IATP's Shefali Sharma reports from The Hague where the Global Conference on Agriculture, Food Security and Climate Change has just concluded.
The closing plenary of the conference ended with a laser light show about answers to the climate change problem and its impact on agriculture. At the closing, the “Chair’s Summary” of the six-day conference was handed to the participants and speakers made references to the idea that this was a roadmap for domestic as well as international action and its implementation would depend on all that were gathered at the conference.
The outcome at The Hague, in the end, was a non-binding Chair’s summary. This is because both governments and civil society organizations raised serious concerns about the first draft of the outcome document that was distributed yesterday morning in which draft language stated, “We collectively developed the Roadmap for Action on Agriculture, Food Security […] to achieve the ‘triple win’ of improving agricultural productivity and food security […]”
Though the outcome document continued to have a “Roadmap for Action” as publicized prior to the conference, the language of the outcome document was watered down significantly from claims to a “shared understanding” to simply “Understanding the Challenges” in the final draft.
The organizers announced on Wednesday that the draft would not be a negotiated document but that inputs were welcome. Yesterday, Australia, Egypt, New Zealand, Philippines and the United States were just some of the countries cautioning that an outcome document that is not actively negotiated cannot claim to have a common vision for action. There was also a significant amount of confusion during the course of the meeting as to the intentions of such a roadmap.
A statement by 12 organizations, including IATP, responded to the first draft circulated yesterday by stating, “Those most impacted by climate change and whose livelihoods are most at risk, in particular small-scale farmers, indigenous people and women especially from developing countries, have not been present, or consulted, nor have genuinely participated in this process. A democratic and participatory process should have involved all sectors of civil society engaged on these issues in a process designed to genuinely engage and dialogue with civil society. The ‘roadmap for action’ drafted by a few cannot be claimed to have been ‘collectively developed,’ even by those present at the Conference.”
They further stated, “Our understanding of the problems and solutions differs fundamentally from the framing posed by the organizers. We believe that adaptation has to be the main priority of this conference. The agricultural challenges faced by the poorest and most vulnerable, in Africa but also in Asia, in small-island states, in Latin America, are adaptation challenges. While sustainable farming practices can provide mitigation benefits, the climate crisis is caused first and foremost by the emissions of rich countries and we reject that small farmers are meant now to take on the mitigation responsibilities of the North.” You can read the full statement here.
The second draft that was circulated this morning no longer had references to the “collective” and “shared” understanding. And the third and final draft in the afternoon made minor edits to the morning version. However, the outcome document remains a collation of a broad spectrum of ideas—none of them agreed and several of them controversial—that cover various propositions through the course of the six days of panels, side events and the ministerial roundtable.
Seventeen of the 26 pages are in the form of an annex whereby countries, intergovernmental organizations, companies and a few NGOs have listed the policies, strategies and “incentive mechanisms” they will use to carry out their vision of “climate smart” agriculture—a phrase that has been in popular use in the run up to this conference. Vietnam has offered to host a “follow-up” conference in 2012 as the outcome document claims to have created a “living Roadmap initiated during this conference.”
During the conference, the World Bank also positioned itself to expand its role into funding agriculture soil carbon sequestration projects through its BioCarbon Fund. Warren Evans, director of the Environment Division at the bank stated, “[…] for the first time, we have been able to move forward with methodologies for monitoring, reporting and verifying soil carbon sequestration from improved agronomic practices […]. This is particularly important because all of us here today want agriculture and soil carbon to be formally eligible for carbon payment in future climate agreements.”
A second major initiative that was announced today was the Commission on Sustainable Agriculture and Climate Change which will be launched by the Climate Change Agriculture and Food Security Program of the CGIAR and Earth System Science Partnership. The initiative is being supported by the Global Donor Platform for Rural Development. The initiative hopes to have a panel of nine senior scientists to act as commissioners. The commission would begin in early 2011 and aims to deliver “a clear set of findings” and policy recommendations on agriculture and climate change to feed into such processes as the UNFCCC COP17 and Rio +20 Earth Summit.
