Climate Finance – Which Goals and What Funds?

In March 2010, Dr. Camilla Bausch and Benjamin Görlach of Ecologic Institute hosted the 14th Climate Talk, together with Dr. Susanne Dröge of the German Institute for International and Security Affairs, where questions concerning the governance of the international climate finance were discussed.

The financing of adaptation and mitigation measures and appropriate transfers from industrial to developing countries were some of the most controversial issues at the Climate Conference in Copenhagen. The most discussed questions were not whether transfers should be made, but rather how much, for which countries, for what purposes and by what means (commitments to 2013 and beyond).

The Copenhagen Accord contains some specific provisions on financial issues: It provides new, additional funding in the amount of 30 billion US$ from 2010 to 2012 by the industrialized countries. For the year 2020, it sets the goal for industrial countries to jointly provide 100 billion US$ from the public and private sources.

Apart from the non-binding nature of the Accord, there are many other implementation issues which remain unclear, particularly institutional issues. A "Green Climate Fund” is intended, but its design, access to funds and other related rules are open. It will also be only one out of several financial institutions in charge of climate finance.

The institutional anchoring and integration of these new financial transfers are important foundations for the effective allocation of sources. The Climate Talk highlighted questions on the role of existing institutions regarding the allocation of sources and whether new institutions should be created to collect and distribute the funds. Existing proposals, recent developments as well as lessons to be learned from fifty years of development cooperation and the discussion of international financial institutions were addressed.

The introductory presentations were held by Dr. Susan Krohn (Federal Ministry for the Environment, Nature Conservation and Nuclear Safety), Dr. Jochen Harnisch (KfW) and Jörg Haas (European Climate Foundation).

Susan Krohn gave an overview of various issues concerning the governance of climate financing. She explained the aspects of the debate on bilateral versus multilateral financial solutions for a financial climate structure. In addition, the potential of existing structures was compared to the added value of a new structure and new funds respectively. Finally, Susan Krohn compared solutions within the regime of the UNFCCC to those outside the convention, for example in the World Bank system.

Jochen Harnisch (KfW) focused initially on issues concerning the sources of climate financing. He stressed the importance of national budgets in this context and pointed out the need for “giver-friendly” financial governance. Mr. Harnisch emphasized that there is a wide range of well-developed instruments in development cooperation, but there are also areas where development is needed. Here he mentioned, in particular, the carbon markets. To create the necessary transparency, he emphasized the need for a register that provides knowledge management and matching.

Jörg Haas (European Climate Foundation) called for reasons and justification of global finance, especially in legal, ethical and pragmatic aspects. He stressed the need for reliable, long-term funding as well as the new tools necessary for this. National governments alone would not be adequate to ensure the necessary reliable financial flows. Mr.  Haas also stressed the importance of ”receiver-friendly” aspects (procedures, structures).
All three speakers discussed the advantages and limitations of institutional competition among benefactors.

In the following discussion, various topics – such as “giver friendliness,” competition, further development of the carbon market and the potential of “high-level panels” – proved to be controversial. The question of under what conditions the developing countries would be entitled to receive money, not only in terms of actual mitigation or adaptation potential of the measures but also in relation to corruption or terrorism, was discussed lively. Gaps in burden sharing and transparency were also identified. In addition, the participants discussed the advantages and possibilities of the “Adaptation Fund" established under the Kyoto Protocol, which was assessed as an innovative mechanism to be observed in the future in order to understand its potential use as a model. The discussion was concluded by an ambitious call for immediate action on the part of the responsible actors. The participants agreed that the Copenhagen agreement, despite its non-binding nature, is a starting point for future climate finance and must now be injected with life.

After the event, the animated discussions continued in a relaxed atmosphere in a nearby restaurant.