Industrialised countries have only paid about US$163 million towards helping the Least Developed Countries (LDCs) adapt to global warming - less than what Canadians spent on hair conditioner last year - says a new report by the UK-based development agency, Oxfam. But less than $10 million of this has been dispensed so far, the UN Development Programme's Human Development Report 2007/2008 pointed out.
"This is because the funds are controlled by the Global Environment Facility (GEF) [a 178-member international financing body that helps developing countries fund projects and programs that protect the global environment]," said Antonio Hill, Oxfam's climate change policy advisor. "[GEF] operates on the one dollar, one vote principle - like the World Bank - where the developed countries are in control."
The Least Developed Countries Fund (LDCF), controlled by the GEF, is one of two funds set up by the UN Framework Convention on Climate Change (UNFCCC) to help these countries adapt to global warming.
The Special Climate Change Fund (SCCF) finances projects related to capacity building, technology transfer and mitigation, and helps countries that are highly dependent on income from fossil fuels to diversify. The SCCF has received about $56.7 million of the pledged $67.3 million and dispensed less than $2 million.
The Oxfam report, Financing Adaptation: Why the UN's Bali Climate Conference Must Mandate the Search for New Funds, urged rich countries to pay up. It was launched on 4 December in Bali, Indonesia, while the meeting on global warming was taking place. Oxfam estimates that the developing world needs at least $50 billion a year to cope with global warming.
The Bali conference will look for a new deal to be put in place after 2012, when the first phase of the Kyoto Protocol, a commitment made in 1997 by 36 industrialised countries to reduce greenhouse gas emissions by at least five percent against a 1990 baseline, expires. Financing the developing countries' efforts to cope with global warming and adaptation are also high on the conference's agenda.
The annual UNDP report, which focused on global warming, noted that by mid-2007 only about $26 million of the multilateral financing pledged for adaptation under the broad umbrella of UNFCCC initiatives had actually been delivered to the developing countries.
"The funds received by the LDCF - $67 million - are less than what people in the USA spend on suntan lotion each month," the Oxfam report commented. Japanese shoppers spend ten times Japan's first pledge to the LDCF of $250,000 every day on air freshners.
The Adaptation Fund
Most rich-country policymakers cite an Adaptation Fund, which has yet to become operational, as the panacea for all financing problems, said the Oxfam report. The fund is expected to raise money from a levy of about two percent on credits generated by the Clean Development Mechanism (CDM) set up under the Kyoto Protocol.
The mechanism allows industrialised countries to earn and trade emissions credits by implementing projects in other developed countries or developing countries, and put the credits towards meeting their targets. The UNFCCC estimates that the fund will raise up to $300 million a year by 2030, depending on the level of demand in the carbon market, which is still too little to make a real difference.
Hill said the Bali conference would consider stricter compliance mechanisms for the post-2012 commitment period to ensure more funding became available.
"Now the developing countries under G77 [and China] are lobbying for the Adaptation Fund to be run by a stand-alone body and not the GEF," he said. "They are arguing that since the money for the fund will be raised through projects run by the developed world in their [G77/China] countries, they should have more say in the matter."
The G77/China were considering the option of a body under the auspices of the UNFCCC secretariat to operate the fund, or a board of independent experts, Hill added.
The Alliance of Small Island States (AOSIS) told the conference on 4 December that the UNFCCC should be the supreme body for the Adaptation Fund, according to the International Institute for Sustainable Development (IISD), but the LDCs said the fund needed an independent secretariat and management structure.
Oxfam has suggested other innovative mechanisms for raising additional finance, such as: carbon taxes; a passenger levy on international air travel; revenue from carbon-allowance auctions; transaction levies in national and global carbon-trading schemes; increasing and extending the CDM levy to other Kyoto instruments; and redirecting distorting fossil-fuel subsidies.
Hill noted that several countries have begun to explore possible new financing mechanisms. "Germany, for example, plans to auction nine percent of its carbon allowances in the second phase of the European Trading Scheme. This is expected to raise around £400 million [about $590.3 million], of which around £120 million (about $177 million) will be dedicated to financing developing-country adaptation."