The U.N. High-level Advisory Group on Climate Change Financing (AGF) released their report today, outlining a series of recommendations on one of the most controversial elements of the global climate negotiations. Everyone agrees that money must be raised to help developing countries both adapt to the effects of climate change as well as reduce greenhouse gas emissions. But how much money, where the money comes from, and who controls it, are all stumbling blocks in the climate negotiations.
Last month, IATP and 25 other civil society groups wrote the AGF, calling for public finance options, including a financial transaction tax, to be given a priority over private finance options that depend on volatile and unreliable carbon markets. IATP's Steve Suppan wrote a paper last month outlining concerns with carbon markets as a reliable source of climate financing. Below is the press release issued today by civil society groups in response to the AGF report:
UN Advisory Group on Climate Finance Report Falls Flat
Recommendations Downplay Role of Public Finance, Rely Too Much on Private Finance
A new report on climate change financing options released today by a U.N. Advisory Group unwisely emphasizes carbon markets and other private finance options, while irresponsibly advocating an increased role for multilateral development banks (MDBs). Despite concluding that public sources of climate finance are available and promising, the report’s findings downplay the role that public finance can and must play in helping developing countries deal with climate change.
The U.N. Secretary General’s High-level Advisory Group on Climate Change Financing (AGF) issued its report today ahead of the annual U.N. climate summit in Cancún that begins November 29. The report outlines a number of public and private options to raise money to help developing countries adapt to the impacts of climate change and reduce greenhouse gas emissions.
“The AGF recommendations are unfortunately based on unduly optimistic econometric projections and a blind faith in the capacity of highly volatile and unreliable carbon price signals to induce long-term investments in low carbon energy production and manufacturing,” said Steve Suppan of the Institute for Agriculture and Trade Policy. “A better start on climate finance would be for developed countries to make good on their $30 billion pledge for immediate funding to allow developing countries to adapt agricultural production and water management systems to the imminent ravages of climate change.”
“It was inappropriate for the AGF Report to make reference to the role of multilateral development banks. MDBs are not a source of climate finance, but are used as a channel. And they are not acceptable even as a channel. MDBs are a part of the climate problem, not the solution. The World Bank and other MDBs are far, far more adept at causing climate pollution than in helping countries to mitigate or adapt to it. Using MDBs as a channel would also mean climate finance in the form of loans or other debt-creating instruments,” said Lidy Nacpill of Jubilee South – Asia/Pacific Movement on Debt and Development.
“Adaptation funding, in particular, is compensation for damages done by developed countries and should only be given in grants. It is untenable that the AGF suggests otherwise. The enormous costs of dealing with climate change must not add to the already heavy debt burdens experienced by many developing countries,” added Nacpil.
“The AGF report—as limited in scope and conservative in its estimates as it is—still shows that there are numerous viable options to generate public finance for climate change,” said Ilana Solomon of ActionAid USA. “Developed countries have no excuse for inaction. The options are there. They must work through the U.N. Framework Convention on Climate Change to come to agreement on a combination of public sources to generate the desperately needed resources to help developing countries confront climate change."
“The AGF acknowledges that meeting the needs of developing countries will take a ‘systemic approach’ to financing climate adaptation and mitigation,” noted Janet Redman, co-director of the Sustainable Energy and Economy Network at the Institute for Policy Studies. “Options like a financial transaction tax meet the mark: stabilizing the economy by curbing dangerous speculation and raising hundreds of billions of dollars each year for global public goods like combating climate change. The AGF is undercutting its own mission by underestimating the revenue generated by a feasible and popular source of public finance."
The groups expressed concern that the AGF was guided by a pledge developed countries made in Copenhagen to mobilize $100 billion per year by 2020 in public and private finance—a pledge which falls short of reasonable estimates of climate financing.
“The $100 billion is an arbitrary, political figure that is based neither on need nor on equity. If the U.S. government rapidly mobilized trillions to bail out Wall Street, why cannot at least equal effort be put toward bailing out the planet from a climate crisis that rich countries caused?” said Karen Orenstein of Friends of the Earth U.S.
In October, at the global climate talks in Tianjin, more than 25 civil society organizations sent a letter to the co-chairs of the AGF outlining their recommendations for climate finance.
