The EU is considering the deployment of carbon allowance revenues from international airlines to fund climate aid to the poorest countries, under a planned $100 billion-a-year global relief fund.
Draft conclusions for an Ecofin finance ministers meeting on 15 May, seen by EURACTIV, say that finances “from auctions of aviation allowances in the EU ETS [Emissions Trading System] could help to support climate action in developing countries.”
Development groups say that the text could help end the EU’s bitter dispute with countries such as China and India over climate levies raised on their airlines.
“It is really crucial that the wording stays,” Lies Craeynest, a spokeswoman for Oxfam told EURACTIV.
“Dedicating revenues to climate action in developing countries would help restore their trust and garner support for a resolution to the debate around including aviation in the ETS.”
“It would give a clear signal that the EU’s inclusion of aviation in the ETS is a climate measure to reduce emissions, rather than a tax on the international airlines sector.”
If approved, the document would be the most explicit commitment yet by the EU’s finance ministers to capitalise the Green Climate Fund, launched at last year’s Durban Summit, which is due to begin operations in 2020.
But sources close to the talks say that a diplomatic “battle” is ongoing, with Poland and Lithuania fighting to have the sentence removed from the draft conclusions.
Fast Start climate finance
The ministerial text also calls for the EU and other developed countries to “work in a constructive manner towards the identification of a path for scaling up climate finance from 2013-2020.”
This has been watered down from an earlier draft which reiterated that the EU should identify pathways itself.
The EU has already committed to provide €7.2 billion of Fast Start climate finance to the developing world for the period 2010-2012, although environmentalists claim that much of the money was recycled from previous aid commitments.
But as recession has hit, one EU diplomat said that “southern European countries have become slightly hesitant while other countries, including the UK, are much more proactive.”
While some EU states are thought to be directing their ETS revenues towards national budgets, Germany is already holding the climate levies it has raised in a separate fund for remedial climate measures at home and abroad.
A more existential question for the finance ministers concerns the very meaning of private sector climate finance.
A paragraph in the text notes “that currently no internationally agreed definition of private sector climate finance exists” and says that “further efforts are required to clarify the concept” in relation to the Green Climate Fund.
At issue is the UNFCCC’s intent to use a minimum of public sector money from the developing countries to leverage private sector investments.
While some rich nations think that the ‘private sector climate finance’ tag should just apply to public-leveraged projects, others want a broader definition taking in any developing world investment which a company says is climate-related.
Underlying this debate is a fear among many of the poorest countries that they could become dependent on a profit-driven sector with little interest in projects that provide few returns, particularly where adaptation to climate change is concerned.
Climate Action Commissioner Connie Hedegaard and Danish Climate Minister Martin Lidegaard declined to offer their preferred definitions at a press conference in Brussels on 7 May.
But Lidegaard noted that “since 85% of the money that is actually circulating in the globe is private, you cannot make the whole transformation and build out the mitigation gap without also getting the private money on board.”
On the same panel, the Bangladeshi environment minister, Hasan Mahmud, agreed but called for public funds to be “in the driving seat” of the partnership.
Around 700km of his country’s coastline have been washed away in catastrophic cyclones in 2007 and 2009 and are still unreconstructed, he said.
“We need finance for this,” he added.