Saturday

17th Apr 2021

Opinion

Climate finance: The EU’s best chance for action

  • Melting ice caps: EU has potential to play pivotal role in climate negotiations (Photo: Marina and Enrique)

As the world’s biggest donor for climate finance and disaster relief, the EU has the potential to play a pivotal role in the current climate negotiations.

Finance, along with the provision of other means of implementation, such as technology transfer and capacity-building, is one of the negotiations’ key stumbling blocks.

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Back in 2009, developed countries pledged to provide at least $100 billion a year in “climate finance” by 2020 to help developing countries cut greenhouse gas emissions and cope with the impacts of global warming. Although it may look like a robust target, it only accounts for 0.2 percent of GDP of the industrialised nations in the OECD club.

According to the United Nations Environment Programme, the level of finance required to meet adaptation needs would amount to $150 billion per year by 2030.

So far, the EU and some of its member states have proved to be serious about contributing climate finance. Together, they provided €14.5 billion in climate finance in 2014, an increase from the previous year.

The European Commission recently announced it would double grants for climate finance from the EU budget up to 2020, reaching about €2 billion per year. This echoes a positive step made last year where the EU agreed to commit at least 20 percent of its external assistance budget to climate relevant actions for the period 2014-2020.

Germany is also set to double its international climate finance by 2020 compared to 2014. France is expected to increase its current level of €3 billion level to more than €5 billion by 2020, with a tripling of its current adaptation finance.

But the picture is not all bright. Far from it.

Although the increase in pre-2020 pledges is welcomed, a lot more needs to be done to ensure that climate finance truly meets the needs of its beneficiaries.

For one, Tim Gore, head of policy, advocacy and research at Oxfam International as said that, while the new pledges are welcome, they are not enough: “If you are in one of the poorest communities in the world, it is not making any difference to you. They are not going see any more of that money.”

Commenting on the conclusions of the EU’s finance council meeting in November, the director of Climate Action International Europe, Wendel Trio, also declared: “The EU has failed to offer a credible financial support package for the Paris agreement.”

Although a key moment to coordinate EU climate finance ahead of COP21, the ministers’ meeting failed to provide a clear roadmap on how to deliver commitments, such as phasing out environmentally harmful subsidies or scaling up climate finance before and after 2020.

According to Isabel Kreisler, Oxfam International’s climate change policy expert: “If finance ministers want to ensure there is something in the Paris deal for those on the frontline of climate change, they must significantly increase public funding for adaptation before 2020, and ensure a new and separate financing target looking past 2020 is also agreed on in Paris.”

Here are some of the key aspects of climate finance that the EU must improve on in order to truly support vulnerable populations around the world.

Equal amount of funding for mitigation and adaptation

An OECD report published last October on climate finance found out that only 16 percent of climate finance is devoted to helping developing nations cope with the impacts of climate change. If the EU is to be considered a credible partner for developing and vulnerable nations, it has to scale up the amount of finance that directly targets adaptation actions in order to reach a 50:50 balance between mitigation and adaptation.

New and additional finance

In numerous member states, the money pledged for climate finance comes from the development aid budget. In Belgium, for example, most of the €50 million that were pledged at the leaders’ event comes from an already reduced development aid budget.

This means that some schools, hospitals and other development projects won’t take place anymore because the money initially allocated to them is being redirected towards climate activities.

This is why civil society is strongly pushing to ensure that all climate finance is additional to development aid and not merely a relabelling of existing commitments.

Innovative finance

There are several cheap and easy ways for the EU to mobilize additional climate finance. The first one is the establishment of a financial transaction tax that could help fund renewables and climate change adaptation projects in vulnerable countries.

The second would be to shelve part of the European Emissions Trade System (ETS) revenues for climate action in developing countries. According to WWF, if 10 percent of the €8 billion generated yearly by the ETS is set aside for climate finance, this could raise as much as €3 billion annually from 2020.

Predictability of financial flows

A major issue with current finance pledges in Europe is that they do not always include a clear roadmap of how and when the money will be delivered.

This is a critical issue for beneficiaries as uncertainty on financial support strongly limits their ability to adequately plan climate-related activities. For example, in November, the EU was incapable to provide any indication on its 2015 contribution.

Post 2020 finance

In relation to predictability, it is important that the EU pushes for an ambitious climate finance package that enshrines the principle of five-year cycles for collective finance targets that address both adaptation and mitigation in a separate way. In addition, such a package could call on Parties to submit, every three years, their planned contribution to these targets.

Fossil fuel subsidies

Finally, the EU must address the critical issue of fossil fuel subsidies. Every year, at least €35 billion are spent by member states on these harmful subsidies. This is two and half times more than Europe’s overall contribution to climate finance. Although the EU has agreed on phasing out harmful subsidies, no concrete actions have so far been seen to move in that direction.

Beyond the numbers, climate finance is also about how the money is delivered. It is only by providing its fair share of climate finance that Europe can build trust and engage in a truly constructive partnership with developing nations around the world.

Working together on an honest and fair basis is the only way we will be able to address climate change.

Charlotte Flechet is an environment policies worker and activist for the Global Call for Climate Action campaign

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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