Wednesday, 28 October 2009

Will the European Council be decisive? - Financing developing countries climate change needs

The outcome of the EU leaders meeting is critical to success in Copenhagen

Finance for developing countries is seen as the key issue for successful climate change negotiations at COP15 in Copenhagen.

The European Commission has estimated that poorer countries will need finance of the order of 100 billion euros per annum from the developed world by 2020.

However the EU finance ministers (ECOFIN) have been unable to agree an internal finance framework for EU Member States contributions, an issue which has already been deferred from earlier meetings.

Poland is reported to have taken the lead in asserting that Eastern European nations would not support 'unfair' proposals that they should contribute to funding climate change mitigation for developing countries; it should come from richer EU members.

Despite this position Poland and a number of other eastern and central European EU members are high CO2 emitting, coal dependent economies; Poland and the Czech Republic are amongst the top ten CO2 emitters in Europe. Some responsibility for climate change issues seems inescapable for them.

As a result of dissent the issue of climate change finance for developing countries was referred, once more unresolved by the European Finance ministers, for heads of state to discuss in the upcoming meeting of the European Council at the end of October. The text of 29-30 October European Council agenda item on climate change reads as follows

II. Climate change

The European Council will take stock of preparations for the Copenhagen conference on climate change in particular on the basis of the preparatory work conducted by the ECOFIN
and Environment Councils of 20 and 21 October. It will take the appropriate decisions,
including on all aspects of financing, required to ensure a successful outcome in Copenhagen.

'Appropriate decisions .....' Yes, decisions are needed.

A wider perspective

Poland's perception of the relative wealth of eastern European EU nations is entirely regional.In a global context their GDP per capita is too high (and their CO2 emissions too substantial) to be used as an excuse to opt of supporting developing nations vulnerable to climate change.

The World Bank International Comparison Programme looked at relative wealth of all countries in terms of a purchasing power parity GDP/capita index on scale in which the world average is taken as 100. Figure 17.1

Although the world financial hiatus will have altered some of the detail it nevertheless provides an indicator of relative wealth.

Figure17.1 'Relative wealth' of new EU Member States
(ICP GDP/capita ppp index with world average = 100)
(click image to enlarge)

All EU countries, including new member states are above the world average GDP/capita ppp index which is set at 100.

Many developing countries have Indices less than 30% of those of the least wealthy EU nations.

It is hard to see why solidarity among EU members should not prevail in order to help developing nations address their needs in relation to climate change.

Unraveling EU climate change policies

However other aspects of EU policies on climate change have been unraveling as a result of pressure from new EU member states.

Recently Poland and the Czech Republic were successful in persuading the European Court of the First Instance that the European Commission had exceeded its powers when reviewing the countries CO2 emission allowances for 2008-2012 trading period of the EU Emissions Trading Scheme (EU ETS)

This decision places the whole of EU ETS in jeopardy since a planned and progressive scarcity of allowances is necessary for a viable 'carbon market' to function.

Since emissions trading, and eventually a global carbon market, is a major plank in EU policy for reducing CO2 emissions and addressing climate change, further weakening of EU ETS would represent a major setback to the EU position and perhaps require reshaped policies.

While styling itself as a world leader in combating climate change the EU may be revealed as having feet of clay if it lacks internal support for its key climate change policies.

Agreeing a finance package to help developing countries seems to be a prerequisite for EU credibility in Copenhagen and the support of all EU members is needed. Within the EU equity can be served by each country contributing to the finance package according to their means.

It is important that that the leaders of European nations are decisive in the European Council and agree a finance package for developing countries climate change needs.