W. STERK, H.-J. LUHMANN, F. MERSMANN| HOW MUCH IS 100 BILLION US DOLLARS However, while the AGF report provides an important point of orientation, key questions are still unresolved. One question is whether the 100 billion US dollars are to be taken as gross or as net flows. The pledges from Copenhagen and the following UN climate conference in Cancún are not clear on this point and the AGF report notes that its members were divided on whether gross or net flows should be counted. This issue is relevant, for example, when financing is provided in the form of loans. Should the full volume of the loan be calculated towards the 100 billion US dollars or only the extent to which the terms of the loan are more favourable than commercial loans, the so-called»grant equivalent«? In addition, the 100 billion dollars are supposed to come from public and private sources, which raises the ques­tion of how private finance should be counted. The AGF report notes that here again its members were divided. Yet another question is whether financial flows from emissions trading – such as the Kyoto Protocol’s Clean Development Mechanism(CDM) – may be counted to­wards the 100 billion target. The purpose of the CDM is to help industrialised countries meet their Kyoto targets by allowing them to substitute emission reductions on their own territory by emission reductions in developing countries. That is, emission reductions through the CDM are counted towards industrialised countries’ emission targets, not towards the emission reduction pledges of developing countries. Some AGF members therefore held that flows through mechanisms such as the CDM should not be counted. Others were of the opinion that they should be counted as they are policy-driven trans­fers. The relevance of these ambiguities is highlighted when one looks at the fast-start finance provided so far by industrialised countries. Most have uploaded data on the website www.faststartfinance.org. Many countries indicate that their funding is supposed to leverage addi­tional private financing but do not count this leveraged finance against their pledges. By contrast, Japan counts the full volume of leveraged private finance against its pledge. Japan also counts the full volume of the loans it provides, while for most countries it is not clear whether the provided funding is in the form of grants or loans. Most countries also do not clarify their baseline for de­termining whether the provided finance is»new and ad­ditional«. Observers assume that most of the fast-start finance is actually relabelled ODA. Developing countries have therefore been highly critical of the fast-start fi­nance provided so far. For example, Indian environment minister Ramesh stated during the Cancún conference that,»The fast-start finance is neither fast, nor has it started, nor is it finance«(The Economic Times 2010). Ramesh and others also reiterated developing countries’ position that a satisfactory agreement on climate finance is a precondition for coming to an overall climate agree­ment. Agreeing on accounting rules is therefore critical for the success of the UN climate negotiations. This study aims to contribute to this discussion. It first analyses the finan­cing sources identified by the AGF with regard to whether they involve gross or net flows. In addition, the financing pledges from Copenhagen and Cancún are compared to financing requirements. The study synthesises available assessments of the additional financing needs of devel­oping countries that result from shifting from the current high-emission to a low-emission development pathway. These financing requirements also need to be differenti­ated according to gross and net flows. Finally, the sources assessed by the AGF differ regarding the political level – national or international – at which decisions are taken and funds flow into budgets. The study will therefore differentiate the sources analysed by the AGF according to the level of decision-making and analyse the impacts of this differentiation. 2. Differentiation of Finance Sources According to Gross and Net Flows 2.1 Overview of Sources Assessed by the AGF The AGF distinguishes the following four categories of sources: public sources, development bank instruments, carbon market finance and private capital. Public sources are revenues raised by or from govern­ments and may be used for grants or loans. The AGF estimated all public sources on a net basis and excluded any incidence with regard to developing countries, for example incidence from charges on international avia­tion and shipping. That is, the estimates include only net transfers to developing countries. The AGF analysed the following sources from which public revenues could be raised: 3