So will Cancun deliver? Watch this space.

December 3, 2010

     By Duncan Green     

Robert Bailey is the Head of Economic Justice Policy at Oxfam.

With the Cancun climate negotiations kicking off this week, and anticipating a flood of articles questioning the process, I was going to write a post in defence of the UNFCCC. However, it looks like lots of other people had the same idea. So I’ll probably hang on to mine until the close of the meeting when perhaps the deluge of opinion pieces declaring the process dead (again) will eventually materialise.

In the meantime I thought I would write about governance arrangements for international climate finance. Keep with me – it’s not as boring as it sounds.

Climate change makes development more expensive. For catastrophic warming to be avoided, poor countries must follow cleaner, but more expensive, development pathways – ‘mitigation’. And for poverty reduction to continue, poor countries must build resilience among vulnerable communities and climate-proof their economies – ‘adaptation’. Rich countries, with more wealth and cumulative emissions under their belts, have agreed to pick-up some of these extra costs by providing climate finance.

Unfortunately so far this money has been drip fed through the existing aid architecture, resulting in a whole bunch of problems described here. Developing countries face a spaghetti bowl of donor-driven funding channels. This increases their transaction costs, as they spend time ‘shopping around’ different funds and donors, each with its own application and reporting requirements. The channels are typically either bilateral or through institutions like the World Bank where rich countries hold the purse strings and call the shots. This means that the money tends to go to projects which resonate with the latest donor fads, rather than to ones developing countries would choose themselves. Finally, the spaghetti bowl results in a lack of transparency and accountability – there are massive discrepancies between what donors pledge, and what comes out the other end of the spaghetti bowl.

More recently, an Oxfam paper found that money for adaptation is being crowded out, with an estimated 90% plus of climate finance flowing to mitigation projects. This is obviously bad news for the poorest and most vulnerable countries, where adaptation, not mitigation, is the overriding priority.

Why is this happening? It’s another symptom of the spaghetti bowl. There is a tendency among rich countries to prioritise mitigation over adaptation. Vulnerable countries are unable to provide an effective counterweight to this, because they are not fairly represented in decision-making bodies. A lack of transparency, and the absence of a single body able to take and overview of flows and ensure appropriate balance across adaptation and mitigation reinforces the status quo.

The good news is there’s a solution. And it’s high on the agenda at Cancun: a new global climate fund. Oxfam has some ideas about what this should look like of course . It must simplify the spaghetti bowl, not add to it. This means rich countries need to agree to put a significant amount of climate finance through the fund – at least half to begin with. It must provide developing countries with direct access to resources and fair representation on decision-making bodies. And critically it must ensure adequate funds flow to adaptation in the poorest and most vulnerable countries. This means a special window for adaptation to which there should be a minimum pre-allocation of resources, and the establishment of a new body responsible for monitoring flows and correcting imbalances.

December 3, 2010
Duncan Green