BETWEEN MONEY, SUBSIDIES AND NEW, DESPERATE IDEAS
At the Bonn interim negotiations, the talk is all about money. The topic of climate finance, i.e. the provision of resources by the most developed countries to support the global green transition, is now increasingly ‘the’ topic of the negotiations, which everything revolves around. Yet, we report with some bitterness, the more we talk about it, the less money seems to appear.
The issue of climate finance – and thus of the right contribution of the richest countries to the global effort – remains the last piece of the Paris Agreement to be ‘set in motion’ after years of work on mitigation and adaptation, approval of the Book of Rules, refinement of mechanisms and goals, and entry into the first five-year inventory of policies (the global stocktake). COP27 even approved the creation of a loss and damage compensation fund for the most fragile countries, after a political battle that lasted almost thirty years. In short, the scaffolding to make the Paris Agreement work now seems complete, ‘only’ the money is missing.
The question of whether this money should be mobilised in the budgets of states, through private finance, or both, is answered according to one’s political approach. Consistent with its mandate of global representativeness, the UN texts approved in recent years consider all possible sources of funding, if the money starts flowing. In recent days the developing countries, in the hours of political tug-of-war over the adoption of the work agenda, have even brought up Article 4 of the Paris Agreement, until this week the perfect unknown of the negotiations, to push the issue of financial transfers.
But why, if everyone over the years has said they are in favour and have not objected to the adoption of decisions providing for this slow flow of money from the global North to the global South, at least on paper, have promised not been kept? This is the question forcefully raised by the G77 countries, in the world of climate diplomacy as in all other UN fora, whether they are talking about biodiversity, climate, or food.
The answer may seem all too simplistic: no Western government wants to divert public money, taxes paid by the taxpayers, to distant countries where perhaps – here a first degree of prejudice – that same money will end up in “who knows what” corruption rings, never to reach the communities. Yet those same governments, like ours, continue to use that same taxpayers’ money to fund the fossil industry through environmentally harmful subsidies, thus effectively doubling their negative contribution to the problem for the worse.
On 14 June, as the agreement was finally reached to adopt the agenda after ten days of negotiations, these issues came to the fore during a side event sponsored by Christian Aid, CIDSE and other Catholic organisations, attended by some experts, activists and the LDC coordinator on the Transition Committee for the Loss and Damage Fund. The aim was, first of all, to dismantle the prejudice about corruption in the destination countries, instead directing actions and reasoning towards “how and when” resources allocated through multilateral funds should reach the territories. This goes well beyond the existing mechanisms such as the Green Climate Fund, judged positively, but also incapable of responding quickly to the concrete needs of the most affected countries. Moreover, corruption takes different forms according to the culture that indicates it, recalled Harjeet Singh of CAN International: ‘As if corruption did not exist in the best-developed countries; it simply takes other forms, made up of opinions, bureaucracy’. The theme of the fear of corruption, and thus of the loss of value of financial transfers along the way from the West to the most fragile populations, is also at the root of Western reluctance towards non-repayable disbursements in climate finance, something the G77 countries are clamouring for. In European capitals, people prefer to think of insurance schemes and accountable projects, perhaps with disbursements in instalments, to better monitor the effective use of the resources received. But how to get the system off the ground if the potential recipient countries do not even have the ministerial and accounting structures to participate in calls for tenders? This is where the related issue of support in administrative growth, and capacity building, comes into play, but even on this, there is still not enough money to be said to be in a process that has begun.
The issue of environmentally harmful subsidies remains central to climate activism and given its absurdity; it could not be otherwise. At the same side event on 14 June, experts debated the proposal, which made a lot of sense to some, to start ‘grinding’ climate finance mechanisms through the provision of a minimum allocation in climate finance in national budgets equivalent to 10% of the environmentally harmful subsidies disbursed in the previous year. For Italy, this would entail an investment of public money in climate finance policies of at least 2.25 billion euros per year, according to the communication just sent by Minister Pichetto Fratin to the Chamber of Deputies, about 3 billion euros per year according to Legambiente data. Even in the minimum option, this would be fresh state money (real, current expenditure) almost three times higher than what was promised in 2022 with the Italian Climate Fund, which would have mobilised resources in mitigation and adaptation in priority countries for the Farnesina and of which no trace has been lost for some time in the meanders of meetings between ministerial committees.
Concerning this proposal, the writer sees its limitation in the fact that environmentally harmful subsidies should gradually – and as quickly as possible – be reduced to zero. Pegging a percentage forecast to a desired decreasing figure might be a good negotiating drop point, but certainly not a good idea in perspective. Perhaps it would be wiser to anchor the percentage forecast to the peak of spending on harmful subsidies or, if negotiating too complex, to a specific base year, so as not to fall into one’s trap.
We are talking about derisory figures compared to the real needs of those living outside the West. The famous and by now almost mythological 100 billion dollars a year in climate finance, to which our government still occasionally refers by pointing to the Italian Climate Fund as the instrument that put Italy in line with the UN goals, not only have they never really been mobilised, but they disappear in comparison with the new estimates that indicate at least 3 trillion dollars a year in financial needs for what is contained in the Paris Agreement. In this sense, too, work has begun towards the determination of a new collective quantified goal (defined by the acronym NCQG, New Collective Quantified Goal), work which continued at minimum speed in Bonn, and which will regain vigour – we hope – at COP28 at the end of the year. Perhaps, together with the achievement of the 100-billion-dollar target fourteen years after its launch and three years behind the 2020 deadline.
Article by Jacopo Bencini, Policy Advisor and UNFCCC Contact Point