ActionAid USA, Friends of the Earth U.S., Institute for Agriculture and Trade Policy, Institute for Policy Studies, Jubilee South – Asia/Pacific Movement on Debt and Development.
This week, the World Bank, the U.N. Food and Agriculture Organization and a number of governments are meeting in the Hague at the Global Conference on Agriculture, Food Security and Climate Change. The original goal was to develop a Roadmap for Agriculture that would feed into the global climate change negotiations at the United Nations.
One of the key obstacles to developing a joint approach on agriculture and climate change is financing: finding money to help farmers and communities adapt to the effects of climate change while reducing agriculture's contribution to climate change. Carbon markets have been one of dominant proposals for financing agriculture-related projects on climate change.
IATP's Shefali Sharma is in the Hague and delivered the below statement to conference participants on the risks carbon markets pose to food security and greenhouse gas reduction goals.
Between 2007 and the spring of 2008, the food price index shot up by 85 percent, then in a few months, agriculture commodity prices fell by 60 percent. The massive price spike and drop was devastating for developing countries, particularly net-food importers. The food price crisis drove another 150 million people into hunger. According to UNCTAD, the extent of price volatility during the food crisis cannot be attributed to supply and demand alone. There is now a wide consensus that speculation on commodity markets by financial traders had a significant role to play in creating the crisis.
In our discussions in the Hague on food security, climate change and “innovative finance," the discussion on speculation in carbon markets and their impact on agriculture commodities is glaringly missing.
Carbon and commodity markets are tied together through futures markets. And carbon trading is essentially derivatives trading. Unregulated derivatives trading, starting with mortgage-backed securities, was a major source of the current global financial crisis. This crisis is the reason most developed countries claim they have inadequate public funds for climate finance. Yet, carbon trading, to the scale at which it is being proposed, would create a large secondary market of carbon derivatives that has thus far been poorly regulated. When bundled with other commodities, such as maize, wheat or oil, carbon derivatives have a large potential to destabilize agriculture prices. A second way that carbon derivatives can destabilize markets is through over-the-counter trading: a preferred mechanism of financial speculators who can make unlimited bets in commodity markets through this window. In 2008, 44 percent of carbon traded on the European Emissions Trading Scheme was through over-the-counter trades. As a result the carbon price in the ETS has been highly volatile and low.
Land-based offsets included in carbon markets therefore have significant implications on land tenure, food sovereignty, biodiversity and the right to food. These linkages need to be carefully examined and have thus far been neglected as a topic of discussion in this conference.
Industrialized countries and their industries have a legal and historical responsibility under the UNFCCC to mitigate climate change. They should not pass this responsibility to countries who have had little to do with creating the problem, but who nonetheless will bear the largest impacts.
Reliable, predictable and public finance needs to fund adaptation needs in developing countries and there are several proposals including carbon, transport and financial transaction taxes that are on the table that should be considered.
IATP's Shefali Sharma is reporting from the Global Conference on Agriculture, Food Security and Climate Change at The Hague.
It is the fourth evening of this six-day long conference, which promises to deliver a “roadmap” of concrete actions on agriculture, food security and climate change through a participatory process. This evening, a draft copy of the roadmap is supposed to be made available at the conference center with the announcement that this was “not going to be a negotiated text” and that only a “chairman’s summary” would be produced as the outcome of the meeting.
For three days now, the meetings have continued nonstop from 10 a.m. to 8 p.m. with plenaries morphing into working groups, morphing into numerous side events and an investment fair in the evening. Participants have complained about not having any breaks or enough time to engage on the numerous topics. The conference has been dominated by panels and confusion has reigned with regards to the objectives of such a “roadmap” that will simply be delivered onto the participants in a top down manner. Certainly, the chairmen’s summaries of what happened in working groups the day before illustrates that the conference is not meant to necessarily capture the diversity of views (and there are many, with little consensus on anything!), but steadily drive towards a planned outline of a “roadmap.”
