Environment

  • Climate campaigners from the global south have rounded on the 'creative accounting' by the EU aid for low-carbon development (Photo: Peter Bischoff/MS ActionAid Denmark)

EU funding offer sparks anger at Cancun

02.12.10 @ 09:29

  1. By Andrew Willis

BRUSSELS - In one of the first major announcements at UN climate talks in Cancun, Mexico, the EU has released details of its contribution to ‘fast-start' funding to help poorer nations deal with the adverse effects of climate change over the short-term.

But aid agencies and governments from developing countries quickly rounded on the news when it became clear that roughly half the money would be in the form of loans or equity in local companies, rather than grants.

Wrangling over the ‘fast-start' funding has led to a major breakdown in trust between rich and poor nations over the past year.

A pledge of $30 billion in "new and additional" money between 2010 and 2012 for poorer nations was one of the few concrete initiatives to come out of Copenhagen last December, but since then richer nations have appeared reluctant to stump up the cash.

Outlining Europe's contribution to the pot on Tuesday (30 November), expected to total €7.2 billion over the three years, EU chief negotiator Artur Runge-Metzger said loans, rather than grants, could provide a "win-win" situation for both sides.

"When it comes to mitigation actions you find that … consumers can repay loans, in other words, finance can be used like a revolving fund," he said.

"In that way, funds can be repaid and used by others. You don't need grants. It would be a waste of money because the individual pays for itself. You have to make best use of peoples' money," he added.

Mr Runge-Metzger later clarified to the Guardian newspaper that EU loans to poorer nations were frequently made on a "highly concessional basis", including a major grant element of up to 75 percent.

Critics said loans were totally unacceptable however, and would simply saddle developing nations with more debt.

They added that closer analysis of developed-country pledges showed much of it be re-cycled money, therefore failing to reach the "new and additional" criteria laid down in Copenhagen.

Together with Europe's €7.2 billion offer, Japan has pledged $15.4 billion and the US $1.7 billion over the three-year period.

NGOs argue that the practice of double-counting money from former promises is adding to confusion and a feeling of mistrust on the part of developing nations. "Countries are definitely using creative accounting to cover up for their shortfalls," said Tim Gore, Oxfam's senior climate advisor.

As well the tough discussions on short-term assistance, talks also got underway on a Green Fund which negotiators at Copenhagen last year decided should be able to raise $100 billion a year from 2020 onwards to help poorer nations fight climate change over the longer-term.

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