Leaked documents reveal that the World Bank is anxiously awaiting the outcome of the Copenhagen Accord on climate change and is optimistic that it will play a leading role in future climate finance. Meanwhile, the looming gap in finance left unresolved in Copenhagen are turning attention to proposals for innovative sources, including those that involve the IMF.
Although approximately 120 national leaders participated in the Copenhagen negotiations, the final outcome was an Accord which was negotiated by a small number of countries, demonstrating a lack of transparency. The Accord is not legally binding and the United Nations Framework Convention on Climate Change (UNFCCC) has emphasized that its provisions have no legal standing within the UNFCCC process.
As part of the Accord, there is a proposal to raise $30 billion for fast-start finance until 2012, with $100 billion to be mobilised annually by 2020. The Accord further proposes setting up a Copenhagen Green Climate Fund to disburse money for mitigation and adaptation. According to sources inside the negotiations, large donors like the US, EU, Japan and others have exerted influence in favour of using the World Bank.
any climate finance generated must be managed through funds accountable to the UNFCCC
While the $100 billion pledge for a green fund is an important step, it will be comprised of public and private finance and creates no specific obligations for countries. The Climate Action Network argues that $195 billion is needed in public finance alone. Of all the pledges made, it appears that the only genuinely new and additional money was from the Dutch.
The UK, which pledged $2.4 billion in fast-start finance in December to kick-start negotiations, committed money that would largeley be taken out of the existing overseas aid budget and has previously been announced. Among that money is approximatley $94 million to go to a Multi Donor Trust Fund for Climate Change (MDTF) (See Update 68). However, in February Bangladesh is scheduled to meet with donors about accepting the MDTF funding since it is slated to be channeled through the World Bank, including approximately $8 million for the Bank in administration costs. “If this money is channelled through the World Bank and the IMF it will attract strings and conditions which are not favourable to Bangladesh”, said a spokesman for the Bangladeshi government.
IMF and new finance
A high level panel is being established under the Guidance of the Conference of Parties (COP) to assess potential sources of finance, which according to recent UN announcements will be chaired by UK prime minister Gordon Brown and Ethiopian prime minister Meles Zenawi. Innovative proposals include a tax on financial transactions supported by ActionAid, Oxfam, Greenpeace and others (see Update 68).
In Copenhagen, financier George Soros also put forward a proposal for the use of special drawing rights (SDRs), a reserve asset created by the IMF which is disbursed in proportion to IMF members’ shares in the institution, to provide a source of climate finance. At the World Economic Forum in early February, IMF managing director Dominic Strauss-Kahn announced that discussions were being held between the IMF and central banks about creating new SDRs to give to wealthy countries to offset their contribution to a green fund with the aim of reaching the $100 billion target. It is not clear if this is the same green fund under discussion in the Copenhagen Accord.
“There is an urgent need for developed countries to agree to new and innovative mechanisms to generate public finance for developing countries’ adaptation and mitigation needs,” says Ilana Solomon of NGO ActionAid. “Using SDRs for climate change could be part of the solution. However, any climate finance generated must be managed through funds accountable to the UNFCCC, where developing countries have an equal voice, rather than through the IMF or other institutions with an undemocratic system of governance.”
At the same time, others have expressed a strong reaction against Soros’ and Strauss-Kahn’s proposals. “Climate finance has to be offered as real resources, rather than reserve assets at an undemocratic institution like the IMF,“ says Lidy Nacpil of Jubilee South. “Furthermore, by offsetting their payments into a climate fund with SDRs wealthy countries are being relieved of paying their climate debt.”
Bank climate leaks
A leaked document from Katherine Sierra, vice president of the Sustainable Development Network at the World Bank Group (WBG) shows that the Bank is positioning itself to capture new funds. “[We] believe we are very well positioned and expect new demands for WBG support and opportunities for the WBG to demonstrate what it can deliver. These expectations assume broad support for the Copenhagen Accord, but even without it, several areas of work are likely to be needed and demanded by clients.”
“The WBG is particularly well positioned to serve as a channel for fast track financing for adaptation and mitigation … We have sent the message that the CIFs [Climate Investment Funds] are able to receive additional funding to support the fast track financing.
Meanwhile, the World Bank used Copenhagen like a dress rehearsal for a coming-out party, demonstrating its eagerness and capacity to play a central role in climate finance with a number of public events showcasing the CIFs (see See Update 60, 66 ). According to the leaked document, in 2009, the CIFs allocated $3 billion and leveraged an additional $27 billion, of which 30 per cent was from the private sector. Currently the CIFs can’t be converted into anything else or be continued beyond the point at which a new UNFCCC agreement is reached. In meetings with NGOs, Bank staff did however, emphasise that the Trust Fund committee of the CIFs, along with donor countries, can extend the funds if parties choose to do so at the COP.
At other events, Bank staff espoused the institution’s ability to coordinate with the UN, while UN agency staff seemed slightly more cautious about the relationship. Bank president Robert Zoellick also participated in meetings with country delegates and high-level legislators. The Bank launched the Carbon Partnership Facility (CPF) aimed at stabilizing and building carbon markets for the future, creating a programmatic approach to carbon finance, drawing in private sector partners and linking to existing Bank lending. The Bank also received a $50 million pledge from the US and $40 million from Japan which finally allowed it to launch the Scaling Up Renewable Energy Program in low income countries (SREP) which is meant to increase energy access through renewable energy use. However, civil society critiques have voiced concern that thus far, the programme appears to focus on attracting foreign direct investment rather than stimulating local development.
Looking to the future, Sierra’s leaked memo outlines plans for securing a significant role for the Bank. This includes an outreach campaign on the Bank’s role in climate finance to ministries of finance; presidents’ and prime ministers’ offices; and ministries of environment and foreign affairs. Furthermore, the Bank plans to demonstrate how its regular lending and grant instruments can support climate finance.
The Bank will also continue to reaffirm the importance of carbon markets in mitigation and implementation of national mitigation actions plans and will provide capacity building to prepare developing countries for them. This will include scaling up the CPF. Future plans are to be highlighted in the interim progress report on implementation of the Strategic Framework for Development and Climate Change, which will be released later this year.