Brussels says climate fund must go 'private'

  

The European Commission has called for the private sector to provide much of the $100 billion a year Green Climate Fund that was pledged at the climate summit in Cancún in December 2010.

In a report released on 8 April, the last day of UNFCCC climate talks in Bangkok, a Commission paper acknowledged that poor countries would not be able to meet the costs of global warming avoidance and mitigation on their own.

But the EU's contribution to the pot would only be about a third, or a little over $30 billion annually in 2020, the paper said.

"Many advanced economies will face serious fiscal constraints in the years to come," said Olli Rehn, EU commissioner for economic and monetary affairs.

"Therefore this cannot be paid by public money alone. We need to rely also on innovative sources of financing, in particular, in the private sector and carbon markets."

Between 2010 and 2012, the EU offered the developing world 2.4 billion euros ($3.5 billion) a year as part of the $10 billion annually promised by rich nations in so-called 'fast-start' aid.

"The EU is already well on track to deliver its fast-start funding," EU Climate Commissioner Connie Hedegaard said. "We will also contribute our fair share to climate funding in the long run."

The consensus in the developing world remains that most funding for the Climate Fund should come from public sources, for reasons of reliability and the historic contribution to climate change made by the developed world.

Oxfam congratulated the Commission for "firing the starting gun" in the search for new climate cash – and for proposing to raise funds from international transport such as shipping and aviation.  

But Lies Craeynest, Oxfam's climate change policy advisor, warned against basing climate aid on adaptation loans from multinational development banks.

"The reliance on private finance and carbon markets won't help meet the needs of the poorest in adapting to a changing climate," he said.

A deal in Bangkok finally coalesced around a climate change roadmap agenda that would allow continued discussion of legal options for a successor agreement to the Kyoto Protocol.

This is due to be agreed in Durban at the end of the year.

But disputes still loom over the size of emissions cuts agreed by developed nations and the nature of the Green Climate Fund.

Rémi Gruet, regulatory affairs officer at the European Wind Energy Association, complained that the talks were "ignoring the key issue of how the international community will achieve the CO2 emissions reductions needed to prevent catastrophic climate change".

On the Climate Fund at least, the EU was optimistic that it had found a workable formula.

"A mix of public finance, carbon market finance and private finance, and some of these sources leveraged by development banks, will be required to deliver this amount of funding," the Commission paper said.

One important source of EU public funds would be revenues from auctioning carbon emission permits to EU industry under the bloc's emissions trading scheme (ETS) from 2013-2020, which could raise more than 20 billion euros ($28.80 billion) annually by 2020, the paper said.

But private sector funding under the EU carbon market would also play a big role. EU industry, for example, could supply up to an additional three billion euros ($4.32 billion) annually from 2013-2020, through purchases of carbon offsets from developing countries, it said.

Development banks such as the European Investment Bank would be a further source of capital.

(EurActiv with Reuters.)

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