1. Deutschland Innovative Finance for Adaptation to Climate Change in Developing Countries - an NGO perspective - Berlin, 26 May 2008 Jan Kowalzig, Oxfam Germany

2. Deutschland Principles for funding New instruments for raising funds Conclusions & Summary Now

3. Deutschland Principles for funding

4. Deutschland Principles for funding: above all... Drive down the costs by avoiding the worst: Adaptation will become a mission impossible without fast, effective and massive mitigation -Limit global warming to below 2°C -Peak emissions by 2015 -Reduce global emissions by 80% by 2050

5. Deutschland 1/CP.13: adequate, predictable, new & additional Oxfam: fair & equitable, democratic & effective Address entire “funding chain”: Principles for funding Raising the money Contributing to mechanism Institutional arrangements /administering the funds Disbursement of funds predictable additional fair & equitable adequate democratic efficient needs based effective

6. Deutschland Principles for funding: “adequate” Current funding -LDCF+SCCF: ~$265m -Adaptation Fund: $80m-$300m per year, $100m to $5bn by 2030 -GEF SPA: $50m =less than 1 year US spending on suntan lotion Funding requirements -UNFCCC: $28bn-$67bn by 2030 -UNDP: $86bn by 2015 -Oxfam: at least $50bn ODA: ~$100bn

7. Deutschland Principles for funding: “new & additional” Additional to existing ODA commitments (0.7%): ODA needs (health, education, development etc.) should not be compromised. Funding is not aid but compensation. But: mainstreaming adaptation into development co- operation makes split difficult, and new funding from national budgets beyond ODA will be difficult. = instruments bypassing national budgets needed!

8. Deutschland Principles for funding: “predictable” Voluntary pledge-based system has failed Binding rules, commitments & quantified targets to realise necessary finance year by year, and get non- Annex 1 country buy-in to post-2012 regime De-linked from national politics (and elections), instruments bypassing national budgets

9. Deutschland Principles for funding: “fair & equitable” Grants not loans Crashing your car into one’s house and then offering a loan to repair it? Responsibility and capability: Level of funding based on polluter-pays principle and economic strength to address the crisis

10. Deutschland Principles for funding: “fair & equitable” II Greenhouse Development Rights (Ecoequity): -RC-Index for differentiation & graduation -Development threshold: minimum average income -Equity within national borders Adaptation Finance Index (Oxfam): -RC-Index for differentiation & graduation -Development threshold: minimum HDI Mexican proposal: Multilateral Climate Change Fund

11. Deutschland Principles for funding: “fair & equitable” III Taking responsibility & capability seriously: -EU: 27-32% of overall burden -Germany: 6-7% of overall burden

12. Deutschland Principles for funding: “democratic” Developing country control: -compensation, not aid -not attached to conditionalities -developing country majority Avoid proliferation of funds: -New money to go into UNFCCC Adaptation Fund -Emerging funding mechanisms to be folded into AF

13. Deutschland Principles for funding: “effective” Needs based and targeted on the poorest: Focused on vulnerable communities & marginalised groups, natural resource management Fast and easy access, also for NGOs, not only governments Integrated with development & PRS (but: ODA+) Incentivise further action: Insurance and risk sharing systems (but: avoid burden transfer to poor people)

14. Deutschland New instruments for raising funds

15. Deutschland New instruments: existing architecture Extending 2% levy to JI and IET: $10-50m by 2010, depends on demand relatively predictable, additional to ODA  low turnout, depends on JI/IET post-2012 markets Increase CDM levy to 3-5% (Pakistan) predictable, higher volumes, additional to ODA  penalises mitigation efforts (but links adaptation with mitigation), seen as adaptation burden transfer, depends on future demand for CDM

16. Deutschland New instruments: auctioning revenues Auctioning of a small portion of CP2 AAUs: Several $bn, depending on share (e.g. 5-10%) predictable, potentially high turnout, polluter-pays  motivates to negotiate for lax post-2012 targets, could be counted as ODA (depending on design) Auctioning maritime and aviation emissions: $22-40bn annually, depends on carbon price predictable, high turnout, polluter-pays, less sovereignty concerns, additional to ODA  depends on carbon price

17. Deutschland New instruments: auctioning revenues II Earmarking of regional/national ET revenues: EU-ETS: €8-20bn by 2013, up to €50bn by 2020 predictable flows, potential high turnout, polluter-pays  constitutional excuses, depends on carbon price, can be ruined by high influx e.g. of forest credits, can be counted as ODA (Germany). US: Liebermann-Warner Climate Security Act -$1bn by 2012, up to $6bn by 2030 for adaptation and national security

18. Deutschland New instruments: taxing polluters International Air Travel Adaptation Levy: $8-15bn annually predictable & high turnout, polluter-pays  can be counted as ODA Tuvalu Proposal for shipping and aviation: 0.01/0.001% levy on transport operations, <$100m predictable flows, polluter-pays  probably not very high turnout, can be counted as ODA

19. Deutschland New instruments: taxing polluters II Levy on fossil fuels sales, carbon tax Germany: €18-19bn in 2008 predictable flows once established, high potential turnout  issues of national sovereignty, can be counted as ODA Divert fossil fuel subsidies EU 2001: €22bn to fossil energy Mitigation link, high potential turnout  issues of national sovereignty, can be counted as ODA

20. Deutschland New instruments: insurance & risk sharing Insurance initiatives: Problem: insurance in low income high risk regions unaffordable, especially for the poor who also suffer most from disasters -Weather index based insurance that pays out on trigger rather than proof of loss (e.g. India) -Polluter-funded capital reserves can reduce costs for insurance holders -Directly subsidise premiums, or “in-kind” premiums e.g. adaptation measures (Germanwatch)

21. Deutschland New instruments: insurance & risk sharing Insurance initiatives, ctd: -Reinsurance cover for rare but extreme events through Annex 1 countries -But: premiums = burden transfer to poor people, will have to be recycled back to local society

22. Deutschland Conclusions & Summary

23. Deutschland Conclusions & Summary No special preference for any particular instrument Probably several instruments needed Tendency towards pollution-oriented instruments that link adaptation with mitigation Entire “funding chain” needs to be addressed: Raising the money Contributing to mechanism Institutional arrangements /administering the funds Disbursement of funds

24. Deutschland Conclusions & Summary II International Negotiations, next steps -Decide on level of finance required -Define “new & additional” -Identify possible instruments, including incentives, and addressing entire “funding chain” Raising the money Contributing to mechanism Institutional arrangements /administering the funds Disbursement of funds

25. Deutschland Conclusions & Summary III Criteria: -adequate: 50-86bn annually, grants not loans -predictable: binding commitments & reliable flows -additional: beyond existing ODA commitments -fair: responsibility/capability, EU share: 27-32% -democratic: developing country majority, channelled through Adaptation Fund -effective: easy access, focused on vulnerable communities & marginalised groups, natural resource management, incentivise further action, integrated with development (but: ODA+)

26. Deutschland Thank you.