Climate Finance – Justice, Governance &
Transparency :
Originally written as a brief background note
for a SASF workshop in Dhaka, Nov.2011
Soumya Dutta
Origin of Climate Finance --
Ordinarily, the ‘subjects’ of climate & finance are from two
different worlds. The understanding that
“anthropogenic”, or more specifically – certain types of economic &
industrial pathway that some countries & societies have followed over
particularly the last 100 years, is causing unpredictable and harmful changes
to the global climate system, is the first connecting link. The second major link is the unjust yet true
tragedy, that those countries & societies are suffering most from these
harmful climatic aberrations, who have
contributed almost nothing to the cause of the unfolding climate change
crisis. In that sense, it’s not right
to call the present crisis “anthropogenic”, as the IPCC (Intergovernmental
Panel on Climate Change) and almost all international players are naming
it. As this is a result of a certain
kind of Political-Economy, and has nothing to do with the existence of the
human species (the ‘anthropo’ part), a more appropriate description would be
“Industrial-capitalism induced” crisis.
And this is in addition to the other major environmental, economical &
social crises the same system is generating.
Out of these two primary linkages, through a process of somewhat ‘coloured’ and unequal
process of international negotiations, the concept of – and one time near
universal consensus on – climate finance
emerged and was codified in the Kyoto Protocol, and the subsequent Bali Roadmap. The idea is that those who have contributed
maximum to create this CLIMATE
change crisis, will contribute FINANCIALLY
towards both the MITIGATION of the problem or crisis
(depending upon who is describing it), and also to help the non-contributing
victims of this crisis try & overcome – at least the worst impacts from
these climatic aberrations, or their ADAPTATION. The financing is also supposed to help the
poorer nations & societies to transition
to a less carbon intensive ‘development’ path, as it was recognised that
these societies need to get increased access to both more energy & other
material services, to reach a minimum dignified level of existence. Thus, climate friendly technologies for these poorer societies are to be part of the
climate finance agenda, along with the
adaptation finance needs of the most impacted.
Climate Finance – Wherefrom, To whom, How
much, Mechanisms –
The initial concept of generating climate finance was almost entirely
from the 36 developed and richer countries in the Annex 1 list, who have historically
contributed maximum to create the climate change crisis in the first place – by
using overwhelmingly large shares of fossil carbon fuels, by consuming
disproportionately large shares of most material productions and by
accumulating, often at the expense of poorer societies, all kinds of wealth
through these uses. It was also agreed
that the major part of the envisaged climate finance will come through PUBLIC
FUNDING by the rich countries, where the unequal market conditions are not a
determinant. This was the near-universal
consensus after Kyoto Protocol came into being and was being
operationalised. Though under pressure
from some developed & rich countries, the concept of generating climate
finance from marketable CO2 emissions was also introduced in the formal design
/ mechanisms. These later became the
primary ‘sources’, with public funding commitments wavering and not
materializing in significant amounts.
It was also a near-consensus till the early part of the first decade of
21st century, that these financing will go to all the under-developed,
under-consuming countries -- and those who are / likely to suffer the most from
these erratic climatic changes -- to
help them fight the impacts of climate change, to increase access &
delivery of basic minimum needs through less carbon-intensive development
pathways, and for the technologies & other means for this transition. There
are many studies / research showing which countries & societies will suffer
most from a range of climate catastrophes, and the following World Bank study /
grouping is one of these.
The above table shows the 12 most vulnerable countries from a range of
five (5) strong climate change impacts which are already evident &/or most
likely to intensify soon. The one
striking feature of this is that all the
most vulnerable countries are low or
middle income, those who have not contributed to GHG-induced climate change to
any significant degree. None of the
richer countries, which caused this problem, are in the high-vulnerability list
! Bangladesh is one of the most
vulnerable in three of these categories, as is India.
It also has to be acknowledged that the number of people being & to
be affected by a variety of climate risks have gone up sharply over the past 40
years or so, as shown by the figure below.
