Show Me the Money: Securing trust in Cancun contingent on cash

December 10, 2010

As the Cancun climate talks stagger into the final few hours, the need for the wealthy countries to support actions by developing countries remains a core issue for negotiators. But for Latin American nations, the amount they can expect to receive is uncertain.

Ever since the very first U.N. conference on the environment back in Stockholm in 1972, developing countries have feared that aid funds they desperately required for basic needs like education, health, and infrastructure might be diverted to green issues, and that they’d have to slow their much-needed economic growth.

Way back then, Brazil’s negotiator tartly remarked that it was a “happy coincidence” that those countries who created the problem of global environmental damage were also the ones with the resources to clean it up, including by paying to help developing countries reduce their pollutants.

Attempting to reassure them, at every major environmental conference since Stockholm there have been promises of a new funding that would not take away from development assistance. The 1992 Rio Earth Summit conference called it the “Earth Increment,” and it summed to $5 billion US in 1992 dollars. Our research for a book called Greening Aid? showed that only 7 percent of Rio pledges in the Agenda 21 document were ever met.

In 2002 climate negotiations set up no less than three climate funds, but they never had much money in them: expert Benito Mueller of the Oxford Institute for Energy Studies ironically calls them the “placebo funds” since they look like a cure but have no real medicine in them.

Copenhagen’s messy finish last year delivered the biggest promise ever: US $30 billion “Fast Start Finance” over 2010-2012, scaling up to US$100 billion a year by 2020. This is a whole new level of funding flows, and could come to equal all current foreign assistance, which sums at about $140 billion a year (see AidData.org). All of the Copenhagen Accord pledge was supposed to be “new and additional” funding, again, a promising sounding vow.

You wouldn’t think that would be so complicated, but a major flashpoint this year in Cancun is whether developed countries are already merely “recycling” or “relabeling” aid, by calling old projects done for other reasons “climate finance,” in order to meet the promises their leaders made at Copenhagen last year.

A series of reports are showing that the practice is in fact widespread, and there are other issues, such as the fact that no baseline was ever agreed above which spending could be considered “additional,” and whether loans count the same as grants. Worse, it was never defined how much of the pledge can be met with private investments and carbon trading instead of public funds.

The “High Level Panel” studied possible new “innovative” sources of funding like a tiny tax on international currency transactions, or a levy on international airline travel. While some Parties reject some of the options, instituting them are about the only way we can be assured that the funds are truly “new.”

All these quandaries arise when debating the raising of the funds. Governing the funds is part two, but a third and pivotal question for Latin America is who gets priority access to climate funds. As it stands, it does not look good for the region.

The original UNFCCC and Kyoto Protocol texts say that such funds should go first to the “most vulnerable countries.” These countries fall in three categories in the treaties: small island states, least developed countries, and Africa, which contains most of the poorest nations in the world and severe vulnerability to drought and flooding.

In Latin America, only Haiti is among the least developed countries, and the Caribbean islands classify as Small Island States under the agreements, but many are above a likely income threshold to which funds may be earmarked.

Under some current proposals, everyone not in this “most vulnerable” list of countries will have to fight over just 40 percent of the climate finance pie promised at Copenhagen. Some of the funds are entirely earmarked for the least developed countries, which are also the furthest ahead in pulling together planning documents called National Adaptation Programmes of Action. Funding agencies and the U.N. are using these NAPAs to prioritize early funding under the Copenhagen promises.

A sign of Latin America’s desperation on getting a piece of the climate finance pie came this week with a failed gambit by a group of countries including Colombia, Bolivia and Guatemala to create a new category of nations, “Highly Vulnerable Countries.” At the CEPAL event on Wednesday, Guatemala’s representative declared his nation among the ten most vulnerable in the world. The problem is that there is no agreement on how to classify countries on their level of vulnerability—the number of scientifically justifiable indicators is nearly infinite.

At Cochabamba, Bolivia, the People’s Conference declared that distinguishing countries by level of vulnerability should not be done, since it is divisive among the poor nations of the world. This is true—all nations include particularly vulnerable populations and the system should not be based on an either-or classification of being vulnerable or not.

The current list of most vulnerable countries has some fairly arbitrary classifications that should be revised. But it is going to be very difficult to agree on one set of indicators and data to compile a UN Vulnerability Index. This is a crucial but politically thorny endeavor.

The real problem for the whole of Latin America is that this train left the station years ago. It seems somewhat specious to object to classification systems years after they were agreed, and only after the funds begin to flow.