Blog Contributor:
Andreas.Huebers
Dec 16th, 2009 6:10 PM UTC
By Andreas.Huebers
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World leaders are arriving in Copenhagen Wednesday night and Thursday, but there has been slow progress in the negotiations. Therefore, they have to negotiate a long list of unsettled issues. Their very difficult task will be to build consensus – fast and wide-ranging. The pressure from personalities like Desmond Tutu, civil society and even the private sector is enormous.
Meanwhile, chances to get leaders to agree to “new and additional resources on top of existing and committed” funding are fading. There are two types of wording for additionality in the current draft [no consensus yet], one for fast track and one for long term financing.
Fast track funding (2010 – 2012) is supposed to be “new and additional”, which is to be interpreted as additional to existing ODA (funding) flows, whereas post 2012 funding is “scaled up, predictable new, additional and adequate.”
There will be a figure for 2010 – 2012 climate financing, presumably 10 billion, and an annex specifying the amounts per country. There seems to be relatively wide agreement on establishing REDD, but no intention to use carbon market mechanisms, so funding will come from the (limited) public sources. There is a general placeholder for aviation and maritime bunkers so support of a high level task force to investigate innovative financing seems sensible.
-Andreas Huebers, ONE’s German office
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Nov 13th, 2009 11:59 AM UTC
By Andreas.Huebers
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As the Copenhagen climate change summit draws closer, the question of how to support developing countries in adapting to climate change, and to enable them to access clean technology, is becoming a make or break issue.
On 30 October, the European Union put its numbers on the table, becoming the first climate negotiation partner to do so. The EU estimates that developing countries will need € 100 billion for adaptation and mitigation by 2020. A large part of that sum would be mobilized by the private sector and developing countries’ own resources. The EU says the remaining € 22-50 billion needs to be covered by donors, and the EU is prepared to contribute its share (presumably around 30%). In addition, the EU agrees that so called ‘fast-start’ international public support (of around € 5-7 billion annually) is needed in the 3 years before any climate agreement comes into force.
This is well below the Worldbank estimate that 75 – 100 billion USD is needed annually between 2010 and 2050 for adaptation alone (20% of which is for Africa), whilst African countries are themselves calling for 67 billion USD for adaptation for the continent.
Yet, the EU proposal is the only financing option with concrete figures on the table of climate negotiators at the moment, and ONE has welcomed it as a first step to unlock the negotiations. But much more work is needed.
The final round of pre Copenhagen negotiations concluded in Barcelona on 6 November with very limited progress and hardened positions. So much so that the African delegation – who for the first time in international negotiations are represented through a unified negotiating team and mandate – walked out of the room on the second day in protest.
Elsewhere the G20 finance ministers, meeting on 7 November in St. Andrews, Scotland, focused on climate financing but could not agree on tangible outcomes. The key question remains whether these funds will be additional to both existing and promised overseas development aid levels. The British government is the most progressive saying that not more than 10% of existing or promised aid levels should be spent on climate related activities. But the fact that the UK is the only major economy with such a proposal, shows that the financing figures currently being discussed could be taken from existing programmes to fight poverty.
With less than a month now to go before Copenhagen, time is running out on achieving an agreement that will provide that best possible deal for the world’s poorest people. If Copenhagen is to be successful is critical that policymakers take special consideration of these people, especially in Africa – both to address their disproportionate need to adapt to impending climate change, but also to work with the continent as a mitigation partner going forward.
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Oct 13th, 2009 4:38 PM UTC
By Andreas.Huebers
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For those unfamiliar with the term, certain countries are considered Heavily Indebted Poor Countries, or HIPC. These are countries that are eligible for special assistance from the International Monetary Fund and World Bank.
The annual “HIPC Status of implementation” report was published a couple weeks ago. There’s some very interesting information here:
In total 35 out of 40 HIPCs have qualified for assistance; 26 have reached completion point. Of the five remaining pre-decision point HIPCs only the Comoros might reach decision point in the next 12 months. The other candidates are either not working towards reaching decision point (Eritrea, Kyrgyz Republic) or find themselves in a governance situation that does not allow progress (Somalia and Sudan). So it will be interesting to see which countries can reach completion point. Given the status of implementation we can estimate this will be Afghanistan and Republic of Congo (Brazzaville) in 2009 as well as Liberia in the first quarter of 2010. Progress of the single biggest debtor at decision point, the Democratic Republic of Congo, is currently stalled, because the Bretton-Woods institution considers its debt sustainability threatened by the DRC’s plan to take a multi-billion dollar loan of the Chinese EXIM-Bank.