This is no of people per lakh of population, and the figure has more
than doubled in the last 40 years ! This
also shows, that in spite of the Kyoto Protocol and various claims of nations
& multilateral bodies like the World Bank, and their “market-driven climate
solutions”, the problem has only worsened over the last decades. Obviously, these false-solutions are not working.
Also note the alarming percentage of world population being / likely to
be affected by extreme climate events. Even this conservative estimate is close to
4% of the global population now, or nearly 280 million people ! A number close to the current total US
population. The number of people being
affected to a lesser degree is much higher.
Somewhere down the line, starting midway in the last decade (2000-2009),
several developed nations started raising the bogey of ‘emerging economies’
bearing part of the responsibility. This
was clearly & knowingly ignoring the
fact that none of the emerging economies – including the wealthiest & the largest
emitter, China – has historical emissions anywhere even comparable to the rich
nations. This was also a violation of
the agreed Kyoto principle of “common but differentiated responsibilities”,
based on respective capabilities, and the fact that the biggest of these
emerging economies are still inhabited by a disproportionately large percentage
of very poor people, who are at the front-line of climate impacts, as shown by
the above figures.
The rich nations have stalled any meaningful climate financing, taking
cover under these new excuses – a clear case of continuing shifting of the
goal-posts after the game began under agreed rules /norms. There is also increasing talks and proposals
in the last two years – starting from the UNFCCC -COP15 (15th
Conference Of the Parties to the United Nations Framework Convention on Climate
Change) at Copenhagen onwards, that a major part of any climate finance will
have to come from “market mechanisms”,
and not public funding. This clearly
neglects the fact that capitalist ‘free’ markets (strangely, free from regulatory
controls, but not from public financial support – as demonstrated during and
after the start of the present economic downturn from late 2007) operate primarily – not to take care of the
needs of the poor, but to make maximum profit from those who can pay for the
goods & services on offer, at levels & terms to maximise the corporate
profits.
The Cancun
Agreement on Long-Term Cooperative Action (Decision 1/COP.16) in Dec.2010 to
some extent consolidated the climate finance promises that were only vaguely
given in the 2009 Dec. Copenhagen Accord – in terms of the Fast-Start &
Green Climate Funds. There are various estimates, guesses,
guestimates and calculations that have gone on to determine what is the range
of climate finance needed for various critical elements of adaptation,
transition etc. Starting with the highly
publicized 2003 Stern Review, to the latest (2010) World Bank estimate, the amount of minimum climate finance needed
has by now, some basis other than random guesses. If the figures circulated around 2004 were about US $200 billion per year for
a comprehensive response to climate change crisis, it has come to a minimum of
US $500 billion (US $1 billion roughly equals Indian Rs.5,400 Crores) per year
in the latest World Bank report.
In the early stages of climate
finance negotiations, the figure of about US $200 billion per year – to go to
the poorer countries – was being seriously discussed. It was also proposed that in view of the
problems of immediate generation of such large financial resources, a
“fast-start” finance will be more “appropriate”. Somewhere before the Copenhagen climate
summit (COP15), this fast-track finance figure came down to the pathetic
(remember, this finance is for the whole world of climate change impacted
people ! ) US $30 billion for the three years of 2010-2012, or US $10 billion
per year till 2012. This was to be
followed by an amount of US $100 billion per year from 2020 ! The year 2012 is significant as the first
commitment period (for actions agreed under the Kyoto Protocol, including
reduction of polluting Green House Gas emission by the developed countries to
the agreed level, and climate finance) under KP ends in 2012. There is as yet no certainty, no clear
direction as to what happens to the international climate treaty & and
positioning of big-nation players after
Dec.2012. Neither has it been fully
agreed what the second commitment period would be – with increased reduction commitments
and vastly increased climate finance needs & hopefully increased financing
commitments, though there are proposals that this be a short period of
2013-2017, as the climate system is running out of maneuvering space and is
dangerously close to increased number of catastrophic events.
