Climate finance at MEF
Officials from the world's largest developed and emerging economies as well as those most vulnerable to climate change will meet in London on 18 and 19 October for high-level discussions that will pave the way to a successful outcome in Copenhagen.
One of the key items on the agenda for the Major Economies Forum will be climate finance – the hundreds of billions of pounds that poorer nations will need to help them adapt to the consequences of climate change and
move from a high-carbon path to low-carbon and climate-resilient growth, including through technology demonstration and transfer and reducing deforestation..
Without such finance, alongside new and reformed multilateral and bilateral institutional structures to ensure the finance can be delivered quickly and effectively, the world will be placed at greater risk of dangerous climate change – especially the poorest.
At their last meeting in L'Aquila, Italy, held in July alongside the summit of leaders of the Group of Eight (G8) countries, MEF countries agreed key principles for climate finance.
They agreed that:
- Financial resources for mitigation and adaptation needed to be scaled up “urgently and substantially”;
- Money needed to come from both public and private funds and from revenues generated by carbon trading markets;
- Additional investment in developing countries should be mobilised, by creating incentives for, and removing barriers to, new funding flows; and
- This funding should be predictable over the long term and be measurable, reportable, and verifiable.
Gordon Brown has set out a clear UK position on climate finance. In a keynote speech on 26 June the Prime Minister said it was vital that countries engaged in “active negotiation on … real contributions” rather than on hypothetical figures.
He proposed “a working figure” for global contributions of around $100bn (£63bn; €68bn) a year by 2020 with funding coming on stream in 2013.
This would help pay for developing countries’ plans to reduce emissions using greener technology, avoid deforestation and to adapt to climate change.
The Prime Minister laid out four principles for climate finance: all countries should contribute although developing countries would get back more than they put in; contributions must come top of commitments on overseas development aid; financing flows should be predictable; and new institutional arrangements were needed to ensure better coordination of how developing countries got this money.
Most of the finance for mitigation is likely to come from private business but some state funding will also be required to ensure that action happens fast enough.
The European Commission has more recently published draft proposals that estimate a need for international funding of €100bn per year (£94bn; $148bn) by 2020 to cover the costs of both mitigating and adapting to climate change in developing countries.
It said the EU’s “fair contribution” would amount to €2bn-15bn a year by 2020 – 9%-30% of the global total – with early financing between 2010 and 2012 of €5bn-€7bn a year.
European Leaders will use these proposals when they gather later this month to agree the figures the EU should take to Copenhagen. In the US, the climate bill passed by the House of Representatives in June would auction emissions permits, and donate a portion of revenues to help poor countries. The climate legislation is now before the Senate.
Other countries have also put forward other kinds of proposals. Norway has suggested that countries should agree to auction a small percentage of their emissions allowances to generate new additional funds for climate change actions.
Based on an assumption that 2% is used to determine the amount to be auctioned, the annual income is estimated to be $20bn-$30bn.
Mexico has proposed a green fund, starting at $10bn a year in 2013 to which all countries except the poorest would contribute, with the amounts set transparently using scale based on GDP and emissions per capita.
And the Group of 77 developing countries and the USA have both put forward clear proposals for how a significant proportion of this finance would be governed and channelled effectively in a post-Copenhagen world.
Many of these proposals are already incorporated – in whole or part – in the text that climate negotiators are working up for Copenhagen. But consensus is proving hard to find, hence the utility of informal discussions such as the MEF.
Although the MEF discussions are on informal basis and not part of the Copenhagen process, the importance of the meeting is highlighted by the fact that 18 October marks 50 days until the start of Copenhagen.
For the first time, vulnerable countries will participate in the MEF, reflecting the growing urgency to reach an ambitious deal – including on climate finance – at Copenhagen. The list of attendees so far includes Algeria, Bangladesh, Costa Rica, Ethiopia, Lesotho and the Maldives.
The 17 major economies participating are: Australia, Brazil, Canada, China, the EU, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the UK, and the US. Sweden will participate as President of the EU, as will Denmark as host of December’s Conference of the Parties to the UN Framework Convention on Climate Change, and the UNFCCC itself.
Download the Chair's summary, PDF 87.50KB
Chair's Summary: Fifth Meeting of the Leaders' Representatives of the Major Economies Forum on Energy and Climate, U.S department of state 20 October 2009
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