The EU could offer 2-15 billion euros a year to help developing countries fight climate change and adapt to its predicted devastating consequences, the European Commission said yesterday (10 September).
“The EU is moving and we hope other developed countries will follow,” Environment Commissioner Stavros Dimas stated, presenting a blueprint for scaling up international finance in support of developing countries.
The move represented an attempt to unblock stalled negotiations over a global treaty to replace the Kyoto Protocol on climate change, due to be agreed at the end of the year in Copenhagen.
The Commission estimates that developing countries’ overall financing needs will hit €100 billion a year by 2020, if an ambitious agreement is reached in Copenhagen. The EU executive foresees that between €22-50 billion will come from the international public sector.
Emissions reductions in core sectors – industry, energy, agriculture and deforestation – would require €10-€20 billion, according to the Commission’s proposal. Adaptation would take up €10-24bn, while €1-3bn is foreseen both for boosting capacity building and research respectively.
Moreover, the EU executive earmarked €5-7 billion to “fast-track” the implementation of the new climate deal between 2010 and 2012 ahead of its entry into force. The proposal also recommends that the EU commit to providing at least €500 million and up to €2.1 billion a year, starting from next year.
The EU’s methodology for determining how much of the burden each developed country should offer hinges on its ability to pay, measured by GDP, and its responsibility for emissions. Depending on the weight of each factor, this would set the EU’s contribution at somewhere between 10% and 30% of the total.
The EU is keen to factor in responsibility for emissions, as this would lower its bill compared to a GDP-only calculation. Where the EU would end up in the wide range of €2-15 billion depends on how the weighting is decided in Copenhagen.
Moreover, the Commission suggests that countries with lower climate ambitions should shoulder a larger financial burden (EURACTIV 08/09/09).
Three sources of finance
In addition to international public finance, the EU expects developing countries to take on a sizeable portion of the burden.
The Commission blueprint suggests that around 20-40% of the total should be covered by public and private funding from the developing countries themselves. Poor countries should fund in particular low-cost energy efficiency measures, which pay for themselves through lower energy bills, it says.
A third source of funding foreseen in the plan is the international carbon market. This would raise around 40% of resources and lessen the need for international public finance as it becomes more ambitious, it says.
Climate victim of politics?
Dimas fended off accusations that the proposal had been scaled down after pressure from member states, as earlier drafts showed that the EU had been prepared to pay €13-€24 billion per year (EURACTIV 09/09/09).
As a result of the EU’s emissions trading scheme, European companies are the biggest source of funding for emissions reduction projects in developing countries through the UN’s Clean Development Mechanism (CDM), he pointed out.
Environmentalists, however, were quick to note that the sums fall far short of an ambitious commitment. They have called on the EU to provide at least €35 billion annually on top of existing development aid.
Burden-sharing among EU countries
According to the Commission, existing international burden-sharing principles would be used to calculate the contribution of each EU member state. But it underlined that specific circumstances in individual member states would be taken into account.
According to Dimas, one such circumstance could be where an EU country has to buy a lot of emission permits due to its reliance on coal, despite having a higher GDP.
The EU is set for a heated debate on the matter, as countries such as Poland have insisted that internal burden-sharing is a prerequisite for an EU funding proposal in Copenhagen.
But Dimas stressed that internal arrangements could be found after Copenhagen. He referred to the climate and energy package negotiated last year as an example of how this could be done.
Funding climate aid via the EU budget?
The Commission’s preferred means of financing the EU contribution would be via the EU budget, a method which would give the European Parliament a say in the process. Other options include the creation of a common ‘Climate Fund’ outside of the budget or direct contributions from member states, it said.
The EU executive sees revenue from the bloc’s emissions trading scheme as an obvious source of funding. It estimates that a robust market could deliver €38 billion annually by 2020. But so far only a vague agreement that 50% of the revenue “should” be used for climate monies has been struck.
The paper will be discussed by EU leaders at their October summit, and it is now up to the member states to decide whether to take up the EU executive’s recommendations.