Copenhagen summit: It's money that matters in the backroom talks

Vast sums will be needed to lubricate the settlement rich and poor nations must achieve to combat global warming. John Vidal considers the prospect of the biggest transfer of funds in history

John Vidal, environment editor
The Guardian, Monday 30 November 2009

Activist guide to Copenhagen Climate change conference COP15: anti-poverty group Oxfam


Members of Oxfam wearing masks of world leaders offer a Copenhagen menu to 'representatives' of poor countries. Photograph: Lluis Gene/AFP/Getty Images

The most powerful lobbyists stalking the corridors of the Copenhagen climate summit will not be the noisy environmentalists or even the global charities who will press politicians for a strong deal that avoids the worst of global warming.

Ecology and morals count in the public arena, but as the negotiations progress and world leaders arrive to take the stage, money will dominate the backroom talks. It is likely to be the deal maker or breaker. Copenhagen may lead over the next 20 years to the largest transfer of money in history from the global north to the south, dwarfing the amount that developing countries now receive in aid.

Industrialists, financiers, bankers, business groups and carbon traders know there is much more in play at the Danish capital than a concern for the health of the planet. They all have a stake in the decisions made and see climate change as the driver of a global energy revolution and the chance to trade in technologies that could shift the world economy.

Those money men will be pressing for a deal that sets up new markets, accelerates investment in clean technologies and gives a clear signal to investors that the low-carbon future lies ahead.

At a conservative estimate, the burgeoning climate change industry expects Copenhagen to open the door to more than $10tn of investment in low carbon technologies by 2030. That, says the International Energy Agency, is what is needed to limit carbon dioxide concentrations in the atmosphere to 450 parts per million, and give a decent chance of avoiding dangerous climate change. The summit could also lead to new carbon markets which will eventually be worth trillions of dollars a year.

But developing countries on the frontline of global warming say it is not just money at stake in Copenhagen – it is the survival of their people. Their negotiators are holding out for at least $400bn a year by 2020, and more later. They have already won the argument that they should be compensated for damage caused by the carbon emitted as developed nations grew rich. They say if western nations expect them to reduce their future emissions with technology that they cannot afford, then the rich must pay for it. So far, ministerial meetings in Edinburgh, London and elsewhere have failed to break the deadlock. Gordon Brown proposed that rich countries together contribute around $100bn a year. The EU improved this to become a firm proposal to transfer €100bn a year to poor countries by 2020. The money would start flowing from 2012.

But developing countries say that rich countries must contribute at least 1% of their GNP by 2020. It's not much, they argue, compared to what was found to stave off a global recession, and nothing at all compared to the eventual likely costs of ignoring climate change altogether.

But the total on the table is just one source of the deadlock. Rich countries insist that any money raised for climate adaptation or mitigation be channelled through the World Bank or the Global Environmental Facility. But these two New York-based institutions are perceived to be controlled by the rich. Instead, poor countries want a separate climate adaptation fund which would be administered by the UN. This they say, would give them an equal voice on how the money is spent.

There is also growing hostility to western nations' insistence that the market provide the main source of funds for adaptation. The EU has said that only €22-50bn of the proposed €100bn will come from public funds. The rest is to come from carbon markets and the private sector.

But many developing countries suffered badly from the liberalisation of their economies under the International Monetary Fund and the World Bank, and have serious concerns about over-reliance on the private sector. Making carbon a commodity, like pork bellies or wheat, is inappropriate for raising the money people need to survive, they say.

But poor countries are divided among themselves by an ambitious plan for rich countries to pay them to protect their forests – nearly 17% of all global carbon emissions are the result of deforestation. In theory, an agreement to press forward with the scheme known as Redd (Reduced emissions from deforestaion and degradation) would generate $10- $40 billion a year for some of the poorest tropical countries. But while countries like Congo DRC, Cameroon, Guyana and Papua New Guinea are eager for Redd to be approved at Copenhagen there are many objections and reservations.

Brazil, the country with the greatest swathe of forest, is unconvinced that markets are the best way to raise money and wants a separate fund. Indigenous peoples and others who depend on forests fear that governments would use it as an excuse to remove them, and environment groups say that unless better protection is built at Copenhagen, it could prove a charter for loggers to reap big profits.

Alternatives to markets have stalled. Plans drawn up by developing nations to raise up to $10bn a year from a small levy on every passenger flight have faltered, as has the idea of auctioning emissions credits. A tax on all financial transactions has got nowhere and the idea of a carbon tax is a non-starter in most places.

With only a few days' negotiating time left before the politicians arrive in Copenhagen, it is extremely unlikely that any financial agreement will be reached except on the broadest of principles. The danger is that the negotiations on who pays what to whom will not just stretch into next year, but will become intractable ‑ a cheque that never gets signed.

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