UNECA
Sources of long-term finance and
their implications
Jeremy Webb and Mulugeta Ayalew
African Climate Policy Centre
(ACPC)
Climate
Change
Meets
Policy
Outline
UNECA
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The Copenhagen promise
The AGF report
Sources considered
Evaluation criteria
Finance scenarios
Conclusions
The Copenhagen promise
UNECA
• Financial commitments in the UNFCCC
– New and additional financial resources to meet
the costs incurred by developing countries in
discharging their reporting commitments
– Financial resources needed by developing
countries to meet the incremental costs of
implementing mitigation and adaptation
measures
The Copenhagen promise
UNECA
– the provision of and improved access to
scaled up, new and additional, predictable
and adequate funding to developing countries
– Fast-start finance: 30 billion USD from 2010
to 2012
– Long-term finance: 100 billion USD a year
from 2020
UNECA
How to mobilize the 100 billion a year
by 2020 is the central question?
…in the context of meaningful mitigation
actions and transparency on
implementation, developed countries
committed themselves to a goal of jointly
mobilizing USD100 billion a year by 2020
to address the needs of developing
countries. this will come from a wide
variety of sources, public and private,
bilateral and multilateral, including
alternative sources of finance…
AGF Report
UNECA
• This is the Secretary-General’s High-level
Advisory Group on Climate Change Financing
(AGF)
• The Group focused on:
– The identification of practical proposals on how to
significantly scale up long-term financing for
mitigation and adaptation strategies in developing
countries from various public and private sources,
and
– How best to deliver it
– It did not the adequacy of 100 billion USD per year
Representation
UNECA
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Meles Zenawi, Prime Minister of the Federal Democratic Republic of Ethiopia (Co-Chair)
Jens Stoltenberg, Prime Minister of Norway (Co-Chair)
Bharrat Jagdeo, President of the Republic of Guyana
Pedro Luiz Carneiro de Mendonça, Under-Secretary General for Economic and Technological Affairs, Ministry of
External Relations, Federal Republic of Brazil
Ernesto Cordero Arroyo, Minister of Finance, Mexico
Chris Huhne, Secretary of State for Energy and Climate Change, United Kingdom
Sri Mulyani Indrawati, Managing Director, World Bank
Donald Kaberuka, President, African Development Bank
Caio Koch-Weser, Vice-Chairman, Deutsche Bank Group
Christine Lagarde, Minister of the Economy, Industry and Employment, France
Trevor Manuel, Minister in the Presidency for National Planning, Republic of South Africa
Bob McMullan, Member of Parliament and Parliamentary Secretary for International Development Assistance,
Australia
Mutsuyoshi Nishimura, Special Advisor to the Cabinet Office, Japan
Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development
(UNCTAD)
Tharman Shanmugaratnam, Minister for Finance, Republic of Singapore
Lawrence H. Summers, Director of the National Economic Council and Assistant to the President for Economic
Policy, United States of America
Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, Republic of India
George Soros, Chairman, Soros Fund Management
Nicholas Stern, Professor of Economics and Government, London School of Economics
Zhu Guangyao, Vice-Minister, Ministry of Finance, People’s Republic of China
Sources considered by the AGF
UNECA
Sources considered
UNECA
• International auctioning of emission allowances
(e.g. AAUs in the KP) and auctioning of allowances
in domestic emissions trading schemes (e.g. the
ETS)
• Offset levies like the 2% levy on CDM CERs for
the Adaptation Fund
• Revenues from international transportation
(maritime and aviation)
• Carbon-related revenues such as finance freed
from removal of fuel subsidies, carbon tax, and
portions of fossil fuel royalties
Sources considered
UNECA
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Financial transaction taxes
Direct budget contribution
Development bank instruments
Carbon market offsets like the CDM
Private finance
Evaluation criteria
UNECA
• Revenue: how much money can be raised
from a particular source?
• Efficiency e.g. the incentive and
disincentives to take measures of reducing
emissions
• Equity and incidence: who is ultimately
paying for it? Who shoulders the burden at
the final analysis?
• Practicality: what sort of institutions are
required for mobilizing resources from a
particular source and whether such
institutions already exist and if not whether
they can easily be established?
Evaluation criteria
UNECA
• Reliability: can it provide predictable
stream of revenue?
• Additionality: is it an additional money?
• Acceptability: can developed countries
easily sell it to their citizens?
UNECA
2020 and beyond price scenarios
• Low = US$15 per ton of CO2
• Medium = US$25 per ton of CO2
• High = US$50 per ton of CO2
UNECA
International auctioning of
emissions allowances
70
60
50
40
30
20
10
0
Low
Mid
High
UNECA
International auctioning of
emissions allowances
Offset levies
UNECA
70
60
50
40
30
20
10
0
Low
Mid
High
Offset levies
UNECA
UNECA
International transportation
70
60
50
40
30
20
10
0
Low
Med
High
UNECA
International transportation
Carbon related revenues
UNECA
70
60
50
40
30
20
10
0
Carbon tax
Wires charge
Removal of fossil
subsidies
Redirection of fossil
royalties
Carbon related revenues
UNECA
Carbon market off-sets
UNECA
70
60
50
40
30
20
10
0
Low
Med
High
Carbon market off-sets
UNECA
UNECA
300
Indicative levels of potential annual
financial flows
250
200
These levels are indicative as the various estimated flows
vary conceptually and as such should not be added directly
150
100
50
0
Low
Med
High
Conclusions
UNECA
• ‘Challenging but feasible’ is the conclusion of
the AGF
• More challenging now than at the time of the
report
– Many of the sources depend on the price of
carbon which in turn depends on the level of
ambition in the international climate agreement
– The Durban Platform for Enhanced Action: the
agreement will come into effect in 2020
– The Kyoto Protocol: Japan, Russia, and Canada
not part of the second commitment period and US
not a party
Changing global situation
UNECA
• Given that the global financial and economic
situation is changing
– Are the mechanisms described in the AGF report
still viable?
• They were ambitious to start with
– What opportunities arise out of the financial and
economic crises affecting Europe currently?
• e.g. the introduction of taxes on financial transactions
– this has been discussed but London and the UK object
• e.g. aviation emissions becoming part of the ETS
– This has been introduced but some countries object
• The 100 billion per year is arbitrary
– It does not take into account actual needs
What counts as climate finance?
UNECA
• The Advisory Group did not seek an
agreed formula on which financing flows
should count and which should not count
towards the US$100 billion per year
• The Advisory Group in some cases did not
agree on how much of a particular flow
should count either
UNECA
Thank you
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Climate
Change
Meets
Policy