Carbon finance, climate debt
Hitherto, under Kyoto, carbon finance for mitigation was mostly through CDM and a levy on CDM was used to fund the adaptation programme. The flow of climate finance to the South was thus taxed to fund adaptation in the South. This money is also anything but reliable. In the days leading up to the Durban COP, the carbon market crashed and panicked traders questioned its chances of revival.
Various efforts are underway to revive trade in the absence of the cap although it is not clear how a market value can be assigned unless there is a cap to create scarcity. One possibility is the creation of regional markets (emulating the European Trading System) or single country markets (as proposed by Australia). Such markets might then permit outside trading through CDMs etc. as happens now. Obviously this undermines the scarcity and hence the price within each market. That is what it is meant to do but only up to a certain point. The market has to be manipulated to keep prices within a range before it can be made to appear ‘natural’.
Whatever the logical incoherence, the EU and the World Bank are the primary proponents of expanding carbon markets. The Bank has thus said it will provide some sort of guarantee for CDM trades after 2012 when the first commitment period ends. At the same time, the Bank’s Carbon Finance Unit is convening a new ‘partnership for market readiness’. This seems to be a sort of faux multilateral treaty body, being set up with an ‘assembly of participants’ rather than the usual ‘conference of the parties’. The objective seems to be to commit countries to the use of market mechanisms. Meanwhile, it is rumoured that the EU may ride to the rescue of Kyoto in Durban in order to save CDM but on condition that Kyoto expire in 2018 in favour of a single LCA climate regime. It seems that this might be done to buy time to figure out how to keep the market afloat without a cap.#
The World Bank is also leveraging its trusteeship of the GCF put forward the IFC (the Bank’s private sector lending arm) as a model for ‘mobilising’ private sector investment in climate funding. In fact, it is a model for lending to business through a ‘private sector borrowing window’ on the assumption that businesses will then invest more. Critics point out that the IFC track record does not point to developmental outcomes that address poverty, reduce inequality or reduce environmental degradation. The more likely result is that private funding will be substituted for public, as is clearly intended by the Northern powers, and will not be available unless there’s a profit at the end of it. It will not, therefore, be available to poor countries.
‘Innovative funding’ from carbon trading or private sources is cover for the absence of climate finance from northern country coffers. Insofar as climate funding has come from public sources, it is mostly rebranded development aid or comes in the form of loan guarantees.
In contrast, climate justice organisations call for grant funding from public sources, in real money that is additional to existing development aid. And they call for lots of it. The $100 billion per year promised at Copenhagen, even if it materialises, is not close to the funding needed to transform developing country economies – revamping infrastructure and production etc. – to provide for adaptation or even to respond to the damage of extreme weather events. The Cochabamba conference saw 6% of Northern GDP – about $1.2 trillion and equivalent to Northern military spending – as a reasonable figure.
This may be taken as a kind of proxy for repayment of the climate debt which is part of the larger ecological debt owed by rich to poor globally and in all countries. The debt can be calculated in terms of:
- adaptation – the costs of avoiding harm as well as the costs of actual harm; and
- emissions – the rich world’s overuse of the carbon budget calculated per capita over the period of historical industrialisation (1900 to 2050 is a common timeframe).
In contrast, grandfathering uses historical overuse to justify high future emissions. Northern carbon pledges amount to a claim to use double their share of the per capita 2010-2050 carbon budget – implying that the poor must make do with less and/or that the carbon budget will be ignored.
An additional debt is added for foregone opportunities: because Northern countries have over used their share, Southern countries cannot follow the same path of development to raise their populations out of poverty. In our view, this mistakes the problem in two ways: First, it assumes a story of development which is false. Northern countries got rich by plundering the colonies, the Third World, the South. Fossil fuelled industrialisation may have helped them do that but it occurred in the context created by imperial and capitalist expansion. Hence, the developmental relationship of North and South is not sequential but structural. Second, being the child of imperial capitalism, fossil fuel development will not lift the world’s poor out of poverty. To the contrary, poverty and inequality is growing in all countries and the demand for developmental carbon space is about competition between national elites who care about the poor only in so far as they fear them.