Transcript Update on the Global Climate Change Alliance (GCCA)

Update on the Global Climate Change Alliance (GCCA)
Update on work on the Global Climate Financing
Mechanism (GCFM)
Marco Morettini
Policy Officer, Climate Change
DG Development
European Commission
Global Climate Change Alliance – Objective and Scope
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Through effective dialogue and cooperation, the Alliance will
help poor developing countries:
 To adapt to the effects of climate change, in support of the
achievement of the MDGs
 To participate in the global mitigation effort, where this benefits their
poverty reduction efforts
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The Alliance is targeted at poor developing countries most
vulnerable to climate change, in particular the LDCs and SIDS
Added value
 European dimension
 Political dimension
 Using established channels
European Commission
DG Development
Global Climate Change Alliance – Effective Cooperation

Focus on five areas:
►adaptation
►disaster risk reduction
►reducing emissions from deforestation
►participation in the Clean Development Mechanism (CDM)
►integration of climate change into poverty reduction strategies
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EC: €60 million of additional funds to kick-start Alliance plus
contributions from geographical programmes; €5.5 million from
Sweden
Priority adaptation, DRR and climate change integration
Preferred aid modality: budget support (but project support also
possible)
European Commission
DG Development
Global Climate Financing Mechanism (GCFM)
DG Development
European Commission
International Finance Facility concept
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IFF proposed by Gordon Brown in 2003 to increase support to
achieve MDGs by borrowing on the capital market
•
Basic idea to frontload support
•
Overcome fiscal constraint on ODA increase
Justified when needs are urgent, short-term funds are
restricted and long-term funds are possible
Commitments are not reflected in fiscal accounts (or deficit
calculation), or as ODA, until actual payments are made
according to an agreed schedule
An IFF is to be established as triple-A rated financial institution
benefiting from high market confidence and low cost.
European Commission
DG Development
Using an IFF for climate finance
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Some parallels between health and climate change: both
are linked to MDGs and both are Global Public Goods
Postponing adaptation action could imply greatly
increased costs (e.g. when investments to counteract
climate related disasters are not undertaken)
Available ODA is not sufficient to deal adequately with
climate adaptation
Innovative funding and financing mechanisms are
desirable
Possibilities for innovative funding exist linked to the
future CO² market (e.g. a share of the revenue from
auctioning emission rights)
European Commission
DG Development
Conditions for a climate IFF to be successful

Frontloading must be solidly justified (the cost of setting up
the financial mechanism must be justified)

International financial markets must be ready to buy the
climate bond
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There should be fundable adaptation and mitigation plans that
fit the development (poverty reduction) strategy (budget
support is desirable)

A group of donors should be ready to enter into legally binding
irrevocable payment obligations

A reasonable magnitude should be between € 500 million and €
1 billion per year:
 Example € 1 billion per year for 5 years starting in 2010
would require annual repayments of € 380 million for 20
years
European Commission
DG Development
Further work required
 Which financial institution should issue the climate
bond?
 What governance structure: representation of donors
and recipients
 An EU initiative linked to GCCA or an initiative that
would make a wider appeal to other DAC members or
even OPEC members?
European Commission
DG Development