Consider the fact that the rich economies together just threw ‘life-lines’
to their biggest and richest banks, financial institutions and corporations
- amounting to over US $3,000 billion of Public Funds in two years after the
financial crisis hit them (the ‘competition based free-market economy’, so
sacrosanct till now, just vanished in thin air, as the ‘free-market’
evangelists themselves got hit). Also
consider the actual climate catastrophe induced losses suffered by just a poor
medium-sized nation – Pakistan – in just one large climate change disaster -- the
recent devastating floods -- conservatively estimated at US $30 billion, just
in one year ! How the estimate of US
$200 billion/year in 2004 came down to
US $10 billion in 2010 (the actual down-grading is more than 20 times,
considering inflation), what will happen from 2013 to 2019, how much US $100 billion will be worth in
2004 value then, what happens to the World Bank estimate of a minimum of US
$500 billion /year,……. ?? None of these
have any clear answers from those playing the geo-political-economical climate
games. It is immeasurably bigger than
even all the Olympic Games put together !
This game not only involves vast amounts of money, it also involves huge
losses of human lives and livelihoods,
fast increasing species extinction, potential threat to the very existence of
the majority of the world’s poor. Thus,
it has far more adrenalin-pumping excitement for the big players than even the
now-rare big-game hunting !
Where will these climate funds come from ? The original consensus of a large part of
this being public funds, have many supporters and many mechanisms have been
suggested for that. Selling or even
auctioning of carbon dioxide emission permits within the developed countries is
one such proposal (note that presently, the emission permits are distributed
free to big-polluters, based on their present calculated emission figures). Carbon tax on all products & services
which have large carbon footprints is another proposal (for example, air travel
is a highly carbon-intensive mode of travel, which causes a large pollution contribution
by fewer richer people, and a carbon-emission tax on this can generate
substantial and well justified climate funds, in addition to braking the fast
growth of this high-emission activity).
A Tobin-tax, or tax on large financial transactions is another idea that
is circulating for long. All are
feasible, but none of these even touches the original idea of a small part of
the GDP of the rich nations being committed as climate finance – as their
moral, ethical & legal commitments to those badly impacted by the
consumption of these rich societies.
The two major climate finance routes that the world’s governments have
adopted are the funds transfer through the so-called Clean Development Mechanism (CDM) – which is an approved mechanism
under the Kyoto Protocol, and the forest related Reduction of Emission through Deforestation and forest Degradation
(REDD) and the addition to this with Enhancement
of forest carbon, or the REDD+ scheme,
which are yet to be formally adopted –
though already operational in other ways.
The CDM allows entities in the rich developed countries not to reduce
their actual GHG pollution, and instead
buy Carbon Credits from poorer developing country’s activities which are
supposed to be less GHG emitting than they otherwise would be, and “offset” their emissions with this
saving of the developing country activity.
The very concept of CDM is flawed and full of fraudulent actions. The only beneficiaries are the rich
corporations in these developing countries, as they are the ones with the
resources to go through the complicated international process, and most of the
CDM projects – Chinese & Indian corporates being the largest beneficiaries –
have only increased the sufferings of the poorer communities around these
project sites, who are supposed to be lead to a “sustainable development path”
by these CDM activities. This is apart
from the fact that CDMs have neither reduced the GHG emission of the buyer or
seller countries, nor of the world as a whole.
And recently, the CDM Executive Board has rejected several Chinese
proposals of Wind Energy Farms – a very clearly climate friendly pathway – on
flimsy grounds of ‘additionality’, while admitting the very polluting coal
fired power plants application for CDM money as they are using the so-called
‘super-critical steam’ technology. The
wind energy farms will have hardly any GHG pollution, while the super-critical
steam coal power plants will add multiple millions of tons of CO2 each, every
year. These are the strange logics of
today’s climate finance mechanisms.
The other major climate finance mechanism in operation today, REDD
/REDD+ , is the concept that poorer developing countries with substantial
forest cover are cutting down their rich forests for economic development, and
need to be financially helped to preserve & even enhance their
forests. The dependence on forests for
economic growth need to be diverted with investments on their basic survival
needs being supplied from non-forest activities. This has the logic that forests are some of
the best carbon sinks, and soak up
carbon dioxide at a far lower price per ton of CO2 than many other emission reduction activities, and thus with
the same climate financing – you can get more bang for the buck. This also follows the ‘least-cost’ logic that
increasing forests in the developed countries is costlier – though these
countries often have far lower population densities and large tracts of land.