Such a shell of an outline was handed to participants today with the headings such as: “Shared Understanding of the Challenges,” “Shared understanding of the Solutions,” “Urgent Need for Action,” and “A Roadmap for Action.” This latter heading is further divided into “Policies and Strategies” for the catch phrase of the conference: “climate-smart agriculture,” “Tools and Technologies for Climate-Smart Agriculture” and “Financing for Transformational Change.” And yet the working groups have not necessarily been addressing these issues in any meaningful way, nor has there been adequate governmental and civil-society participation in the debates or time to merit a “shared understanding.”
The conference appears to be dominated by agribusiness interests and those promoting opportunities for carbon-related offsets and market-based approaches to solve the climate crisis in agriculture sector in the Global South. The words “mitigation” and “adaptation” have been used interchangeably, particularly by representatives from industrialized countries such as the U.S. and New Zealand, raising concerns that this so-called “roadmap” of the chair of the conference will simply ignore the legal obligations of industrialized countries who are party to the UNFCCC to reduce their own carbon footprint and greenhouse gases domestically and to set the stage for carbon offsets in agriculture.
In response to the proceedings of the conference, Bolivia and Nicaragua on behalf of the ALBA group of countries (Bolivia, Cuba, Ecuador, Nicaragua and Venezuela) made 13 recommendations to the conference organizers regarding the chairman’s summary as the outcome document of the conference.
They noted that “a process that genuinely seeks to draw together the linkages between agriculture, food security and climate change should involve government delegates from both the agriculture and climate change sectors in order to support fair and effective solutions to the agriculture and climate crises.“
They called on the chair to “honor the commitments” under the UNFCCC on mitigation, adaptation and financing. They said, “Developed countries should not shift the burden of reducing their emission to developing countries through the carbon market and offsetting […]” Instead, they called for a “holistic framework” that also includes water management, biodiversity, agricultural prices, commodities markets, livelihoods, employment, salaries, womens’ and indigenous rights and poverty reduction.”
The ALBA group also supported the findings of the International Assessment on Agriculture Science Technology and Development (IAASTD) and referenced the World People's Conference on Climate Change and the Rights of Mother Earth held in Cochabamba on April 2010. They stressed that ecological agriculture “is the route to food security and adaptation to climate change” and as such adaptation should be the main priority of the conference. They noted that a market-based approach will lead to carbon speculation “and inevitably a carbon bubble. On the contrary, we need to get non-sector speculators out of food futures markets. Speculation in food security that leads to mass malnutrition is immoral and should be illegal,“ they said.
They concluded by emphasizing the Adaptation Fund of the Kyoto protocol as the appropriate channel for financing and stressed that further funding could also be obtained through Special Drawing Rights at the International Monetary Fund.
Tomorrow begins the ministerial roundtable to deliberate on the chair’s summary.
This Sunday, the Netherlands, several other governments, the World Bank and the FAO are hosting a major six-day conference on agriculture, food security and climate in the Hague. Those closely following the climate talks believe that this conference is an attempt to include agriculture much more centrally within the climate negotiations of the U.N. Framework Convention on Climate Change.
In principle, that is a welcome idea—to finally address the air, water and land-related pollution that industrial agriculture causes and the dangers it poses to our health and the health of the planet. Agriculture, along with land-use changes, is said to contribute up to 30 percent of the gases that are warming our planet to dangerous levels. However, we must be able to recognize real solutions in addressing these problems.
The conference agenda shows scant evidence that the real causes of agriculturally based greenhouse gas emissions will be addressed. For instance, one of the biggest sources of agriculture emissions is industrial livestock factories. According to one FAO paper, the livestock sector contributes almost 80 percent of all agriculture-related emissions. Yet, industrial livestock factories do not appear to be a topic of discussion.
Instead the emphasis will be on finding “innovative” ways to finance adaptation to climate change in developing countries and “innovative” practices that can help small farms adapt to climate change. Innovation is well and good, only in this context it appears to mean carbon markets and “climate genes.” Up to 75 percent of these patented technologies are owned by multinational seed and agrochemical companies such as Monsanto, BASF, DuPont and Syngenta.
