Monday, 13 December 2010

Cancun and climate finance – loans or grants

In the lead up to Cancun our churches have focused on the negotiation of climate finance. We have argued that requiring developing countries to rely on loans from multilateral banks in order to meet the costs of developing low carbon economies would be iniquitous.

Funafuti, Tuvalu
At Copenhagen it was agreed that developed countries ensure that by 2020 $100 billion per year of new money would be available to support developing countries in mitigation and adaptation. There has been confusion since Copenhagen as to how much of this $100 billion per year of climate finance might be raised by public money and how much will be new private investment. This remains unresolved.

The Cancun agreement has proposed that the multilateral negotiated Green Climate Fund will make a “substantial” contribution to the $100 billion per year but there was little progress on the revenue streams that might offer predictable and sustainable sources of climate finance. Will governments be prepared to channel revenues from the auctioning of carbon allowances, from duties places on air travel and shipping and from levies on bank into an internationally managed fund?

In the short-term much of the $30 billion fast start finance to be raised between 2010 and 2012 is likely to be offered in the form of concessionary loans. But grant funding is required to help the least well-off nations adapt to the impacts of climate change.