Hard cash talks much louder than soft human lives – if they are poor,
and that’s why there is hardly any considerations
that a fairly large number of the world’s poorest people live in or around the
forests, that they are largely dependent on forest resources for their
livelihoods, that forests are also the habitats of a very large part of the
world’s bio-diversity, and any attempt to look at forests through the lens of Forest Carbon-Stock, is most likely to
seriously impact all these humans and other lives. The considerations of various human rights of
people who live inside or in the periphery of forests, the multiple importance
of the diversity of plants & animals in a forest, rather than how much
carbon can be stored in a certain amount of tree-covered area etc are thorny
questions yet to be answered, and impacting this route of climate finance,
though these have not deterred either the rich-country entities or even the
poor-country governments from going full steam ahead with REDD / REDD +. Money
talks louder than humans in these games.
There are other ‘innovative’ proposals for climate finance, some of
which have generated considerable international interest. The Equadorian governments proposal of not
drilling for and extracting its huge petroleum (a GHG emitting fossil fuel)
reserve under the dense Amazonian forest of Yasuni region, if the rich nations
pay Equador the climate finance in exchange of this non-extraction &
burning of a polluting fuel -- has attracted several countries. Some European countries, lead by Germany, has
committed substantial climate funds for this “Yasuni Green Gold” proposal. There are other ideas, but all are now being
diluted in light of the dithering of the richer nations in face of their
economic turmoil and their clear reluctance to honour the commitments.
Governance & Transparency Issues --
The poor nations have waited and waited for any kind of
Climate Finance, facing one devastation after another, and wondered about how
the estimated (much much less is actually committed) climate finance figures
kept shrinking, without being actually privy to the negotiating games. This was brought to the fore, when in
Dec.2009 at the COP15, a “selected” few nations (big emerging economies were
part of that coterie lead by the US & Denmark) sat together behind closed
doors – violating the UN negotiating principles of every country as equal
consulting partner – and came out with the atrocious “Copenhagen Accord”, effectively
throwing many accepted KP decisions to the garbage bin. Several poor countries protested this
secrecy & unilaterilsm, but many folded up to the pressures of coercion or
little financial temptations. Bolivia
was the noted exception and stood up for all the marginalised societies. In terms of compliance of KP, the “Cancum Agreement” of the COP16 at Mexico
in Dec.2010 only took this process of non-transparency and de-collectivisation
of governance and delegitimisation of signed treaty -- further down the
unethical might-is-right road. Though Cancun
also saw the creation of the “Green Climate Fund” now being discussed and the Cancun LCA text also included a decision
to establish a Standing Committee on finance to assist the COP on matters relating
to financial mechanism, and to improve reporting by developed countries on
their provision of finance to developing countries. This was one right step towards accountable
governance.
When even official “Parties” – the national governments – to the UNFCCC
& KP are not always privy to decision making and goal-post shifting, one
can easily imagine the status of the civil society which often is the only
representative voice of the marginalised.
Apart from this, even the decisions that our own national governments
are taking, or their commitments to international fora or secret chambers of
powerful nations (like the G-20), are hardly ever open to scrutiny to our own
Parliaments. Within South-Asia, the Indian government has
drastically changed its position on mitigation, on climate finance etc –
without in any way taking its people, or even its own Parliament into
confidence. Bangladesh is one of the
most vulnerable countries in the world, from several continuing and expected
climate change impacts, and yet it failed to stand firm in Copenhagen &
Cancun on the principles of climate justice.
Nepal has a large percentage of its people deeply dependent on forest
resources, and yet it has initiated REDD+ projects in its territory, in return
of some money from a few European countries.
It is no surprise that the large number of poor people in India or in Bangladesh
or in Nepal, who are already suffering from clmate impacts, have no information
or knowledge of their own government’s stands or changes of positions, and that their
lives & livelihoods are up for
garage-sales.
