Environmentalists and banking sector representatives alike professed “disappointment” that details of the EU’s positioning on the proposed $100 billion UNFCCC Green Climate Fund, were left on ice.
“They haven’t put all their cards on the table yet,” Lies Craynest, Oxfam’s climate policy advisor told EurActiv “but because climate finance is a major issue and a way to build trust with developing countries, we hope that’s not the end of it. There’s still time before Durban.”
The Green Climate Fund has become an important card in the negotiations between the developed world which has been historically responsible for most global CO2 emissions and a developing world that is suffering most of the consequences.
In Cancun last year, world leaders committed to funding a $100 billion a year Green Climate Fund to help the developing world adapt to and mitigate the worst effects of climate change.
In April, the EU said that it would contribute about a third of the total amount, but called for two thirds of that to come from the private sector and "innovative" sources such as the carbon market and multilateral development banks.
Developing nations are resisting this, arguing that the private sector is unreliable and profit-seeking.
Private sector involvement
But draft conclusions from a meeting of EU finance ministers seen by EurActiv emphasise the role of the private sector in providing climate finance for developing countries, while reaffirming the EU's commitment to donate €7.2 billion of climate finance over the 2010-2012 period.
They also call for “further efforts to address regulatory barriers and to develop policy frameworks necessary to leverage private climate finance”.
“A public finance contribution needs to be consistent with sound and sustainable public finances, and sound public financial management,” says the document, which is due for adoption by EU finance ministers on Tuesday (4 October).
It would then be up to each EU member state to decide how much public revenue to deliver, in accord with a “sound and sustainable public finances policy framework.”
But without a concrete funding pledge on the table for 2013, Lies Craynest, Oxfam’s climate policy advisor feared that monies allocated to combating climate change could soon run out.
“There’s a major risk that we could hit a gaping finance hole in January 2013 where fast start climate finance falls back to zero if no clear commitments are made, as EU ministers are not putting any money on the table.”
Craynest complained that the Fund had still not been provided with enough money to prepare for its launch in 2012, which is supposed to be agreed at this year’s Durban summit.
“It risks ending up as an empty shell because it will have the governance structure and the agreement but with no finance to run or even start any substantial programme in 2013,” she said.
EIB lending in the pipeline
The EU is in the process of signing off on a $2 billion European Investment Bank (EIB) climate finance lending package for the 2011-2013 period, with a mini-plenary in the European Parliament set to send it back to the European Council for approval later this month.
“The EIB has increased its lending for climate action in the last few years and we intend to continue in this context,” Nick Antonovics, an EIB spokesman told EurActiv.
Tuesday's conclusions by EU finance ministers laud the role that multilateral development banks like the EIB can play in leveraging financial flows through “soft loans” and other measures.
One EIB banker is on the UNFCCC committee responsible for setting up the Green Climate Fund and the bank is expected to announce a large tranche of climate action framework loans later today (4 October).
But Yvo de Boer, a former UN climate chief who now works for the financial consultancy KPMG, said that the private sector also had concerns.
He told EurActiv that he wanted the fund to be a coalition of financial institutions – a facilitator rather than a new and distinct creation.
“If the Green Climate Fund becomes just yet another source of climate finance where really does its added value lie?” he asked. “What will make it different or better than what is already out there?
Aviation and shipping emissions
Both De Boer and Craynest welcomed welcomed a passage in the draft ministerial conclusions that presses for a global agreement on CO2 cuts.
The document says that “further work is urgently needed in IMO [International Maritime Organisation] and ICAO [International Civil Air Authority] to develop without delay a global policy framework that avoids competitive distortions or carbon leakage.”
De Boer said that the EU was “getting a lot of pushback” on its policy of bringing foreign airlines into the Emissions Trading Scheme (ETS) and was seeking a compromise.
“The original legislation offered a possibility to treat differently countries that have comparable legislation at home, so if China or other countries have domestic environmental policy in place to address the aviation sector, then potentially they could be partially exempted,” he said.
Craynest pointed out that the UN Development Programme originally called for $86 billion a year to be provided to the developing world for adaptation to climate change alone and said that monies raised from global carbon levies – or an EU financial transaction tax could fill that gap.
“It is really a no-brainer,” she said. “We need a global framework that is fair and raises funds for the climate fund because the private sector has no incentive to invest in adaptation.”
“Last week’s announcement by Barroso on the financial transaction tax offered a clear opportunity to raise climate change revenues and finance ministers could have picked the low hanging fruit on this.”