Global Trends by Martin Khor

Monday 14 September 2009

Bad signals from Europe on climate change

News from Europe of a threat to impose import taxes, and the offer of only small funds for developing countries, may impact negatively on a climate deal

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Hopes for a global deal on climate change to deal by December look less bright after two disappointing developments in Europe last week.

First was a threat that Europe could introduce trade measures to block products from developing countries as part of its policy to address climate change.

French President Nicolas Sarkozy on 10 September called for a European carbon tax on imports.  It follows from his previous proposal for Europe to place import tariffs on goods from countries that do not commit to international targets on Greenhouse Gas emission reductions.

Sarkozy said he “will not accept a system that imports products from countries that don’t respect the rules in France.  I will fight for a carbon tax at the borders of Europe.”

He referred to the recent passing of a bill in the United States House of Representatives containing measures to impose a charge on imports based on emissions, saying:  “I don’t see why the US can do it and Europe cannot.”

This confirms the fear of developing countries that since the US is embarking on trade-protectionist measures in the name of climate change, there will be strong pressures in Europe to do likewise.

The developing countries are the targets and they will be the losers if these threats are carried out.  Compared to the developed countries, they have less funds and technology to make their production systems less polluting.

The developed countries which are mainly responsible for the climate crisis should be assisting the developing countries, instead of making them victims doubly  -- of the effects of climate change, and of climate-linked trade protectionism.

At the climate talks in Bonn in August, India and other countries protested against the looming trade measures and proposed that the Copenhagen climate conference in December proclaim that such measures be prohibited.

If the threat of protectionist measures continues, it will sour the negotiating atmosphere make a deal in Copenhagen more difficult.

The second adverse development was the release also on 10 September of Europe’s offer of financial resources to developing countries. 

The European Commission said that developing countries will need Euro 100 billion a year (by 2020) to act on climate change.  But it added the governments of developed countries should fund only 20-40 per cent of that, while the carbon market will come up with 40% and the developing countries will self-finance 20-40 per cent.

It proposed that international public financing for climate activities would be Euro 22-50 billion in 2020, of which Europe would fund Euro 2 to 15 billion. And in the near term, 2010-2012, there would be only Euro 5-7 billion a year, with Europe contributing Euro 0.5 to 2.1 billion.

These figures are extremely low, especially since they cover the whole range of activities – mitigation (reduction of emissions), adaptation (coping with the effects of climate change), capacity building (the development of institutions) and technology development.

The proposed amounts pale in comparison with the estimates made by many organizations of what is needed by developing countries to fight climate change.

Two weeks ago the United Nations’ Economics and Social Department published a detailed report estimating that US$500-600 billion is required annually by developing countries for mitigation and adaptation.

The economist Nicholas Stern (who authored the Economics of Climate Change for the British government) estimated that the annual cost of global climate action is about 2 per cent of world GNP (around US$1,000 billion today or US$2,000 billion in 2050).

He advocated US$130 billion per annum of public funding from developed countries for use by developing countries ($15 billion for forest conservation, $40 billion for R&D and $75 billion for adaptation), and also estimated another $50-100 billion flow to developing countries for mitigation, through carbon trading.

On adaptation alone, the UN Climate Convention secretariat estimated the global annual costs at US$40-170 billion.  But the actual adaptation costs are 2 to 3 times higher in the sectors covered by the report, according to a recent study by the International Institute for Environment and Development and the Grantham Institute of Imperial College London.

And if sectors left out of the secretariat report are included, the cost would be higher still.  For example, the cost of protecting eco-systems could cost US$350 billion.

Another study by scientists in China estimated the cost of reducing China’s emissions as US$438 billion per year within 20 years.

The developing countries’ grouping, the G77 and China, have called for developed countries to provide 0.5 to 1 per cent of their GNP (which is around US$200-400 billion a year) to fund developing countries’ climate actions.

Besides being so inadequate in quantum, the European proposal also comes with many conditions and assumptions.

These include that some developing countries should also contribute to the international funding, that they must agree to cap their emissions and take part in carbon trading within a certain year, that much of the funding will go through existing channels such as bilateral aid and the World Bank. 

It practically ignores the G77 and China proposal for a big fund to be set up under the UN Climate Convention.

Many of these conditions are counter to the Convention’s provisions and principles, and are likely to be opposed by many developing countries.

Finance is a crucial part of any global climate deal, and it was hoped that the long-awaited offer from Europe could help break the impasse in the climate talks.  Unfortunately, it may have the opposite effect.