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CLIMATE CHANGE: New Financial Scheme Turns Heat on Rich Nations

Marwaan Macan-Markar

BANGKOK, Oct 10 2009 (IPS) - A new financial mechanism to help the developing world deal with the challenges posed by climate change looms as a major hurdle on the road leading up to a United Nations summit in Copenhagen in mid-December.

Negotiators from the developing world and the developed world have only five days of climate talks in Barcelona, Spain from Nov. 2 to 6 to bridge stark differences that have emerged between the developed and developing nations before they head to the Danish capital for the pivotal U.N. climate change summit.

The only consolation, for now, seems to be hints that "there was some convergence in language" between negotiators from the two camps over the need for climate change funds for the developing world during the two weeks of the U.N. climate change talks that ended here on Friday evening.

"Developed world negotiators came here and shared beautiful language, but we want those words to be translated to real commitments in finance," Su Wei, chief negotiator for China, told IPS. "We have to set up a new financial mechanism that will be boosted by public funds from the developed world."

"Creating this new financial mechanism will be a crucial part of the Copenhagen agreement," he added. "The burden is on the developed world to help bridge the differences between them and the developing world."

"We came here with hope and confidence, but have to leave here with disappointment and deep concern," Su told negotiators during the closing session of the Bangkok talks. "In Barcelona we need to agree on financing."

His views were echoed by Bernarditas Muller, a leading climate change negotiator for the Philippines. "We are extremely concerned by the lack of numbers and clear funding commitments by the developed world," she told IPS. "There is an attempt to shift the responsibility of financing to developing countries, to depend on market mechanisms and the private sector."

Recent estimates by the World Bank placed the bill at between 75 billion U.S. dollars and 100 billion U.S. dollars annually till 2050 for the developing countries to cope and adapt to the ravages of global warming due to greenhouse gas (GhG) emissions.

The Bank’s calculations were based on how much money developing countries would need to adapt to an environment that would get warmer by two degrees Celsius than pre-industrial levels by 2050. Such a warmer Earth would result in "more intense" natural disasters, droughts, heat waves and "extreme weather" patterns, revealed the Bank’s study, released on Sep. 30.

Just how wide the gap to create a new financial architecture was reflected in the contrasting views expressed in a discussion paper on financing climate change during the just-ended U.N. climate change talks. Driving the push for such new funding mechanism was the Group of 77 (G77) and China, who, with its 130 members from the developing world, makes up the largest body of the over 180 countries that participated during the U.N. climate talks here.

For one, the developing world’s negotiators want the new mechanism to be placed within the ambit of the U.N. Framework Convention on Climate Change (UNFCCC), enabling its members who are party to the international treaty to combat global warming to have a fair say in the disbursement of funds.

This will ensure "an equitable and balanced representation of all Parties with a transparent system of governance to address all aspects of the means of implementation (of climate change funding) for developing countries," states a proposal by the G77 and China bloc made available to negotiators – and seen by IPS – during the last week of the talks here.

Proposals from negotiators of the developed world argued differently, placing more confidence in international financial institutions like the World Bank and the existing Global Environmental Facility, a partnership of some U.N. agencies and the Bank, to guide climate change financing. This financial arrangement ensures that the richer nations will continue to have a greater say in the manner funds are disbursed to developing nations.

For another, the source of money for three funds – to help developing countries adapt to climate change, for mitigation and a ‘Multilateral Climate Technology Fund’ – exposed deep faultlines. Developing world negotiators want the Copenhagen summit to endorse a package that would guarantee new public funds for climate change beyond what the developed world gives as its current development aid.

"The level of new funding can be set at 0.5 percent to one percent of the GNP (gross national product) of (industrialised countries)," states the text of the developing world’s proposal.

Last year, the developed nations gave close to 120 billion U.S. dollars in aid to developing nations, reveals the Organisation for Economic Cooperation and Development, a club for the rich, industrialised nations.

The European Union, seen by some developing country negotiators as the bloc that should take the lead in the climate change talks, offered a mixed message on the issue of financing. "We will need both public and private financing," said Anders Turesson, chief negotiator for Sweden, at a press conference.

"We will have a meeting for (EU) finance ministers on October 20," added Turesson, who spoke on behalf of the EU at the climate talks. "Hopefully, by Barcelona we will have a much more elaborate message on the financing side."

The current pressure by the developing world for the developed world to deliver stems from an "action plan" that all countries agreed to during a U.N. climate change summit in Bali in December 2007. The summit in Indonesia was seen as a breakthrough in environmental diplomacy, following the agreement for the first time by the developing world to slash its own GhG emissions on a national and voluntary basis on condition that the developed world would fund the cost to create a green-friendly environment.

But serious discussions about climate funds from the countries responsible for the largest chunk of GhG emissions – 37 industrialised countries, the EU and the U.S. – had not surfaced till climate change negotiations in Accra, Ghana, last year.

"The developed countries engaged with the developing countries on the financial issue more seriously here. There was a slight improvement after the Accra meeting," said Meena Raman, legal advisor for the Third World Network, a regional think tank based in Penang, Malaysia. "But you cannot say there was much progress because of what the developing countries want with the new financial architecture."

"It is a fight over governance and source of funding," she told IPS. "Barcelona will be a make or break moment on the financial architecture."