For the 35 post-decision-point HIPCs, poverty reducing expenditures between 2001 and 2008 increased by 2 percentage points of GDP, on average, while debt service obligations declined by the same percent. The total amount of debt cancellation now stands at $117 billion, out of which $72 billion was cancelled under HIPC and $45 billion was cancelled under MDRI – the Multilateral Debt Relief Initiative (all in nominal terms). This is an increase of roughly $5.5 billion in cancelled debt ($3 billion under HIPC and $2.5 billion under MDRI) since last year. The number of post-completion-point countries that are at risk of re-incurring unsustainable debt (especially due to the global economic crisis) has increased from four in 2008 to five now.
This last point is showing the importance of continuing and expanding the initiative. Post completion point countries must have a chance to maintain bearable levels of debt, even when shocks, such as the global economic crisis, occur. This can be done firstly, by providing grants rather than loans. Otherwise, financing the achievement of the MDG’s in many countries will be tantamount to reaccumulating unsustainable debt.
Secondly, a sovereign debt workout mechanism is needed. This is a comprehensive way to preserve the achievements of debt relief. Governments in the South and civil society have long been calling for such an “international insolvency procedure” for states. It would be applied by a panel similar to the arbitration panel structure of the World Trade Organization (WTO).
-Andreas Huebers
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Jun 1st, 2009 3:08 PM UTC
By Andreas.Huebers
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Africa has contributed least to the current climate change. In fact, UN statisticians have found that only 3.6% of global C02-emissions come from the African continent (see figure above).
In stark contrast, the continent is affected “first and worst”. Some examples include severe floods in Zambia and Mozambique, a shift in rain patterns in Uganda and in South Africa, and huge areas experiencing longer and more intensive periods of drought across the continent.
These are arguably only the first signs, with worse to come. According to the International Panel on climate change (IPCC), by 2020, some regions could see crop yields from rain-fed agriculture fall by nearly 50% and 75 – 250 million people additionally could be affected by lack of water.
It is not enough to just minimize the number of individuals further impoverished by these changes. The international community needs to find ways and means to help African societies preserve the gains made in the past several years. The affected communities will need significant resources to adapt to these challenges. There are many proposals on the table: a carbon tax on air travel or maritime transport, a global auctioning system of emission rights and many others. I believe that these funds will have to satisfy certain criteria. The need to be:
- Sufficient – funds generated are equal to the scale of the task. Existing estimates of annual needs vary considerably but could be as high as $86 billion annually (see table below.)
- Predictable – funds are generated in as stable and predictable a way as possible
- Equitable – funds will have to be generated in those countries that are responsible for the lion share of greenhouse gas emissions: the industrialized countries.
- Additional – funds are ‘new and additional’ to existing aid requirements
- Verifiable – funds are collected and disbursed in a transparent and verifiable manner
- Easy to implement – mechanisms that can be readily implemented should be favoured
Many new funds have been set up, but the volumes they have disbursed so far are rather ridiculous compared both to the task at hand as well as the number of funds (see the excellent overview).
 Raising new funds is one side of the coin, spending them efficiently yet another. Already African countries are complaining about an increasing numbers of donors at the country level which they have to coordinate and report to. In the Paris declaration and the Accra Agenda for Action donors have agreed to harmonize their procedures, increase transparency and work through the financial and procurement systems of the partner countries. A plethora of new funds would threaten the achievements of the international efforts to increase aid effectiveness. It is therefore essential to find a solid framework or governance structure for these efforts. The funds must be governed under a representative structure that takes the interests and perspectives of developing countries sufficiently into account.
It might seem close to impossible to sort out all the open questions raised above on a global level within 7 months, when a global climate treaty will be signed in Copenhagen, Denmark.
However, the public expectation and pressure is just about as gigantic. In the end, whether or not a historic deal will be signed in Copenhagen will depend both on the leadership of the negotiators as well as the pressure of a globalized civil society.
-Andreas Huebers
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Apr 22nd, 2009 4:01 PM UTC
By Andreas.Huebers
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Check out this post from Andreas in our ONE German office about how Earth Day can be an excellent time to begin thinking how developed economies can support the poor in a global climate deal.
Earth Day reinvents itself periodically to bring out its messages loud and clear. In 1990, 20 years after its foundation, it went global. 10 years later, in 2000 it successfully focused on global warming. The message could be heard by people on the continent that will be hit hardest by the climate change: Africa. A talking drum chain traveled from village to village in Gabon.
It seems like 2009 is another key year for citizens to raise their voices, as it is the year in which the governments of the world need to agree on a global climate regime. But to do this, they will need the support of their citizens.
Which steps will take us to the “Post-Kyoto-Protocol”?
