December 2009 Copenhagen 2009: How to Finance Climate Policy STEFAN STROHE Summary The upcoming United Nations Climate Change Conference in Copenhagen, December 7 th - 18 th 2009, is an opportunity to design a new climate agreement to replace the Kyoto Protocol, which will expire in 2012. This fact sheet outlines the positions of the main countries and groupings with regards to curbing carbon emissions and sharing the financial burden. Background To keep the increase of global temperature below 2°C, the Intergovernmental Panel on Climate Change(IPCC) advises to cut global carbon emissions below 1990 levels, respectively by 40% until 2020 and 80% until 2050. Studies by the Stern Review on the Economics of Climate Change 1 and the World Wildlife Fund(WWF) 2 estimated the global costs as respectively US$ 500 billion and€ 200-350 billion annually until 2030. These amounts equal less than 1% of global GDP, whereas, by contrast, in 2008 military expenditures amounted to 2.4% of global GDP(US$ 1.4 billion). Moreover, the Stern Review concluded that in case of inaction, the effects of global warming could cut the world’s GDP by at least 5% (around US$ 2.8 billion) per year. Three main issues will dominate negotiations in Copenhagen: 1) targets for developed countries to reduce their carbon emissions; 2) measures to curb the developing countries’ future growth of emissions; 3) financial support from industrialized to developing countries. There are disagreements between parties in terms of commitments and implementation. And while scientists urge for a legally binding agreement, many of the main negotiating actors, including Yvo de Boer, the United Nations climate chief, anticipate a political agreement that will lead to further negotiations in 2010. Positions of Main Actors The European Commission(EC) insists that developing countries as well as industrialized countries have the responsibility to cut emissions. The EC plans to cut its carbon emissions compared to 1990 by 20% until 2020. Should other countries undertake similar actions, cuts could eventually increase to 30%. The Commission estimates the financial requirements for climate protection measures in developing countries by€ 100bn (around 0.2% of global GDP) per year between 2013 and 2020. The European Union(EU) and other developed countries should contribute 50%. The commission suggests three main sources for financing: About 60% should come from domestic public and private finance in developing countries as well as international public finance by industrialized countries. Another 40% should be generated by an international carbon emissions trading market. The EC promised to contribute about€ 15bn annually after 2013. However, there is still disagreement on sharing the financial burden among EU member states. Some EU governments block the Commission’s proposal as they refuse to make concrete financial promises to the developing countries prior to Copenhagen. The United States government under President Obama announced reducing carbon emissions by 17% until 2020 compared with the 2005 levels(which equals a cut of 7% below 1990 levels). By 2050 it intends to reduce its emissions by 83% below 2005 levels. The US Congress currently debates more ambitious emission­cutting targets(20% by 2020 below 2005 levels). The United States refused to ratify the 1997 Kyoto-Protocol as emission cuts were not imposed on rapidly developing countries like China and India and were considered damaging to the US economy. To date, the US has neither made any commitments to financial support for developing countries nor is the US willing to finance measures solely at their own expense without concessions from other nations. The US demands binding emission targets and more financial contribution from advanced developing countries, especially from China. Together, both countries accounts for 37% of total global emissions. China announced actions would mainly depend on concessions from the US. China opposes binding commitments for developing nations as this would reduce their economic growth and impede eradication of 1 http://www.hm-treasury.gov.uk/stern_review_report.ht 2 “The New Climate Deal”. WWF 2009: http://assets.panda.org/downloads/wwf_climate_deal_1.pdf