Institute of Development Studies

Climate finance and Europe: lost momentum and challenges ahead

3 August 2010 - Merylyn Hedger

As the UN climate change conference resumes in Bonn this week, IDS Research Fellow and project team member for the European Development Cooperation 2020 research programme, Merylyn Hedger reflects on the lead Europe should be taking in Climate Finance and Europe: lost momentum and challenges ahead.

Europe still key to forging a climate deal

One of the most depressing aspects of the lost momentum on the post 2012 deal has been the lack of effective leadership from the EU. Despite the strong cards it held for Copenhagen with well-placed Scandinavian leadership, supported by the personal commitment of the heads of France, UK and Germany, it emerged as isolated and weak. The ambiguous status of the Copenhagen (CPH) Accord within the UNFCCC system added to uncertainties. The EU then played its key card, which is its adherence to its unilateral 20% cut by 2020, and not the 30% cut which was contingent on a global deal. But this seemed like a cynical move and was not helping to recreate an atmosphere which was likely to lead to a deal. However, the new Climate Commissioner Connie Hedegaard, has tried to reinvigorate the negotiations showing that the 30% cut would now not be so costly for the EU to adopt. However, there is a long way to go if Cancun is to deliver anything credible.

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Focusing on the critical finance dimension, the situation has become more intractable since Copenhagen because larger EU finance issues have emerged. With the credibility of the Euro undermined and the financial crisis putting pressure on leadership in the UK, France and Germany, an EU drive has been lacking. Worse still the Greek crisis has revealed a deepening leadership crisis stemming from an anti-Brussels backlash in member states. Weaknesses have also been exposed in other parts of the Euro area. Greater political European integration and coherence overall has been under threat. In the midst of all this, the issue of climate finance seems not to be at the top of the in-tray for resolution.

But for a global solution it is vital that the EU and its Member States get back on track: they are still the key progressive players amidst the industrialised countries for forging a climate deal. With its paper on fast track financing the EU has created some policy space, and it is vital to maximise opportunities. There is a need to ensure the gaps left by the CPH Accord are filled and what was promised is actually delivered. There are three critical linked issues for attention.

Europe's green future

How can European governments maintain support for delivering on their international commitments to their voters whose own jobs and incomes are under threat? There are some difficult messages to sell. Importantly, European voters need to see the bigger picture that the low carbon economy is a way of driving technical innovation and job creation, and a policy strategy of gain not pain. Unless this happens Europe will continue to toil as a global power in a new world where China and other emerging economies are surging forward and gaining the benefits: China is investing more in green investment schemes than the US and Europe combined.

Delivering what was promised

Progress before Cancun on delivery of what was promised at Copenhagen, is vital for its success. Until the May Council paper, there was little in evidence from the EU apart from the vague call to get its commitment of the $2.4 billion mobilised, from a variety of sources, including alternative and innovative funding. Effective leadership on climate finance needs coordination across departments - difficult enough to achieve within Member States but much more difficult in a fragmented Commission. The latest paper for the June UNFCCC meeting in Bonn still lacks detail on Member States' individual commitments. Furthermore, there is little sign that the preferred model mechanism for disbursement of the developing countries, the Adaptation Fund, is likely to be used with consequent further erosion of trust.

Ensuring a sustainable package

Developing countries have frequently emphasised that the new and additional climate finance should be from developed country public finances. Developed countries think that it will be innovative funding, linked to the private sector, which can deliver long term. New ideas should emerge from the UN high level group on finance: the EU must step and help get this deal breaker fixed.

Merylyn Hedger is a Research Fellow with the Climate Change and Development Centre at IDS

Image credit: Fredrik Naumann / Panos

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