The global climate regime is scheduled for agreement in Copenhagen in December 2009. In preparation, the UNFCCC has convened several high-level meetings. The last one before Copenhagen was convened in Poznan, Poland in December 2008. Progress on this meeting was somewhat hampered by the fact that it took place during a transitional period in the US. This means other forums for global governance will now need to guide the highly complex discussions that climate negotiators will conduct in Bonn in June and August, Bangkok in September and at a venue yet to be confirmed in November.
A first political push may come from the “Major economies meeting “ to be held in Washington on April 27th-28th. The leaders of the 16 major economies will then meet again at the G8-summit in La Maddalena, Italy on July 8th-10th.
Another major moment is the next G20 summit. Although the date has not been set yet, it will certainly take place before the conference in Copenhagen in December.
What is needed from our political leaders?
Political leadership must take into account the interests of the poorest countries. African countries have contributed the least to the current climate change yet they will be hardest hit and are the least prepared. Fairness demands that the industrialized countries support African countries in adapting to these new challenges. The climate change agenda is very closely connected to the development agenda. Estimates of the funds needed to finance necessary adaptation measures in developing countries range between 28 and 86 billion USD annually. These funds need to be additional to development financing, as critical funding to reach the MDG s cannot be diverted for this new challenge. In addition, developing countries need to be enabled to embark on a low-carbon growth path. Recommendations for the negotiators are listed in a research paper that ONE has co-financed with UK NGOs.
-Andreas Huebers
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Apr 17th, 2009 11:53 AM UTC
By Andreas.Huebers
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After freeing itself from a civil war, Liberia is now freeing itself from another major impediment to its development: a mountain of foreign debt. Little more than a year ago, Liberia’s foreign debt totaled $4.9 billion, equivalent to 700% of Liberia’s national income. This basically means all Liberians would have had to work for seven years without eating drinking or consuming anything just to pay off their debt to foreign creditors (and this is excluding the interests due during these seven years).
The country has chosen another path and embarked on a series of steps for which the support of creditors is indispensable.
The first step was taken when the country reached decision point under the “Highly-Indebted-Poor-Countries”-Initiative in March 2008. Liberia was originally named as HIPC-eligible but, due to its 14-year civil war, progress was limited. Under the leadership of President Ellen Johnson-Sirleaf, Liberia worked with major creditors to clear past debts, and at the same time creditors built in flexibility for Liberia in allowing a Staff-Monitored Programme of the IMF to count towards the requirement that countries demonstrate a track record of working with the international financial institutions. Although there were costly delays, the flexibility of the IFIs has offered essential support to Liberia at a turning point in its political and economic history. This first step only affected government-to-government debt.
This debt buyback is a second important step to ensure the economic viability of the country. As around 25% of the debt of Liberia was held by private creditors (hedge funds for a large part), it was essential to tackle this category of debt as well. With the financial support of the Worldbank and bilateral donors, Liberia has bought back the commercial debt that it owed to private creditors.
The third step, which has yet to be taken, is the completion point under the Heavily Indebted Poor Country (HIPC) Initiative. Liberia’s foreign debt is now down to $1.8 billion (still standing at around 250% of its national income). Most of this remainder will be cancelled when Liberia reaches its Completion Point. The creditors and above all the Worldbank, should continue to be flexible. They are setting and interpreting the triggers, which will decide when Liberia reaches decision point. One year has now passed since Liberia reached decision point. This means the minimum time any one HIPC country has to stay at decision point level is now over.
Therefore, the buyback is a good reminder to allow Liberia to take the third step and to rid itself of a debt burden that impedes the development of this increasingly stable post-conflict country.
Andreas Huebers
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Apr 7th, 2009 1:28 PM UTC
By Andreas.Huebers
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On March 31, Cote d’Ivoire reached the “decision point” under the HIPC-initiative. Cote d’Ivoire is the 29th African country to reach the decision point. The West-African country can now stop servicing around $ 3 billion worth of mainly bilateral debt and start spending it on urgently needed health and education policies instead. The debt stock will only be cancelled when it reaches the final stage of the Highly Indebted Poor Country Initiative (HIPC): the completion point.
At this point around $ 3 billion in mainly bilateral debt and $2 million USD in multilateral debt will be cancelled. The Worldbank and IMF are optimistic that this can happen rather rapidly. In the HIPC-process this means probably more than a year. The International Financial Institutions have good reasons to move Cote d’Ivoire to “completion point”: Cote d’Ivoire is a post-conflict country at a critical stage of its development. A Peace Accord between the government and the rebels was signed in 2007 and has proved stable since then. The interim debt relief that comes with reaching decision point is a good first step. But the benefits of full debt relief could contribute even more substantially in helping the country to stabilize and develop.
-Andreas Huebers
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