A leaked Copenhagen draft on financing – and what’s really going on behind the scenes

Financing is the bedrock of the talks at Copenhagen this week. Developed countries must agree sufficient financing to poor countries to enable them to reduce their emissions and deal with the effects of climate change, or the developing nations have threatened to walk away – as demonstrated on Monday.

Ed Miliband, energy and climate change secretary of the UK, has been made one of the co-chairs of a group set up at the Copenhagen climate talks to draw up a new text on financing.

Groups have been set up on all the key subjects, and each is co-chaired by representatives from developed and developing countries. Miliband’s counterpart on the financing group will be the Ghanaian environment minister, Hani Sherry Ayittey.

It is a plum job for both countries. Miliband made it clear earlier on Monday that Gordon Brown, the UK premier who intends to be one of the first - if not the first – of the leaders to arrive at the talks, would take a deep personal interest in solving the financing issue. (Brown was for a decade the UK’s finance minister.)

Given the brief, Miliband and Ayittey are likely to be up all tonight, in the words of their aides “undertaking intensive consultations aimed at breaking through the deadlock on one of the toughest issues on the table in Copenhagen”.

But a leaked copy of the draft text for this group has been seen by the Financial Times, and it seems to make their lives rather easier.

Almost all of the difficult decisions have been deferred until next year, or cannot be decided until the end of the conference when leaders will converge on Copenhagen.

It appears that decisions on how the fund should work, its entire governance structures, its “guidance” and “accountability” – that is, who it should give money to and for what, and how we can be sure the money is warranted, and reaches its destination – will all be questions for next year, when governments meet again in long sessions to work out the details of the “political agreement” still hoped for in Copenhagen.

The decision on whether the fund should be governed by existing institutions such as the World Bank are also left out.

And, of course, there is no hint in the document of how much financing the developed countries will agree.

That, Miliband reiterated on Monday, would be “for the leaders” and would not be decided until the very last stages of the talks, which end this Friday.

We have known since before the COP that developed countries were not expected at Copenhagen to agree on their share of a global financing package for the developing world, that is expected to reach $100bn a year by 2020. Instead, they may agree on a headline figure for 2020, without saying how they will reach it.

But the absence of detail in this and other documents may become a worry for developing countries seeking to know whether the developed world is being serious or making vague promises in order to get them to agree on emissions curbs.

While we’re on the subject – another short note on financing. Developing countries want $10bn a year for the next three years in short-term or “fast-start” financing, to enable them to cut emissions and adapt to climate change.  Todd Stern, special envoy for climate change for the US, has taken to talking about a fund of “up to” $10bn by 2012.

While the European Union has promised Euros2.4bn a year for this fund, the US has made no concrete promises, although it speaks in private of a commitment of $1.4bn a year for next year, already in the government’s budget, and reassures developing countries that this is “only likely to go up”.

But Stern’s characteristically careful choice of language suggests that he may be planning to offer the developing countries a significantly weaker package than they are demanding. Or else he may be just pretending to, in order to keep everyone on their toes.

This is, after all, a negotiation.

Related links:

Are financial toosl the right instruments to help developing countries? (FT Energy Source, 11/12/09)
Failure to sign a treaty might not be so disastrous (FT ES, 06/11/09)
The Copenhagen positions of China and India: Not always what they seem (FT Energy Source, 03/11/09)

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