Turning a camel into a thoroughbred

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It’s tempting fate to say anything is a done deal at the UN climate negotiations, but as this year’s talks in Durban (Conference of the Parties or COP 17) draw to a close, the signs are looking good for the new Green Climate Fund.

 In Cancun last year, developed countries promised $100 billion in new funds to help poorer countries cope with the impacts of a changing climate and build low carbon development paths. They also promised the new Fund to channel a significant amount of the money.

A committee has been working throughout this year to design the Fund and its Chair, South African Planning Minister Trevor Manuel, presented their recommendations to the COP last week. The Green Climate Fund is a must for poorer countries and is supported by most parties. Host South Africa has invested political capital in launching the Fund at Durban and worked hard to make sure its draft governance mechanism is adopted, with a clear timetable for implementation in 2012.

There are still real concerns over how the Fund will work and whether it will deliver for countries at the forefront of climate change. Talk here is of a “balanced” or “middle ground” governance instrument – for which read a fragile and imperfect compromise that leaves substantive issues for the new Board to sort out next year. A negotiator from Singapore put it more colourfully: if you design a horse by committee, you end up with a camel but you hope it can still gallop.

Disagreement – at least for parties here – is now crystallised around 3 questions. These may seem like a techy or minor issues to outsiders but, as usual in this process, the devil is in the detail and the detail depends on political realities. All three hinge on how independent the Fund is and its relationship with the existing international financial institutions, especially the World Bank.

The first is the legal status of the Fund, since this will determine the extent to which the fund can operate independently and effectively. The second is who will host the Fund when it is set up – main contenders at the moment seem to be Switzerland, Mexico and Germany. Third and finally, who will host the interim secretariat that will provide technical, administrative and logistical support to the Board until the permanent Secretariat is established? Developed countries still want the Global Environment Fund (GEF), while many developing countries are unhappy with this idea because of the GEF’s relationship with the World Bank and lack of legal personality.

For civil society, even if the Fund is set up, there will still be plenty to do in 2012. This includes fighting for some fundamental governance issues: making sure funding is transparent, enshrines genuine country – citizen, not just government – ownership of programming and respects international human and environmental safeguards. Another touchstone issue is the Fund’s relationship with the private sector, both in terms of using its funds to leverage private capital and ensuing any private sector funding is subject to safeguards.

The other part of the equation is how to raise the money required, including how to scale up from 2013 to reach the promised $100 billion target by 2020. So far countries have failed at Durban to agree a timetable to decide specific sources of finance, including working out who should contribute what by the next COP to be held in Quatar in 2012.

Not only the USA (as expected) but also the EU appear to want to kick this issue into the long grass. The oft repeated mantra is that this is about sequencing: we should first secure the Fund and then decide how to fill it. Another rationale is that financing decisions fall within the purview of Finance Ministries and other fora so cannot be decided here. Implicitly, there seems to be concern about the need to build political acceptance for the Fund in austerity-ridden Europe.

However, as Chris Huhne stated strongly in his speech to the talks yesterday, we cannot afford to let the current economic crisis stop us from tackling dangerous climate change and committing to a brighter future. There are already potential new and predictable ways of raising finance on the table, as explored in a recent report for G20 finance ministers.

One source of climate finance is a Financial Transactions or Robin Hood Tax currently being supported by Eurozone countries, especially France and Germany. Another is global carbon pricing of international shipping (bunkers). Maritime bunkers is under discussion in Durban as both a way of cutting emissions and raising finance for climate action.

 One proposal includes ensuring any new shipping levy imposes no extra costs or “incidence” on poorer countries – something NGOs including CAFOD see as essential (see our new Fair Finance report). Unfortunately, this proposal is hanging by a thread and may not make it through.

But it’s too early to be downbeat. We may yet get a timetable for resolving the whats and hows of long term financing from Durban that can lead to real results in Quatar.  And securing the Green Climate Fund would be a huge step forwards for climate justice, as the essential building block for a new global financial architecture to support poor countries facing devastating climate change. In the end, no country wants to be seen as the one who killed the camel in Durban.

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