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Can the EU get its act together on climate finance for development cooperation?
Merylyn Hedger – 1 May 2009
No global deal will be achieved on climate change in Copenhagen this December without a significant funding deal for developing country partners on adaptation and to support the take-up of low carbon technologies. A recent workshop in Brussels, part of the European Development Co-operation on climate change to 2020 project (EDC 2020), reviewed the main challenges that Europe faces on climate financing and how to improve coordination across the continent.
As the largest provider of Official Development Assistance (ODA), the EU has taken a lead role in international development efforts. Member States also collectively form the largest donor to funding mechanisms within the Climate Convention (UNFCCC). But while Europe has driven negotiation at the political level it lacks internal agreement on critical climate finance issues and financing institutions. In fact the recent proliferation of initiatives from the Commission and individual Member States have added to the confusion.
It is still unclear what the costs of adaptation to climate change will be. The extent of potential damage cannot be predicted as it will relate directly to how successfully greenhouse gas concentrations are constrained. The UNFCCC has suggested that by 2030 developing countries could have additional annual needs of $100 billion for adaptation. These figures seem smaller when compared to funds spent in bailing out banks, global annual GDP, or the costs of catastrophic climate change. What is clear is that climate change will impact most on poor and vulnerable groups of people – the main targets of development co-operation.
Europe faces three challenges
The first challenge: What is Europe’s role in filling the funding gap for climate change?
Developing countries are demanding that funding for climate change is a new need, additional to the 0.7 per cent Gross National Product (GNP) aid target agreed by ODA countries.
Potentially Europe is well placed to resource the additional funding by creating an innovative funding source using the flexible mechanism model of carbon trading – linked to its Emissions Trading Scheme (ETS). However Member States at last December’s Climate Conference in Poznan weakened the Commission’s plans. Member States can now voluntarily commit 50 per cent of the revenue (potentially EUR 25 billion a year) and provision was made for international cooperation to supplement this as it is needed.
The second challenge: Can the EU work collectively in a coherent way to maximise effectiveness?
There is an agreed code of conduct within the EU to work collaboratively, but there is no real evidence of this at international level. Perhaps the best example is the Global Climate Change Alliance, proposed by the Commission in 2007 as a way of delivering additional resource to the most vulnerable countries – the Least Developed Countries (LDC) and Small Island Development States (SIDS). Despite formal support from the EU Council only one Member State, Sweden, has invested funds in this (EUR 50 million).
The third challenge: Can the EU respond to the leadership challenge?
One of the biggest challenges for the Copenhagen deal is to deliver an institutional architecture able to handle the new funds and build confidence for to all parties. The lack of coordination within the EU in this regard is worrying. Fourteen new international financial initiatives on climate change have been launched in the past two years, several involving European Member States, but it is not clear how others will be able to learn from them.
The Paris Principles on Aid Effectiveness aims to harmonise efforts, avoid conditionality and build support with partner countries’ development strategies. However, these often fail to fully account for climate change. Conversely, separate funding for climate change could work against these aims so there is a need for clear thinking and leadership.
If Europe can get its act together, the critical negotiations leading to Copenhagen – which start in Bonn on 1 June – could proceed faster and more effectively. The EDC 2020 project will help to provide hard evidence of EU level coordination problems, examine what is actually happening in key partner countries and suggest how incentives for improved coordination could work.
EDC2020 is funded under the FP7 research programme of the EC. Socio-economic Sciences and Humanitarian these and coordinated by EADI. Partners are ODI, IDS and DIE.
Merylyn Hedger is a Research Fellow in the Climate Change Group at IDS and a member of the Climate Change and Development Centre
Image: Piotr Malecki/ Panos
Related Projects
- European Development Co-operation on climate change to 2020 - The aim of this project is to synthesize and understand the evidence base on CC and EU development policy in key areas of CC and development programming and to map out possible future influences on these policy area (2008 - 2010)