Climate finance — old wine in a new bottle?

This blog post is one of a series of updates from Friends of the Earth representatives at the United Nations Framework Convention on Climate Change in Bonn, Germany.

By Marjorie Williams, International Gender and Trade Network, Janet Redman, Institute from Policy Studies, & Kate Horner, Friends of the Earth US

June 9, 2011

While waiting to speak on a panel earlier this week, our talented and eloquent colleague from Malaysia scribbled a quick note asking about the English idiom “old wine in a new bottle.” We polled the crowd and indeed we were right in thinking that the money being put on the table by developed countries to help developing countries address climate change fit the phrase: it is the same old thing in a shiny new package with a new label.

Little did we know that we would have occasion to use the phrase again so quickly. According to a presentation yesterday by the European Union on “fast-start finance” for developing countries (meaning money contributed between 2010 and 2012), as well as recent reports to the UNFCCC, developed countries’ finance commitments look a lot like old wine in a new bottle.

The financial pledges for international climate assistance made by developed countries have been hailed by some as landmark successes of the international climate negotiations. At the 2009 Copenhagen climate summit, and again in Cancun, rich countries claimed they would provide $30 billion in “fast-start finance” from 2010 to 2012. The goal was to enable developing countries to start reducing their emissions immediately and address the devastating impacts of climate change. Unfortunately, a closer look at the numbers reveals that, once again, developed countries aren’t living up to their commitments and are acting in bad faith — even camouflaging funds for US multinational corporations as “climate finance” for poor countries.

The $30 billion promised in Copenhagen is supposed to be “new and additional, predictable and adequate funding.” This injection of new, short-term money was meant to catalyze action now, while the systems to deliver the scale of finance actually required were being designed through the ongoing climate talks. The new money would build trust and show a commitment among rich countries to meeting their obligations to provide climate finance.

In May 2011, developed countries reported pledges to the UN totaling $28 billion in short-term finance. But a recent report estimated that the countries have actually promised only $16.2 billion of the $30 billion, and of that a mere $12 billion has actually been allocated in rich countries’ national budgets. This means that just over one-third of rich countries’ commitment is actually being met.

There is growing evidence that little of the finance is genuinely “new” — i.e. committed since Copenhagen — or “additional” — meaning above and beyond existing pledges for other programs such as foreign aid. Japan, for instance, claims to have pledged $15 billion over the three-year period, but $10 billion of this was already promised under its Cool Earth Partnership back in 2008. The United States also counts funds dedicated to export credit agencies, which support U.S. multinationals in exporting to and investing in developing countries, as climate finance. Globally, it seems that less than $5 billion of the $30 billion (considerably less than 20 percent) may be genuinely “new and additional” in the sense that it was not already pledged before Copenhagen and will not involve the double-counting of official development assistance as climate finance.

Double-counting ODA as climate finance not only undermines the trust desperately needed in the UNFCCC but, equally importantly, imperils the longstanding need to address poverty eradication in developing countries.  Many developing countries face extraordinary challenges in meeting health, education, transportation and sustainable development needs. They simply do not have the excess capacity available to address the climate crisis — which is an urgent problem they did not create.