The UN High Level Advisory Group on Climate Change Financing (AGF) released a new report today to mobilize $100 billion in international climate assistance by 2020. This climate financing will be a key to the international climate negotiations, which resume next month in Cancun, Mexico. Following are comments by WRI’s Athena Ronquillo-Ballesteros.
This new report sends a very strong signal that scaling-up climate financing to support developing countries in mitigating and adapting to climate impacts is challenging, but feasible.
With its strong technical and analytical foundation and high-level engagement, the report offers developed countries a menu of options that could help deliver tens of billions of dollars toward the $100 billion financial target that was agreed to at the Copenhagen climate meetings last December. (WRI currently tracks developed country “fast-start” climate finance pledges in an interactive table.)
The options include a range of innovative sources of finance such as pricing emissions from international air travel and shipping; auctioning emissions allowances in developed countries; and eliminating developed country subsidies to fossil fuels and using these resources to support climate action.
All of these options rely heavily on developed countries putting an explicit price on carbon domestically, either through a tax on carbon or through a market mechanism (cap-and-trade system), and/or by pricing other externalities such as excessive speculative financial flows (financial transaction tax). While this is based on sound economics, it does make it challenging for additional public or private flows to materialize—whether from auctioning emissions allowances or the private capital that will be leveraged through public capital. In some countries, increasing budget allocations for international climate finance from existing revenues may perhaps be the more viable option.
One significant issue with the AGF is that it diverges from its mandate by recommending possible institutions that should receive the newly-generated public finance. For example, the AGF recommends that additional resources should be provided to the multilateral development banks (MDBs). It does so based on the rationale that the additional public capital will allow it to raise more resources from the global capital markets. However, the national development banks of developing countries that received this capital might also be able to do the same. So, the rationale for singling out the MDBs seems misplaced.
The challenge now will be for leaders of developed countries to muster the political will to put in place the fiscal or legislative measures that will either directly or indirectly generate new sources of finance. As UN Secretary Ban Ki Moon and the co-chairs (Ethiopia and Norway) emphasized today, developed countries will need to exercise ‘extraordinary political will’ to implement the report’s recommendations and ensure long-term finance commitments (or pledges) are met.
This issue will also be a key to the upcoming Cancun climate talks. If governments fail to hold true to their promise of delivering finance, technology and capacity support, real progress in Cancun will be difficult.