Public sector must lead way on climate finance – China

www.environmental-finance.com
11 June:

Governments from developed countries must lead the way on finance for climate change adaptation, mitigation and technology transfer, said a negotiator for China today at UN climate talks. Speaking on the sidelines of UN climate talks in Bonn, Zhu Liucai told Environmental Finance that public financing plays "a crucial role" in future funding mechanisms to support developing nations.

"Public finance can play a catalytic role, to leverage the private sector," Zhu said. "If everything depends on the market itself, then why are we here?" China has proposed that 0.5-1% of developed countries' GDP each year be put into a central fund to finance technology transfer, climate change adaptation and mitigation measures, and capacity building in developing nations.

Zhu noted that governments were able to find public funds for economic stimulus packages, to the tune of 1-2% of GDP - more than the cost to fight climate change. Not addressing climate change could cost 5% of GDP each year, he said, citing the Stern Review, a UK-government commissioned study on the economics of climate change. China's proposal "would help with the green recovery", Zhu added.

Meanwhile, a proposal from Mexico, which would see all countries contribute to a central fund based on their historic and current emissions and GDP, seems to be gaining traction in the talks, according to negotiators, although nothing has been ruled out yet.

Norway has put forward another popular proposal, which would see a set percentage of Assigned Amount Units - or whatever allowances are issued post-2012 to governments which adopt targets - set aside for sale, with the money used to support developing nations. "No matter how you twist it, you still see industrialised countries paying 90% of the bill," commented a European negotiator.

The Mexican proposal, said another, is "very well placed in the race - there is no real opposition to the idea, which is everyone pays something". However, the negotiator noted that this proposal is estimated to collect less than $10 billion a year - estimates of the level of finance needed to support adaptation measures range from $10 billion to $100 billion each year. And since the funding would have to be approved by each country's legislature each year, it runs the risk that domestic politics could derail international commitments, he said.