$100 billion per year for climate actions in developing countries

A Commission staff working document on “Scaling up international climate finance after 2012” confirms that raising $100 billion per year by 2020 will be challenging but it can be done, if the right balance is struck between public funding, funding raised from international carbon markets, as well as private funds, partly leveraged by development banks.

Climate funding and development aid need to go hand-in-hand and it requires strong international coordination to ensure an efficient spending.

Connie Hedegaard, Commissioner for Climate Action, said: “The EU is already well on track to deliver its fast start funding for the period 2010-2012. And we will also contribute our fair share to climate funding in the long run. Both private and public sources of financing from the EU and other developed countries are essential to support actions for reducing emissions and adapting to climate change in developing countries.” Olli Rehn, Commissioner for Economic and Monetary Affairs, emphasized that “many advanced economies will face serious fiscal constraints in the years to come. Therefore this cannot be paid by public money alone. We need to rely also on innovative sources of financing, in particular, in the private sector and carbon markets. We should make good use of innovative financing mechanisms in close cooperation with development banks.”

The assessment from 8 April, based on the report by the UN Secretary-General’s High-level Advisory Group on Climate Change Financing (AGF) presented in November 2010, broadly confirms the report’s overall conclusion that it will be “challenging but feasible” to meet the goal of mobilising USD 100 billion per year by 2020. Several of the public sources related to carbon pricing assessed in the AGF report are already in place in the EU or will be increasingly used in the next years. Other public sources, such as taxes on international maritime and aviation transport, or on financial transactions, would require more global cooperation. The carbon market can deliver a substantial contribution if, in addition to improvements in the existing Clean Development Mechanism, sectoral carbon market mechanisms are introduced. Private finance will also have a key role in scaling-up international climate finance. Multilateral and other development banks can further leverage these sources of climate finance.

Ensuring an efficient implementation of climate funds

The assessment also examines how to ensure that funds raised and channelled to developing countries can be spent within a sound governance framework which ensures an efficient use of the additional money. The implementation of climate finance in developing countries must go hand-in-hand with that of development aid. This means ensuring a maximum of coherence between these flows. Strong international and European coordination is required on the governance aspects and on the delivery, including a fair international burden-sharing among developed countries, the scaling-up from 2013 to 2020, as well as the “measurement, reporting and verification” (MRV) of financial flows. The EU budget after 2013 could take a more prominent role in channelling EU climate finance to developing countries.

Background
In the international climate negotiations in Cancún in December 2010, developed countries committed themselves to a goal of jointly mobilising USD 100 billion per year by 2020 to address the needs of developing countries if they take transparent and meaningful action for reducing emissions. The ECOFIN Council invited the Commission to prepare a detailed analysis setting out the key elements needed to deliver on this commitment. The Joint EFC/EPC Working Group on International Financial Aspects of Climate Change will further discuss this issue and report to ECOFIN ministers.

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