Whatever climate finance is actually committed and operationalised, it is
facing and will continue to face the big question of credibility as the World Bank has been
made the trustee of the fast-track finance for the first three years till 2012,
and the WB has no admirable record of looking after the poor societies, rather
the opposite. There is the newly
constituted “Green Climate Fund” with a governing board split numerically equally between
developed & developing countries, but who and how this fund will be
governed, is yet being negotiated. In
the meantime, big businesses are already establishing their stranglehold over
many of the processes – by floating many pressure groups on governments &
by floating BINGOs (Business and Industry NGO) to influence the little bit of
open-space that occasionally comes up for civil society organisations and
people’s movements, during the
negotiations.
The challenges are not only about which country or country grouping,
which institutions etc will be ultimately governing the climate finance and
through what mechanisms, but the bigger challenge is how to bring in the voices
of the poor, of those communities already paying the price of reckless fiddling
with nature’s climate system. How do we
ensure that the world’s Carbon-Keepers -- those who practice a low carbon
life-style, and protect forests or grow our foods through low-impact
agriculture – are given the benefit of these climate finance ? And these cannot be achieved by just giving a
little space for voicing their concerns (in any case, not many true
representatives of these communities are able to reach the high tables of the
negotiators & parties to the negotiations).
For true democratic governance and transparent operation of climate
finance, these communities have to be brought to the centre of the climate finance
decision making. The climate finance – however little and whatever little –
will finally flow to the developing country governments, but how or whether
they will reach the true climate impacted communities in real need based &
transparent manner, is not clear.
These are the many questions in the vexed issue of climate finance. How to resolve them in a just and equitable way? That is the 500 billion dollar question.
Soumya Dutta, Bharat Jan Vigyan Jatha, Oct.21, 2011
Box 1. Some key principles in Climate Finance
–
Climate finance
must be adequate and equitable compensation. Climate justice, supported by principle
of common but differentiated responsibilities, holds the North as mainly
responsible for climate change. Correcting this injustice entails large-scale
compensatory funding from the global North to finance climate action,
especially adaptation which the global South needs most urgently.
Climate finance
must be adequate and predictable; additional to existing Official Development Assistance
(ODA) commitments; public in nature; and delivered as instruments that do not
create repayment obligations. Climate funds should come primarily from
contributions of developed countries assessed according to responsibility and
capacity to pay.
Climate finance
must be democratically governed. International climate funds should ideally
have mandate from the UNFCCC and come under the full authority of the COP.
Developing countries should be proportionally represented. Nationally, climate
finance institutions should be publicly mandated institutions with full
multi-stakeholder structures. At both international and national levels, ample
space must be provided for participation and intervention in governance by
civil society and other non-government stakeholders, especially those
representing communities and sectors most affected by climate change.
Climate finance
must be human rights-based. Climate finance
must be framed as a relationship between rights-holders (developing country
recipients) and duty-bearers (developed country providers).
Climate finance
should lead to the protection, fulfillment, or redress of the rights that are
compromised by climate change (e.g. right to life, food, shelter, work,
self-determination) and not lead to their further violation. Apart from general
human rights as described in the UN Universal Declaration of Human Rights,
climate finance must also thoroughly consider the specific subsets of rights
especially of those sectors most affected by climate change, such as women,
farmers and indigenous peoples.
Climate finance
funding decisions and processes of delivery must also be consistent with human
rights principles. These include the rights to information, participation in
decision-making, and access to justice through redress mechanisms.
Climate finance
must be country-led and democratically owned. Climate finance should not be driven
by donor priorities, but the nationally-determined needs of developing
countries and their diverse peoples, as articulated in climate change plans or
strategies or integrated in development strategies.
Climate action is
integral to overall development. Even the best-financed programs cannot succeed
in halting climate change and shielding people from its impacts if the
underlying conditions to environmental destruction and poor people’s
vulnerability – unequal and unsustainable patterns of development – are left
unaddressed. Climate adaptation and
mitigation strategies and funding must be framed and integrated with national
development strategies towards ecological sustainability, food sovereignty,
decent work, gender equality, social equity and people’s empowerment. Policy
coherence around these goals across the various areas of international
cooperation, such as aid, trade, investment and finance are also
necessary.
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