E3G

Towards a Global Deal on Climate Finance at Copenhagen

By Monica Araya, Matthew Findlay and Claire Langley

A global deal on climate finance underpins a successful outcome at Copenhagen.

Agreement on a climate finance package will require bridging both a quantitative gap – how to scale up beyond current inadequate levels – and a qualitative gap – how to shift the focus from financing “cheap tonnes of carbon” to transformational change in key sectors of the economy. Closing these gaps requires, in turn, a “grand bargain” between developed and developing countries to address the current political gap and mistrust in the negotiations.

Achieving the grand bargain requires agreement on three guiding principles:

Public financing mechanisms should be designed to leverage private capital investment as effectively and efficiently as possible (the principle of “leverage”);

Climate finance architecture must be flexible enough to respond to a wide range of needs in countries at differing stages of development (the principle of “flexible governance”);

Public finance must be genuinely new, additional and predictable if it is to drive long-term planning and investment decisions and this will require contributing governments to tap into innovative sources of public finance such as bunker revenues (the principle of “innovative public finance”).

To sustain momentum and prepare countries to benefit from the post-2012 arrangements, Copenhagen must deliver substantial quick-start funding of € 6.8 – 13.6 billion per year for adaptation and mitigation efforts before 2012. The design of a quick-start financing governance structure should be scaleable and flexible and serve as a model for long term financing. A substantial share of the overall quick start finance package should be earmarked for investments in adaptation and reducing emissions from deforestation and forest degradation

This latest briefing from E3G, “Towards a Global Deal on Climate Finance at Copenhagen”, available to download above, discusses these issues and attempts to outline the design imperatives of a credible climate finance package for Copenhagen.