Climate Finance: Waiting For The First EU $1 From Pledged $100 Billion

Listening to Europe speak in Bonn, Germany during the recent conference on how to implement the Paris Agreement on climate change, it is possible to be get carried away thinking, nay believing, that the global response is well underway. But it isn’t. Talk of European progress and solidarity with developing countries is not enough.

The French President’s proposal to solve a problem that is on the horizon is promising. Starting 2018, the IPCC will have all the money that it needs, declared Emmanuel Macron. His camaraderie was aimed at plugging a hole in the organization’s €59 million 2018-2019 budget expected when the Americans finally absolve themselves of their responsibilities to solve a problem they substantially helped to create – and still do.

EU Commissioner for Energy and Climate Action, Miguel Arias Cañete, unreservedly and repeatedly boasted that, “we have over-achieved our Kyoto Protocol commitments” whether on reducing emissions or contributing to climate finance. And he was equally forthcoming with evidence.

“We have honoured all our commitments under the Green Climate Fund. In 2016 the EU and Member States contributed €20.2 billion in climate finance, an increase of 15 percent compared to 2015. We have improved our support for developing countries. We’re the biggest provider of climate finance for the Green Climate Fund.”

Quite remarkable accomplishments while the French have kept firm fingers on the levers at all their 58 nuclear reactors. And the Germans, as Chancellor Angela Merkel so forthrightly put it, still use a lot of lignite coal. As do the unyielding Poles who’re to host the next climate change talks. But these are challenges willing minds could imagine solutions for, of course.

For while Cañete was billowing a press conference room with the EU’s achievements, he was tiptoeing around a fundamental problem that poses perhaps the greatest challenge to implementing the Paris Agreement. He says the EU’s 2020 ambition is not only about reducing emissions; it’s also about solidarity with developing countries. A remark Merkel complemented, promising to double Germany’s climate finance contributions in 2020.

But these promises and pledges need to be converted into tangible form that can be used to implement climate mitigation projects, such as deploying solar and wind technologies to generate electricity in places like sub-Saharan Africa. It’s here the IEA says is at the “epicenter of the global challenge to overcome energy poverty.” Promises and pledges need to be seen influencing de-carbonisation in this region where 30 per cent of global oil and gas discoveries in the last five years have been made. Promises and pledges must now begin to change the lives of the growing population of sub-Saharan Africa, which was a mere 258m in 1984 and is projected to exceed 1bn in 2030.

But let’s set aside promises and pledges; just where can we find the EU’s €20.2bn to support developing countries?

“Up till now I don’t think we have received even 1 dollar of this $100bn that was promised,” is one answer from the Guinean president, Alpha Conde, chair of the African Union. Presumably that EU contribution went to the Green Climate Fund (GCF), where it’s likely being held, awaiting institutional changes in developing countries to match those in Brussels, the Bundestag or l’Elysée.

The EU has a responsibility to assume a greater leadership role at the GCF, which is the main fund established under the UNFCCC to lend developing countries money to implement climate mitigation and adaptation projects. The fund has done poorly in balancing the interests of its donors with the needs of those it was set up to support. It is a dolt’s enterprise to argue against the need for the fund to be sustainable – and certainly a prudent task to find a fine balance between donor’s interests and the multiple investment risks that comes with doing business in developing countries, most of which do not have as strong regulatory frameworks as do donor countries.

After a slow start, the GCF has been equally slow at providing funds to developing countries. As the UN chief António Guterres puts it, the fund needs to be “more relevant, effective and more user-friendly.” But many complaints haven’t changed what appears to be a strategy that delays providing funds by weighing risks. In fact, the process to access GCF funds is so cumbersome; it sets aside millions to fund its Readiness and Preparatory Support Program for countries seeking help “efficiently engage with the fund.” Or, to put it more honestly, access money.

It is not enough for Cañete to acknowledge that with regard to developing countries gaining access to funds, “many improvements can be made” while wearing a bemusing smile to remind everybody that “the EU is not part of the board of the GCF.” The subtext is unmissable: the EU recognizes these problems but the solutions are elsewhere. Being the third largest greenhouse emitter after the U.S and China, the EU must do more. EU promises, pledges, commitments and contributions don’t mean a thing if they don’t swing developing countries onto de-carbonisation pathways.

The marketplace of climate finance, both public and private, will face its toughest task yet in developing countries. There are multiple investment risks, from regulatory risks to political/economic stability, from foreign exchange rate risks to legally enforcing contracts, and to those connected with the credit-worthiness of developing countries. It is a sordid but unavoidable fact that solutions for these problems will not be found in the time we have left to save vulnerable lives in distant lands.

Developed and developing countries must work hand in gloves on a truly global problem. They tried before to sustainably feed perpetually starving millions in the African continent with mixed results and abandoned efforts. The central questions European leaders must now answer are: how to invest billions to build infrastructure that put developing counties on a de-carbonisation pathway in a financially sustainable way and second, who will pay? The EU delegation that European Commission Jean-Claude Juncker will lead to Macron’s One Earth Summit on 12 December must find candid responses to those questions. Going beyond camaraderie and promises will also help save the lives of millions in developing countries who are among the most vulnerable from the climate change-related disasters that are increasingly becoming the norm of our lives.