The UN Advisory Group on Climate Change Financing (AGF) held a high-level side event at the The United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP) 16 on Wednesday, December 8th, 2010, to formally present the findings of their recent Report of the Secretary-General’s High Level Advisory Group on Climate Change Financing to UN Secretary General Ban Ki-Moon.

The Report, released on November 5th, 2010 concluded that, while the goal of achieving $100 billion dollars annually by 2020 to assist developing nations with climate finance would be a challenge, particularly given the lingering global economic crisis, that it would, nevertheless, be possible.

Co-chairs Prime Minister Meles Zenawi of Ethiopia and Jens Stoltenberg of Norway led the presentation of key findings from the Report to a crowded room at Cancun Messe. The Advisory Group, comprised of 21 members, was established by the Secretary General in February 2010 to assess the feasibility of collecting climate finance funds and to identify additional financing resources. Prime Minister Zenawi remarked that, while the targets could be attainable, achieving them would be tremendously difficult if the price of carbon were set too low. He assessed that a minimum carbon price of $20-$25 per ton would be needed in order for the goal outlined to be plausible.

The AGF did not investigate the delivery mechanisms for these funds, nor explicitly delineate whether the funds would be primarily publically or privately financed, commenting that it was up to the Parties to determine these details. Since its release, the Assessment has been criticized for its emphasis on multilateral development banks (MDBs) and the potential implications for finance burdens to be shifted to the private sector.

The Report findings showcase three potential instruments for acquiring the funds, each with zero incidences upon developing countries:

1. Raise 30 billion per year by auctioning emissions.
2. Establish a carbon dioxide tax or emissions transaction fee for international carbon trades.
3. Reallocate funds from fuel subsidies in developed nations to lesser developed nations for climate mitigation and adaptation purposes.

The AGF cites the goal of establishing a pricing system for carbon to be twofold: 1. To serve as a source of revenue for less developed nations 2. To serve as an incentive for emissions reductions.

Following the AGF presentation, another of the member of the Advisory Group, Nicholas Stern of the London School of Economics, spoke expressing the need for an “economic industrial revolution.” Mr. Stern stated the group sought to outline the possibilities so as to better inform policymakers on their menu of options. Still, Mr. Stern’s words held strong ethical implications, stating that action with respect to climate change finance is a “matter of choice.”

The subsequent Q & A session included a strong rebuke from a Pakistani gentleman who had reviewed the report extensively in recent months, and had developed a formal critique which he had bound and printed for public distribution. The man dubbed the Report’s analysis “deeply flawed” by virtue of its assumptions based upon pricing of a volatile good-carbon- and what he perceived to be the implication of burden-shifting to the private sector. Eyebrows raised as he indignantly intoned his criticisms, going so far as to call the Report “a half-cooked idea” and charging that it would only add to the confusion over climate finance and further complicate matters.

The Panel responded to his critique stating that the Report does not attempt to identify the specific sourcing streams for the funding-public nor private- instead leaving those conclusions to policymakers. With respect to the volatility issue, the Panel remarked that it is wholly impossible to keep both prices and emissions volumes stable simultaneously, noting that variable pricing is inherent in any carbon dioxide trading schema, whereas a taxation system would provide greater market stability. They further noted that prices inevitably will vary under a scenario of capped emissions, and that emission volumes would necessarily vary if stable pricing were established.

Written by JPERRON.