Footing the bill for climate change

Footing the bill for climate change

Footing the bill for climate change

Footing the bill for climate change

Svante Axelsson Generalsekreterare Naturskyddsfreningen

Footing the bill for climate change

Footing the bill for climate change

Footing the bill for climate change

Box 1: Reservoirs, sinks and sources

The historical responsibility of the developed countries

Footing the bill for climate change

How much money is needed?

and their commitment to pay

Footing the bill for climate change

The costs of climate change adaptation measures

Footing the bill for climate change

Adaptation to climate change

Climate Convention UNDP World BankBank Oxfam

28-58 (year 2030) 86 (year 2015) 9-41 50 200-210 (year 2030) 15

Mitigation by 25% compared to 2000

Sources: UNFCCC (2007a), UNDP (2008), Vrldsbanken (2006), Oxfam (2007).

The costs of climate change mitigation measures

Footing the bill for climate change

Box 4: Climate change adaptation how do they calculate? *

Footing the bill for climate change

Box 5: What does the science say?

Footing the bill for climate change

Guiding principles for financing

Footing the bill for climate change

Current financing mechanisms

The World Bank

General fund PCF CPF

Combating climate change

Footing the bill for climate change

I. Mechanisms within the Climate Convention

1) How can the fund mobilise sufficient resources?

The Adaptation Fund

2) How will the fund be managed?

Footing the bill for climate change

GEF other funds within the Climate Convention

Footing the bill for climate change

Footing the bill for climate change

Box 6: Emissions trading

Footing the bill for climate change

Footing the bill for climate change

Are the Climate Conventions funds and mechanisms effective?

Footing the bill for climate change

with broad aims encompassing both climate change and development.

II. Other existing financing mechanisms

The World Bank climate funds

Footing the bill for climate change

Footing the bill for climate change

Box 7: Should the fox be allowed to guard the hens?

The EUs Global Climate Challenge Alliance

Footing the bill for climate change

Footing the bill for climate change

Negotiations for new financing mechanisms

I. Proposals that primarily deal with how funds can be mobilised

Footing the bill for climate change

Auctioning of emission credits