Civil society organizations, including IATP, concerned about this meeting and its intentions have joined together to send a statement to these governments, the World Bank and the FAO. They say it’s critical that governments heed the policy recommendations of IAASTD, a comprehensive assessment conducted by over 400 experts. They say that small family farms, laborers, indigenous peoples, women and civil society organizations are already providing practical, just and affordable solutions to the problems of food security and climate change. They just need to be heard.
 Others include Bayer, Dow, Mendel, Ceres and Evogene. Source: Syam, N. “Implications of an IP Centric Approach to Adaptation of Agriculture to Climate Change.” Power Point Presentation. South Centre, October 2010
We've posted an October 4 draft report of the U.N. High-level Advisory Group on Climate Change Financing (AGF). The AGF was set up by the U.N. Secretary General in February, following the global climate talks in Copenhagen, to evaluate and provide options for financing efforts to address climate change, particularly in developing countries. The AGF is expected to release a final draft in November, and present its findings at the COP 16 meeting in Cancún.
Prior to the climate talks earlier this month in Tianjin, China, IATP released a short paper outlining concerns that carbon markets are considered a reliable source for climate finance. While in Tianjin, IATP and other civil society organizations sent a letter to the AGF co-chairs expressing that the amount of climate finance being considered is not enough; public finance should be prioritized over private finance; multilateral banks should not serve as a channel for climate finance; and that carbon markets lack the necessary reliability for climate finance.
While agriculture is unquestionably one of the sectors most affected by climate change, it has historically been somewhat of an afterthought in global climate negotiations. That changed in the lead-up to the climate talks in Copenhagen last year. Agriculture now has its own sectoral chapter within the climate negotiations that covers such ground as food security, traditional farming knowledge, sustainable practices and a research agenda for better understanding agriculture's role in contributing to and addressing climate change. In addition to its own chapter, agriculture will certainly be affected by other aspects of the negotiations, including climate finance (how funding is raised and disbursed to address climate change).
IATP's Shefali Sharma just returned from Tianjin, China where the U.N. held its final negotiations prior to the next big global climate meeting (COP 16) in Cancún, Mexico in December. Shefali writes that despite the wide gaps between countries on many major issues, the stakes continue to be high for climate and food security around the world. In a post-Tianjin report, Shefali outlines the state of play for agriculture within the global climate talks and what we can expect to be discussed in Cancún. Read the full report.
One of the most contentious issues at the global climate talks taking place this week in Tianjin, China continues to be finance: how to fund efforts to adapt to climate change and mitigate greenhouse gas emissions. The global financial crisis has made these discussions even more challenging as developed countries like the U.S. struggle with rising deficits. To move the discussion forward, the U.N. established a High-level Advisory Group on Climate Change Finance (AGF) last year, which will present a report at the COP 16 climate talks in Cancún, Mexico in December.
Prior to the Tianjin meeting this week, IATP published a paper outlining our concerns with carbon markets as a reliable source of climate finance. Earlier today, IATP joined over 25 civil society organizations in Tianjin in expressing grave concern that the AGF “is not going to support the type of solutions that will truly benefit developing countries and communities living in poverty.” In a letter to the co-chairs of the AGF, the groups wrote that:
You can read the full letter here.
IATP co-hosted a side event at the United Nations Framework Convention on Climate Change (UNFCCC) climate negotiations in Tianjin, China earlier this week. Below are the remarks of IATP President Jim Harkness. Other speakers at the side event included Nick Berning and Karen Ornstein of Friends of the Earth along with a Bolivian UNFCCC delegate on how carbon markets are being treated in the negotiations.
A reliable and practical source of climate finance?
Remarks of IATP President Jim Harkness at the UNFCCC climate negotiations in Tianjin, China. Presented October 5, 2010.
Thank you for joining us today. My name is Jim Harkness.
I am the President of the Institute for Agriculture and Trade Policy. We are a 25-year-old organization that works locally and globally to ensure fair and sustainable
food, farm and trade systems. We are based in the United States, with offices in Geneva, Switzerland. And we have representatives on our board of directors from Brazil, the Philippines, Mexico, Canada and the Netherlands.
