US$10.14 billion: this is the amount reached in Lima with the pledges as a contribution to the Green Climate Fund, the financial mechanism created during the climate negotiations in Cancun in 2010. The purpose of the fund is to mobilize sufficient funding for a low-carbon energy transition in developing countries. It seems a substantial amount, but to understand its significance, it must be compared with estimates for the costs of climate change adaptation and mitigation, along with the subsidies given for fossil energy.
First, we must remember that industrialized countries have already promised to mobilize funding totaling US$ 100 billion per year by 2020 during past climate conferences. These pledging are therefore only the beginning of a far more ‘broad needs’ of funding.
Furthermore, the Green Climate Fund is not the only instrument of climate finance: according to the new report of the UNFCCC “Summary and recommendations by the Standing Committee on Finance”, the total annual flow from developed countries to developing ones already amounts to a figure between 40 and 175 billion per year, depending on the calculation method. This figure is a term that can be used as a comparison point for the funding needed to transition to low carbon in a developing countries. Even so, according to the Indian minister for the environment, Prakash Javadekar, the funding required would amount to a figure between US$600-1,500 billion per year .
Meanwhile, according to data from the IEA World Energy Outlook 2014, public subsidies to fossil fuels continue to flow at the rate of US$500 billion per year. One part of this is used for the exploration of new deposits that will never be used. According to a new analysis from Oil Change International and Overseas Development Institute, these grants amount to US$26.6 billion per year. “Spending public money on exploration for new fossil fuel reserves flies in the face of not just climate science, but common sense. We cannot afford to burn the vast majority of the fossil fuels already in proven reserves, so spending money to find more is a waste of public resources and a threat to our planet,” said David Turnbull, Campaigns Director at Oil Change International.
According to these pictures, it looks like the Green Climate Fund’s US$10 billion is the absolute minimum to continue negotiations on the future treaty, but there are some outstanding issues, as the rules for funding, the transparency in resource allocation, the scheduling and the rapidity in responding to the needs of developing countries. The next step will be for some states to send their commitments to their legislative bodies. Other, such as Germany, have already done so. For them, the next step will be the signing of a contribution agreement, which would set out the terms of the loans and, in particular, the timing. In fact the first funds cover the period 2015 -2018, but it is up to individual states to decide on the timing. Subsequently, by June 2015, the rules for funding from individual bodies are to be decided. Already half of next year will give the opportunity for developing countries to present projects. The evaluation will take place on the basis of ability in order to achieve greater impact compared to a business-as-usual scenario. The new rules that will be adopted and the spending commitments will be two critical factors for the success of the negotiations and the achievement of an international treaty to reduce emissions of greenhouse gases can halt climate change.
(Image: World Bank Group President Jim Yong Kim participates in a panel discussion during the official launch of the Green Climate Fund in Songdo, Korea, Dec. 4 2013. Photo credit: Young-Jin Yoo / World Bank on Flickr)
Written by Veronica Caciagli in Lima, Peru. In collaboration with Italian Climate Network.