Paying off climate debts
Posted on 05. Oct, 2009 by Ben Jervey in U.S.A.
The long-anticipated (well, for diplomatic policy dorks like us) American finance proposal has dropped. But first, why should you care about the American finance proposal? For starters, it cuts across pretty much every conversation going on here. Pick an aspect of climate change, and developing countries need cash to deal with it. Meeting mitigation goals, adapting for the impacts, implementing new technologies, and on and on and on. And, of course, there’s this “historical responsibility” aspect that developing countries certainly aren’t going to let us forget about (nor should they).
So, how these financing mechanisms are structured and how much money will be involved are both key questions in these talks. Over the weekend, the U.S. submitted it’s proposal for the structural financing mechanisms (no numbers yet-and realistically don’t expect them for awhile) and had the chance today to speak to the suggestion that wound up tucked into the draft text of the non-paper (under sub-section 6, paragraph 19, option 5, for anyone following along at home).
Here’s the quick take-more substantial analysis to follow after we wade through the actual text in the “non-paper” (that’s more diplo-jargon for an unofficial paper) and follow up on a couple of hazy points.
The U.S. is proposing that a “new operating entity” is established-the operations of the fund would be handled by an existing multinational institution (likely the World Bank, but probably not exclusively), though all policies and program priorities would be governed by the COP itself. In other words, the World Bank would still hold the cash, but most decisions about where it goes would be decided by a representative group of Parties, balanced between net contributors and net recipients. (In contrast to the “donors decide” system that governs most current World Bank transactions.) The system would appear to be one in which a big existing and “trusted” institution like the World Bank would control the money itself, but a body representing the COP itself would actually control the purse strings.
The fund would split up mitigation and adaptation efforts, and would utilize a handful of different financial instruments-not only grants (though they’d still be the overwhelming majority of funds), but also concessional financing, loan guarantees, and even insurance. “The form should fit the function,” in other words.
Now things get a little stickier when you start to talk about where the $$$ is coming from. Developing countries want it all to be distinct public funds (in the form of grants), but the U.S. proposal leaves open the door to private sector financing-things like carbon credits from cap-and-trade systems and also offsets. They claim this isn’t to diminish public sector support, but to leverage private money for maximum impact.
Finally, the biggest possible point of controversy: the U.S. doesn’t think that contributions to this fund should be mandated. Countries should give what they can-what they’re capable of-but shouldn’t have a direct mandate to kick in a predetermined amount. Without doubt, developing countries will cry foul over this-they’ll want to be able to plan on a certain amount.
Like I said, there’s a lot to still figure out about this. The Philippines delegation asked how, exactly, this differed from the system currently in place? If we’re going to use existing institutions, what makes this different? Tanzania wondered what was wrong with the structure of the Adaptation Fund-a public finance option contributed to by richer and able nations-in its current form under the Kyoto Protocol, a similar program that was long debated but is now considered, by developing countries at least, logical and fair. Both concerns are going to require some answers, which might come as soon as the next finance contact group tomorrow. Stay tuned.