We’re here to talk about financing for adapting and mitigating climate change. Most of us believe that we will not have a meaningful climate deal without a clear system of finance in place to invest in a low-carbon economy and adaptation. We are at a critical juncture in this discussion. As you know, a draft decision on a climate finance fund is expected in Tianjin. Also, the Secretary-General’s High-level Advisory Group on Climate Change Financing (AGF), which was formed after Copenhagen, will be presenting a draft report on climate finance shortly after Tianjin and a final report before Cancun.
Much of the discussion in Copenhagen, and throughout the climate debate, has focused on carbon markets as a primary source of climate finance. Of the $100 billion a year by 2020 committed to “be mobilized” by developed countries within the Copenhagen
Accord, much of that climate finance is expected to come from carbon markets. Many have argued that carbon markets are necessary because developed countries no longer have the public resources for climate finance. It’s important to note that one reason developed countries are facing such financial constraints is the recent bailout of the financial services industry following a decade of its deregulation and spectacular
near-collapse. We are deeply concerned that the global community is now being asked to trust this failed and unrepentant industry—which has fought regulation following its bailout—to provide adequate climate finance through carbon trading. We believe that carbon markets will not result in reliable and timely financing for the critical projects around the world that are needed to adapt to climate change and reduce greenhouse gas emissions. And, having studied the role of poorly regulated financial markets in the global food crisis of 2007-08, we are concerned that such markets will not only shift the burden of mitigation
to developing countries, but will also adversely affect food security, and undermine many important efforts to deal with both climate change and rising global hunger.
Carbon and agriculture markets are tied together through futures markets. Big financial firms, many represented here in Tianjin, have positioned themselves to invest in carbon derivatives. These derivatives would be based on the value of carbon emissions permits—given to industry by governments—and of carbon offset credits. And these carbon derivatives could bundle together permits and credits with each other and with other commodities, such as oil or agricultural futures contracts.
Carbon derivatives would be created and traded under regulations that oversee all commodity futures contracts, which include agriculture, metals, energy and oil. And here’s the crux of the problem. These commodity futures markets have experienced a decade of regulatory exemptions, exclusions and waivers that have led to excessive speculation by big Wall Street players. The result has been enormous price volatility and harm to many around the world.
Excessive speculation by big financial firms, like Goldman Sachs, on commodity futures exchanges are now well recognized as major contributors to the global food crisis of 2007-08. The U.N. Commission on Trade and Development (UNCTAD), a recent FAO committee report on agriculture price volatility and the U.N. special rapporteur on the right to food have all stressed the need to address excess speculation on these markets by big financial firms.
How do these firms distort futures markets and what exactly are the effects? The big financial firms use two key tools to game the system. One, commodity index funds bundle together up to 24 futures contracts for all types of commodities. So, within one fund you might have derivatives for corn, gold and oil all together. Because financial firms, unlike commodity users, are not limited in the number of contracts they can hold, financial speculator “weight of money” (the sheer size of their holdings) drives the prices of the indexed contracts. As these contracts are sold and new contracts are bought, the “weight of money” induces enormous price volatility, far beyond what can be explained by commodities supply and demand. This price volatility is also replicated in global food prices—this is devastating for poor consumers and for the small farmers who produce most of the world’s food.
Carbon derivatives could also be bundled within a commodity index fund. The price effect of bundling contracts of consumable commodities and those of carbon, a wholly artificial and legislated commodity, can be difficult to predict. Legislation that allows the unlimited “banking” of carbon emissions permits could result in a periodic flooding of the market with permits. The resulting price drop would undermine the environmental objective of raising carbon prices to induce long-term industry investments in clean technologies. The current practice of trading carbon offset derivatives before the offset projects are verified to have reduced greenhouse gases could likewise result in price volatility, if the carbon asset underlying the derivative turns out to be fraudulent.
What would happen to agricultural contracts tied directly or indirectly to the vastly capitalized $2 trillion carbon market of 2017 forecast by the U.S. Commodity Futures Trading Commission (CFTC) under a mandatory U.S. carbon market scenario? The mostly likely outcome is that the bigger market drives prices in the much smaller agricultural markets. If agricultural futures prices return to their 2007-08 volatility, net import food–dependent developing countries would be unable again to forward contract food grains at reliable prices, leading to increased food insecurity.
