Transcript Folie 1

Innovative Finance for
Adaptation to Climate Change
in Developing Countries
- an NGO perspective -
Berlin, 26 May 2008
Jan Kowalzig, Oxfam Germany
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Now
• Principles for funding
• New instruments for raising funds
• Conclusions & Summary
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Principles for funding
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Principles for funding: above all...
• Drive down the costs by avoiding the worst:
Adaptation will become a mission impossible
without fast, effective and massive mitigation
Limit global warming to below 2°C
Peak emissions by 2015
Reduce global emissions by 80% by 2050
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Principles for funding
• 1/CP.13: adequate, predictable, new & additional
• Oxfam: fair & equitable, democratic & effective
• Address entire “funding chain”:
Raising the
money
Contributing to
mechanism
predictable
additional
fair & equitable
adequate
Institutional
arrangements
/administering
the funds
Disbursement
of funds
needs based
effective
democratic
efficient
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Principles for funding: “adequate”
• Current funding
LDCF+SCCF: ~$265m
Adaptation Fund: $80m-$300m per year,
$100m to $5bn by 2030
GEF SPA: $50m
= less than 1 year US spending on suntan lotion
• Funding requirements
UNFCCC: $28bn-$67bn by 2030
UNDP: $86bn by 2015
Oxfam: at least $50bn
ODA: ~$100bn
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Principles for funding: “new & additional”
• Additional to existing ODA commitments (0.7%):
ODA needs (health, education, development etc.)
should not be compromised. Funding is not aid but
compensation.
• But: mainstreaming adaptation into development cooperation makes split difficult, and new funding from
national budgets beyond ODA will be difficult.
= instruments bypassing national budgets needed!
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Principles for funding: “predictable”
• Voluntary pledge-based system has failed
• Binding rules, commitments & quantified targets
to realise necessary finance year by year, and get nonAnnex 1 country buy-in to post-2012 regime
• De-linked from national politics (and elections),
instruments bypassing national budgets
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Principles for funding: “fair & equitable”
• Grants not loans
Crashing your car into one’s house and then
offering a loan to repair it?
• Responsibility and capability:
Level of funding based on polluter-pays principle and
economic strength to address the crisis
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Principles for funding: “fair & equitable” II
• Greenhouse Development Rights (Ecoequity):
RC-Index for differentiation & graduation
Development threshold: minimum average income
Equity within national borders
• Adaptation Finance Index (Oxfam):
RC-Index for differentiation & graduation
Development threshold: minimum HDI
• Mexican proposal:
Multilateral Climate Change Fund
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Principles for funding: “fair & equitable” III
• Taking responsibility & capability seriously:
EU: 27-32% of overall burden
Germany: 6-7% of overall burden
EU
G e rm a n y
E c o e q u ity R C I
%
$bn
27
1 3 .5 - 2 3.2
6
3 .0 - 5.2
O x fa m AF I
%
$bn
32
1 6 .0 - 2 7.5
7
3 .5 - 6.2
(b a se d o n co st e stim a te $ 50 -8 6 bn )
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Principles for funding: “democratic”
• Developing country control:
compensation, not aid
not attached to conditionalities
developing country majority
• Avoid proliferation of funds:
New money to go into UNFCCC Adaptation Fund
Emerging funding mechanisms to be folded into AF
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Principles for funding: “effective”
• Needs based and targeted on the poorest:
Focused on vulnerable communities
& marginalised groups, natural resource management
• Fast and easy access, also for NGOs, not only
governments
• Integrated with development & PRS (but: ODA+)
• Incentivise further action:
Insurance and risk sharing systems (but: avoid burden
transfer to poor people)
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New instruments for raising funds
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New instruments: existing architecture
• Extending 2% levy to JI and IET:
$10-50m by 2010, depends on demand
 relatively predictable, additional to ODA
 low turnout, depends on JI/IET post-2012 markets
• Increase CDM levy to 3-5% (Pakistan)
 predictable, higher volumes, additional to ODA
 penalises mitigation efforts (but links adaptation
with mitigation), seen as adaptation burden
transfer, depends on future demand for CDM
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New instruments: auctioning revenues
• Auctioning of a small portion of CP2 AAUs:
Several $bn, depending on share (e.g. 5-10%)
 predictable, potentially high turnout, polluter-pays
 motivates to negotiate for lax post-2012 targets,
could be counted as ODA (depending on design)
• Auctioning maritime and aviation emissions:
$22-40bn annually, depends on carbon price
 predictable, high turnout, polluter-pays,
less sovereignty concerns, additional to ODA
 depends on carbon price
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New instruments: auctioning revenues II
• Earmarking of regional/national ET revenues:
EU-ETS: €8-20bn by 2013, up to €50bn by 2020
 predictable flows, potential high turnout,
polluter-pays
 constitutional excuses, depends on carbon price,
can be ruined by high influx e.g. of forest credits,
can be counted as ODA (Germany).
US: Liebermann-Warner Climate Security Act
$1bn by 2012, up to $6bn by 2030 for adaptation
and national security
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New instruments: taxing polluters
• International Air Travel Adaptation Levy:
$8-15bn annually
 predictable & high turnout, polluter-pays
 can be counted as ODA
• Tuvalu Proposal for shipping and aviation:
0.01/0.001% levy on transport operations, <$100m
 predictable flows, polluter-pays
 probably not very high turnout, can
be counted as ODA
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New instruments: taxing polluters II
• Levy on fossil fuels sales, carbon tax
Germany: €18-19bn in 2008
 predictable flows once established,
high potential turnout
 issues of national sovereignty, can be
counted as ODA
• Divert fossil fuel subsidies
EU 2001: €22bn to fossil energy
 Mitigation link, high potential turnout
 issues of national sovereignty, can be
counted as ODA
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New instruments: insurance & risk sharing
• Insurance initiatives:
Problem: insurance in low income high risk regions
unaffordable, especially for the poor who also suffer
most from disasters
Weather index based insurance that pays out on
trigger rather than proof of loss (e.g. India)
Polluter-funded capital reserves can reduce costs for
insurance holders
Directly subsidise premiums, or “in-kind” premiums
e.g. adaptation measures (Germanwatch)
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New instruments: insurance & risk sharing
• Insurance initiatives, ctd:
- Reinsurance cover for rare but extreme events
through Annex 1 countries
But: premiums = burden transfer to poor people,
will have to be recycled back to local society
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Conclusions & Summary
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Conclusions & Summary
• No special preference for any particular instrument
• Probably several instruments needed
• Tendency towards pollution-oriented instruments that link
adaptation with mitigation
• Entire “funding chain” needs to be addressed:
Raising the
money
Contributing to
mechanism
Institutional
arrangements
/administering
the funds
Disbursement
of funds
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Conclusions & Summary II
• International Negotiations, next steps
Decide on level of finance required
Define “new & additional”
Identify possible instruments, including incentives,
and addressing entire “funding chain”
Raising the
money
Contributing to
mechanism
Institutional
arrangements
/administering
the funds
Disbursement
of funds
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Conclusions & Summary III
• Criteria:
adequate: 50-86bn annually, grants not loans
predictable: binding commitments & reliable flows
additional: beyond existing ODA commitments
fair: responsibility/capability, EU share: 27-32%
democratic: developing country majority,
channelled through Adaptation Fund
effective: easy access, focused on vulnerable
communities & marginalised groups, natural
resource management, incentivise further action,
integrated with development (but: ODA+)
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Thank you.
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