Climate cash must not increase third world debt: new Oxfam report

Campaigns and Advocacy, Media Releases article written on the 31 May 2010

Australia can advance the Copenhagen Accord and help re-build trust in the international process to fight climate change by committing climate finance to help poor countries deal with climate change at the UN climate negotiations which start in Bonn today (31 May), says Oxfam.

Oxfam Australia climate change coordinator Kelly Dent said the $178m of climate finance for adaptation committed by the Australian Government in the recent Budget (for 2011 – 13) needed to be increased, given Australia’s wealth and high per capita emissions.

“It’s disappointing that this climate finance is not additional to existing aid commitments, given that the Copenhagen Accord stipulates rich countries must provide ‘scaled up, new and additional’ funding,’ Ms Dent said.

Oxfam is releasing a report, The $100billion questions, which warns that the US$100 billion a year pledged by rich nations to help fight climate change could fail the poorest people, if recent moves to deliver climate cash as loans continue. 

“It’s becoming clear that a significant proportion of the first instalments of ‘fast start’ climate cash, to be delivered between 2010 and 2012, will be loans not grants,” Ms Dent said.

“At a time of economic emergency, when several poor countries are slashing critical health and education budgets to avoid a debt crisis, rich countries are considering saddling them with climate debt for a situation they did not cause and are worst affected by.

“It’s like crashing your neighbour’s car and then offering a loan to cover the damages.”

The report lays out a clear road map for how rich countries can not only meet their US $100bn a year promise, but also double it by 2020 in line with actual needs.  It suggests new and innovative sources from which to raise the cash, to ensure that governments do not raid it from existing and future aid budgets.  These include:

  • US $100bn a year from a global Financial Transactions or ‘Robin Hood’ tax on banks – a small tax of 0.05% that could raise US $400bn a year in total for health, education and climate change.
  • US $20-$30bn a year through the creation of emissions trading schemes for international aviation and shipping.  This would cap the amount of carbon emissions that could be produced by these industries, then charge them for each unit of carbon used.
  • US $75 bn a year in fixed contributions from rich countries according to their historic responsibility for carbon emissions and ability to pay.   This could be raised through the money from domestic emissions trading (or cap-and-trade) schemes or taken from budgets currently used for subsidising fossil fuels and carbon-heavy industry.
  • US $16bn a year by 2012 from the IMF in the form of low-interest loans for low-carbon development. Using US $120bn of rich country Special Drawing rights (SDRs) as capital, ‘green bonds’ could be issued, raising US $40bn per year that can be made available as low-cost loans for clean energy investments in developing countriesOf the US $40bn loaned every year, the net transfer (or savings) benefiting developing countries, is US $16bn.

The report also highlights the need for public sources of climate cash, to ensure the world’s poorest are not excluded from investments in their future. 

Whilst huge sums are needed from big business to create a global green economy, it is unlikely that companies will invest in small-scale projects with little or no financial return, designed to help poor people adapt to climate change, such as planting mangroves and developing irrigation systems. As 80 per cent of food produced in poor countries is grown by women farmers, relying on market forces to deal with climate impacts could pose grave threats to world hunger.

“Rich nations failed to deliver in Copenhagen,” Ms Dent said.  “Now they can inject a much-needed dose of trust back into the negotiations.

Showing they are willing to put their money where their mouth is will go some way to healing the deep rifts forged at last year’s climate summit, as well as helping to alleviate the plight of those living on the front line of climate change.”

Oxfam calculates Australia’s fair share of the US $100bn of climate finance, based on our historical responsibility and capacity to pay, is US $2.29b.

Read the report

For further information and interviews, please contact Laurelle Keough on 0409 960 100,