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Our aid pledge: The climate dimension

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This post is part of the Australia's aid budget 2012 debate thread. To read other posts in this debate, click here.

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12 April 2012 16:17


This post is part of the Australia's aid budget 2012 debate thread. To read other posts in this debate, click here.

Nic Maclellan is a journalist and researcher in the Pacific Islands and author of the Lowy Institute Policy Brief Turning the Tide: Improving access to climate finance in the Pacific Islands.

In the debate over whether Australia will reach the development assistance target of 0.5% of gross national income (GNI) by 2015, one element is often ignored – our parallel commitment to provide 'new and additional' financing to assist developing nations to respond to climate change.

Given that global warming is likely to set back progress on key development objectives – poverty alleviation, food security, water supply, public health and infrastructure maintenance – the debate over whether Australia can and should reach the target of 0.5% needs to include analysis of the funding of climate responses.

Since Copenhagen in 2009, OECD nations have pledged to provide US$100 billion a year by 2020 for adaptation and mitigation initiatives. For Australia to meet its fair share of this global target, about $2 billion a year, requires a ten-fold increase in less than a decade (Canberra's existing allocation of 'fast track' climate financing for 2010-13 averages A$200 million a year).

Under the UN Framework Convention on Climate Change (UNFCCC), climate financing is supposed to be 'new and additional'. Developing nations have long said climate finance is 'new and additional' only if it is above the pre-existing goal, set in 1970, for developed nations to give 0.7% of GNI as Official Development Assistance (ODA).

As documented in my Lowy Institute analysis paper, the money currently pledged for adaptation and mitigation in Australia's 'fast-start' climate funding has been drawn from the aid budget. At a time when there was an expanding aid program and bipartisan support to increase the budget, this has not raised much public debate. But if there is now a move to ditch the 2015 target, there will be significant domestic and international reaction.

This debate is complicated by statements from Opposition politicians that, on winning government, they will cut funds for Australia's International Climate Change Adaptation Initiative from the ODA budget. In a 2010 debate at the National Press Club, Shadow Foreign Minister Julie Bishop stated:

In the last budget Labor put $300 million of Climate Change Adaptation money into the Foreign Aid budget and tried to claim that they'd boosted foreign aid. We will not do that. That is against the principles and guidelines laid down by the Copenhagen Climate Change Conference. We will not use climate change money in a way to say we're boosting foreign aid.

So where will the money come from?

Given Australia will need to find predictable long-term sources of finance to meet its share of the global commitment of US$100 billion a year by 2020, a proportion of revenue generated from carbon taxes could be allocated to international financing of adaptation and low-carbon development in developing countries.

However, this issue is off the table in current Australia debates, with the Gillard Government allocating revenues from its carbon tax to compensating low-income households, emissions-intensive industries and renewable energy programs. Given the Coalition has pledged to repeal the carbon tax, it seems unlikely to rely on this revenue stream for carbon trading or grant payments to developing countries!

The 2011 independent review of the effectiveness of Australia's aid program, headed by Sandy Hollway, made only brief reference to climate financing, but noted that Australia's fair share would be roughly 2% of the proposed US$100 billion a year in 2020. The review (p.158) suggests this could come from both private and public sources, with the aid budget allocating nearly $1 billion dollars by 2020:

If Australia's share were to stay at 1.9 per cent, with half funded through private sources, then by 2015, the Australian government’s ODA commitment would be US$0.5 billion and by 2020, US$0.9 billion.

The 'private sources' are most likely international carbon trading schemes under REDD, but recent critiques of AusAID-funded REDD- initiatives in Kalimantan suggest that this will not be easy to access in the short term. Neither major party has seriously discussed alternative revenue streams such as a Robin Hood Tax on financial transactions or taxes on bunker fuel, both discussed in a study by Bill Gates commissioned by President Nicolas Sarkozy for the Cannes G20 meeting in November 2011. This debate will have much greater significance in the medium to long term, as projected levels of climate finance grow and begin to match current levels of global aid spending.

The Hollway Review explicitly rejected the call from the developing world that climate financing should be additional to existing obligations to meet ODA targets of 0.7% of GNI:

Using aid budgets to finance climate change spending is often opposed by developing countries on the grounds it should be ‘additional’. Australia has argued that, with a growing aid budget, aid funding for climate change is additional. In any case, the objections raised by developing countries have not stopped donors relying on aid for their climate financing. On the contrary, all public sector climate funding is counted as ODA.

How well will this argument stand up if there's uncertainty over the 0.5% commitment?

Beyond targets for the reduction of greenhouse gas emissions, financing the transition to a low-carbon economy in the developing world is one of the central pillars of the UNFCCC negotiations. The failure to maintain our aid and climate obligations will impact on Australia's reputation on the international stage over the next few years, as countries move to finalise an international climate treaty by 2015. We risk alienating key trading partners in Europe as well as Asia by reneging on our international pledges, a problem exacerbated if we manage to win a rotating seat on the UN Security Council in 2013-14.

There is a whole other debate about the effectiveness of aid and climate financing, but many countries in our region will be looking at the bottom line of Australian commitments, especially as the MDG summit and the climate treaty negotiations are both held in 2015.

Photo by Flickr user Michael Connell.

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