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Climate finance: a clash of world views?

Written by Neil Bird

This week will see many commentators talking about a clash of world views, as anti-capitalist demonstrators make their presence felt during the G-20 meeting in London. However, look to Copenhagen in December to see an equally momentous clash of world views. An early, powerful contribution to the forthcoming debate was delivered by Surya Sethi at ODI’s lunchtime meeting on climate finance. Mr Sethi leads India’s negotiating team for the United Nations Framework Convention on Climate Change (UNFCCC); his views provide an important insight into the issues that will need to be resolved if a global consensus on tackling climate change is to be reached. There is widespread acceptance that developing countries (and the poorest members of such societies) will be hit first and hardest by changing climatic conditions. But that is where the consensus appears to end at present, as there is an ongoing struggle of ideas over how international finance to fund climate change actions should be framed.

There are two very different starting points to the issue of how to raise the considerable sums that will be necessary to cope with climate change. The first approach sees climate finance as a new component of official development assistance (ODA), which has defined the relationship between the industrialised countries and the developing world since the demise of colonialism over 50 years ago.  It is known as the voluntary aid paradigm. This has led to resource transfers between the North and the South, although the predictability of such flows has been poor and the sums involved have not been adequate to overcome the constraints that many developing countries have had to face. The often quoted 0.7% GNI commitment for ODA remains unmet (the UK reached 0.36% in 2007). The recent, much heralded political commitments made at the 2005 G8 meeting in Gleneagles appear to have fallen by the wayside. In short, donor counties have failed to abide by their pledges to provide adequate voluntary aid assistance to the developing world.

There is another basis on which international public finance might be raised in response to climate change – as outlined by Surya Sethi at the ODI lunchtime meeting.  Here, climate finance is not to be seen as voluntary aid but as an obligation, enshrined within the UNFCCC Convention Articles, to provide new, additional, adequate and predictable financial resources to developing countries. It is a necessary obligation of industrialised countries to respect the Convention’s principle of ‘common but differentiated responsibility’. If this view predominates in Copenhagen it has the potential to introduce a new era in international relations, as it represents an alternative to the existing world view of the relationship between the North and South; rich and poor.

Already there has been significant positioning that reflects the divergence of these two world views. For example, the early development of a number of international climate funds was handled almost exclusively by bilateral donor and multilateral organisations. The recent proliferation of such climate change funds has been strongly influenced by those from within the international development community.  The question is whether or not this community is providing the right sort of leadership – leadership that will meet the demands of the international negotiations of the UNFCCC.

If a ‘polluter pays’ principle is to replace the ‘voluntary aid’ principle as the guiding concept for establishing the financial flows to address climate change between  industrial and non-industrial countries – as advocated by Surya Sethi – what earlier precedents might offer clues on how this might be done in an equitable manner? One experience that appears to have been missed so far is the history of war reparations, where monetary compensation has been paid to cover the damage caused by warfare. This has long been an accepted practice of international relations. The 1945 Potsdam conference, for example, saw Germany commit to pay the Allies $20 billion, and more recently UN Security Council Resolution 687 established the legal basis to impose war reparation claims against Iraq following the war in Kuwait. This included a category for damage to the environment.

So, a major battle of ideas is underway. Surya Sethi’s ODI presentation represents a clarification of one world view; we have yet to hear a similar authoritative statement from the perspective of the official development community. But let us be clear on one thing, this is not an argument over delivery or implementation mechanisms.  Climate related actions need to fit seamlessly into the national development strategies of developing countries and complement official development assistance.  What is in dispute is the basis of such funding and, ultimately, who controls the financial flows.