The High-Level Advisory Group on Climate Change Financing: Global deal or civil service review?
This is how naive I am. When Ban Ki Moon announced in February this year that he was setting up a High Level Advisory Group on Climate Financing, I thought he had ticked off a key commitment from the Copenhagen Accord, viz securing agreement on how to mobilise $US 100bn a year by 2020. Two serving prime ministers as co-chairs. Eight other ministers as members. Senior people from the aid world and from business. George Soros, for goodness’ sake! Larry Summers! This was not your typical civil service review. This was a group carefully crafted not just to offer options, but to help broker a global deal.
Nine months later, the baby has been born, and looks like nothing so much as - a civil servant. There is careful analysis. There are lots of options. But there is no deal. ‘Naturally’, the report says, ‘there were differences in perspective’. But ‘the Advisory Group did not seek consensus . . . Rather it took the view that its analysis can be useful to parties and decision-makers by reflecting different perspectives’. Thank you very much. Civil servants indeed. We should issue all the members with bowler hats and rolled umbrellas.
Please don’t misunderstand. The analysis is invaluable, and will indeed be useful to policy-makers. The report classifies different sources, explains how they might work, and calculates how they might sensibly be combined to reach the target of $US 100bn a year. It notes that funding can come from public sources, development banks, carbon markets and private capital. And it reviews options such as levies on international transport, financial transactions taxes, carbon-market levies and profit-sharing by private companies. There is serious analytical work embedded in the text, for example on the difference between net and gross value of foreign direct investment, or the inframarginal rents of carbon market flows (whatever they might be). Few will read this report and not learn something new. Paragraph 64, by the way, if you want a definition of inframarginal rent.
Readers need to read between the lines, however. There are compromises built into the report which perhaps belie its status as a neutral, technical review. The greatest of these is to adopt, without explanation, a carbon price for 2020 of $US 20-25 per ton of CO2 equivalent. Frankly, this is astonishingly low. Allow for inflation, and $US 20-25 in 2020 is about the current price on the European Emissions Trading Scheme. This is a level generally agreed to have been depressed by over-enthusiastic issuance of permits to private companies, and by the impact of the recession. Nick Stern, for example, in A Blueprint for a Safer Planet, published this year, declares in favour of a price of €40/ton (Pg 109). That is more than twice the price recommended in the AGF.
There are other controversial items slipped in under the radar. For example, a box on how to calculate the benefit of climate-related private investment by developed countries and aid agencies suggests that investors should ‘modestly lower their return expectations’ by 2 per cent, in order to generate cash flow which would contribute to the $100bn target. This begs many questions, not least about what kinds of investments might count as contributions to mitigation and adaptation.
There are also issues not fully discussed in the report. A crucial one is additionality, given that the Copenhagen Accord spoke explicitly of climate finance needing to be ‘new and additional’. The Report simply notes (Para 74 ) that defining additionality is ‘politically and analytically very difficult’. It does suggest in the same paragraph that the newness of a source (for example a new carbon levy) might act as a proxy for additionality, but then says that there are ‘other interpretations’.
Additionality is difficult territory, as Neil Bird and Dirk Willem te Velde have both argued in recent contributions. Jessica Brown and her co-authors have identified at least four different definitions, with widely differing implications for how much will be funded from existing aid programmes. Why did the AGF not list these definitions and try to adjudicate between them?
The answer is that this is another issue they would not have agreed on, and that might have threatened to derail publication of the report. We have already seen controversy about additionality torpedo the proposed European Commission Communication on climate change and development, which has allegedly had to be cancelled because of disagreement between Member States on precisely this issue. The European Union will be greatly weakened in Cancun as a result.
Which brings us back to expectations. Was it naive to expect that the AGF would resolve problems that have eluded the European Commission, the UNFCCC, the G20, and every other forum in which climate finance is discussed? Personally, I think not. Prime Ministers Meles of Ethiopia and Jen Stoltenberg of Norway are both honourable and committed, but I think they let their fellow Members off the hook. I can’t believe that if Gordon Brown had been able to continue as co-chair, he would have tolerated the lack of resolution that characterises the final report.
Do you know what I would have done in Ban Ki Moon’s shoes? I would have refused to accept the report as it stood. I would have pointed to paragraph 4 of the terms of reference (‘the Group will develop practical proposals’) and to paragraph 5 (‘the Group will provide views and suggestions’), and I would have sent them back to write another draft. Maybe they would not have been able to reach agreement, in which case there would have been a majority and one or more minority reports. Or maybe the embarrassment of failing to agree would have concentrated minds.
It is too late for that, but there is another option, which is for Ban Ki Moon to refuse to let the group stand down - or, more diplomatically, ask them to continue their work. In that case, the November report would be considered as an interim report, with the proper, political report, to follow. Perhaps Ban Ki Moon feels that this a step too far for him to take. In any case, the original idea for a High Level Panel was in the Copenhagen Accord (Para 9). So maybe the UNFCCC should take this up, and re-commission the same team to finish the job. Felipe Calderon is President of Mexico and host of this year’s Conference of the Parties in Cancun. How about it?
To vote on whether Ban Ki Moon should ask the Advisory Group on Climate Change Financing to write a new report, clickhere.