A second way speculators take advantage of exemptions from commodity futures market rules is through over-the-counter (OTC) trading. These are unregulated private trades between firms, rather than trading on public and regulated exchanges. By trading over the counter, these financial firms are able to avoid regulatory scrutiny since OTC trade data are not reported daily to regulators,
as is required of regulated exchanges. By claiming that OTC trades are “customized” and that the data is confidential business information, OTC traders gain an unfair price information advantage over public exchange traders
OTC trading is already common on the European Emissions Trading Scheme—accounting for 44 percent of all carbon trades in 2008, according to Point Carbon. Trading under the ETS has resulted in high volatility and low carbon prices. Low and volatile prices have not has spurred big emitters to invest in greenhouse gas–reducing technologies and practices, as required by the ETS legislation.
UNFCCC Parties will be asked to consider adopting another variant on carbon trading as a major source of climate finance currently pushed by one of the largest carbon trading lobbies. The International Emissions Trading Association (IETA) is made up of over 170 financial, law, energy and manufacturing companies. They are leading advocates for carbon derivatives. Their most recent proposal for financing is something called green bonds. We believe green bonds are also extremely vulnerable to excessive speculation.
Under the IETA proposal, financial firms would loan developing countries money—through a green bond—to engage in a carbon-reduction project. The carbon credit that would result from that project would serve as the collateral for the bond. IETA proposes that international financial institutions guarantee project loans in case of a developing country default.
Once again, if a carbon market is highly volatile, the developing country may not be able to cover that loan through the sale of carbon offset credits or other revenues. So, we have a scheme that puts developing countries into debt while guaranteeing the investment of financial firms. All under the guise of addressing climate change.
On the issue of climate finance, we need to start a new conversation and be open to new proposals and ideas. We need to answer such questions as: Who should provide the financing to address climate change? Who oversees that money and decides how it is spent?
We believe that those who are largest polluters historically have a responsibility to be the largest source of climate finance in accordance
with the convention—and not just countries, but polluting industries as well. There are a variety of taxes being discussed including carbon, transportation and financial taxes. Those should all be on the negotiators’ table.
It is absolutely essential that climate finance investments do not undermine food security, e.g., by displacing farmers from their land. Our goals should be exactly the opposite: to support sustainable agriculture that improves our ability to adapt to climate change, reduces greenhouse gas emissions, increases food security and strengthens rural livelihoods.
We strongly oppose the World Bank’s involvement in controlling a climate finance fund. This proposal would divorce climate finance from the normative and technical agreements of the UNFCCC—a grave mistake. The World Bank has an unfortunate history in its involvement with the Clean Development Mechanism and other climate related projects—as well as being a leader in pushing for deregulation in the finance sector.
Instead, we believe the Adaptation Fund, within the UNFCCC’S Kyoto protocol, is the appropriate place for climate finance funds to be held and distributed. We also support the establishment of a new fund under the convention, as proposed by developing countries.
We are interested in working with others to develop new, creative ideas on climate finance. We believe that new approaches to climate finance will only succeed in addressing climate change if they are consistent with the convention and are transparent, inclusive and equitable.
We have materials on the table that go into more depth on the issues I’ve discussed today. You can find all of our materials on our website: www.iatp.org. Thank you!
IATP President Jim Harkness and Senior Program Officer Shefali Sharma are in Tianjin, China this week monitoring the ongoing global climate talks that will serve as the final prelude to COP16 in Cancún later this year.
In a side event held today, entitled “Carbon markets: A reliable and practical source of climate finance?” IATP hosted a panel to discuss public finance mechanisms, market and environmental integrity in carbon trading, and consequences for sustainable agriculture. A press conference will be held on Thursday.
IATP's Senior Policy Analyst Steve Suppan has also written a new paper addressing the U.N. Secretary-General's High-Level Advisory Group on Climate Finance (AGF), entitled "Trusting in Dark (Carbon) Markets?" Read the press release below:
Climate finance can’t afford carbon markets
Influence of market speculators too risky for the future of the planet