Ahead of EU summit, Soros unveils climate finance plan

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While EU leaders are expected to agree on immediate action to provide financial support for developing countries in Brussels today (11 December), in Copenhagen billionaire investor George Soros has unveiled a plan to provide up to 150 billion dollars for poor countries to access clean technologies.

The plan was presented as negotiations intensify at the UN summit in Copenhagen on financial aid and short-term fiscal arrangement. 

Developing countries are calling for significant transfer of money and technology from the industrialised world to Africa, Asia and Latin America. Rich nations have proposed 10 billion a year from 2010 to 2012 to help developing countries. 

The $10 billion is “not sufficient” and the gap between what is being offered and what is needed could cause the Copenhagen climate conference to fail, Soros said yesterday (10 November). 

Systems exist, all is needed is political will

About $100 billion as a one-off injection could be generated, Soros said, noting that all that is required is political will. 

Underpinned by gold reserves, rich countries could double the funding available to combat climate change by donating recently-issued Special Drawing Rights (SDRs) to a new green fund. 

This fund would jumpstart investment in low-carbon energy sources, reforestation efforts, rainforest protection, land use reform and adaptation programmes. “This is a win-win opportunity for developed and developing countries to work together,” Soros said. 

“Since the funding is available now, it can have an immediate impact.” Unlike other proposals, the plan could be implemented within existing financial structures. SDRs, issued by the International Monetary Fund, essentially constitute additional foreign exchange. 

In response to the global financial crisis, in September 2009 the IMF issued $283 billion in SDRs, with more than $150 billion going to the 15 biggest developed economies. This sits largely untouched in their reserve accounts, leaving a surplus that could be donated to the green fund, according to Soros’ plan. 

ActionAid Climate Justice Co-ordinator Tom Sharman said Soros’ proposals were exciting. 

“The US$200 billion a year that developing countries need to tackle climate change effectively will not just fall out of the sky. That’s why innovative ways to find the cash are so important,” he said. 

However, there is a major stumbling block in the way of Soros’ plan: getting approval to reallocate IMF funds, particularly from the United States. 

The US administration faced an uphill battle to win approval in Congress for the IMF’s $200 billion in new SDRs to deal with the global financial crisis, and would likely face further hurdles in any effort to change the destination or purpose of those funds. 

Other plans try to bridge political divide in Copenhagen

On top of Soros’ plan, another detailed proposal was delivered recently by Project Catalyst, a joint initiative between the European Climate Foundation and the Climate Works Foundation. 

The project reckons that $100bn will be needed by 2020 to finance climate change programmes in developing countries. About half could come from the growing carbon market, which would be worth an estimated $2 trillion a year by 2020. 

Countries could give some of the carbon market allowances to green programmes, with other funds coming from a relatively small fee on each transactions. 

Additional funding of $10 to 20 billion would come from taxes on fuels used in aviation and shipping sectors. The rest – $25-30 billion – would be provided by loans or grants from developed countries, particularly the US, the EU, Canada, Japan and Australia. 

Last week, US President Barack Obama’s spokesperson reportedly said that the president supported a short-term fund for climate aid and that the United States would pay “its fair share”. 

Project Catalyst considers that fast-start funding should be allocated as follows: a third for mitigation excluding forestry, a third for foresty and a third for adaptation, 20% of which would go for capacity building. 

Another Project Catalyst report argues that a high-level climate finance board, guided by and accountable to the UN and with equal developed and developing country representation should be responsible for the integrity of the system. 

Operational implementation would fall to existing multilateral institutions such as national trust funds and a new strategic fund. 

The global community is currently engaged in negotiations to agree a successor to the Kyoto Protocol, which expires in 2012. 

A political agreement is set to be reached at the Copenhagen climate conference, which started on Monday (7 December), but talks have stalled over developed countries' reluctance to commit to concrete financial aid for developing countries and the lack of a commitment to sufficient CO2 reduction targets. 

On 10 and 11 December, EU heads of state and government will gather in Brussels for their customary December summit. It will be the last summit to be held under the Swedish EU Presidency and the last to be chaired by a rotating president. 

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