Climate change finance is about social justice and people’s sovereignty.

The facts are beyond dispute: the dangerous build-up of greenhouse gases in the Earth’s atmosphere is the effect of two centuries of unsustainable industrial production centered in the North. It is a process organized around profit-maximization and excessive consumption, fuelled by the unaccountable and imbalanced overuse of non-renewable energy and natural resources. Responsibility for emissions and the depletion of carbon sinks lies principally with developed countries, corporations, and their flawed industrial model. Constituting a minority of the global population, they grew their economies and profits generating two-thirds of all historic emissions, consuming more than their fair share of the common atmospheric space.

Meanwhile, developing countries and the poor – constituting the majority of the global population – stand to bear the worst effects of climate change despite having little or no responsibility for causing it. Their lives and livelihoods are most vulnerable to climate change impacts. But having benefited the least from the profit-centered, high-growth, and high-consumption economic model, they are also least capable to respond and adjust to the effects of climate change. More so, they find their development paths and poverty alleviation prospects seriously challenged by a changed climate and a carbon-constrained world.

As most culpable for polluting the atmosphere, and as most capable in responding to climate change – a capability leveraged with a destabilized climate – developed countries, especially their elites, face a clear obligation to finance the costs of climate change response in developing countries. To redress inequities, financing must be compensatory and democratic in nature. Those who have inordinately benefited in the process that caused climate change should compensate its victims.

The compensatory financial transfers are to fund adaptation and mitigation in the developing world. First, funds must compensate developing countries and the poor for the losses and damages they incur from the adverse effects of climate change. It must also enable them to avoid future losses by adopting mechanisms and building capacity to adjust and respond to climate change.

Second, funds must compensate developing countries and the poor for having been denied the atmospheric space and the climate they need to overcome poverty and achieve human development. Because the low-cost, fossil-fuelled development path industrialized economies took without restraint is now an unsustainable option, financing must cover the costs incurred by developing countries in shifting towards a sustainable, low-carbon development trajectory. This would enable them to partake in the global effort to reduce emissions while addressing immediate poverty and development concerns

Existing climate change funds violate social justice and people’s sovereignty

Funds are not compensatory. Although developed countries have accepted their financial obligation as signatories to the United Nations Framework Convention on Climate Change (UNFCCC), their provision of funding is not based on the principle of compensation. Rather, they channel climate funding for developing countries as voluntary contributions. Channeled through new and existing bilateral and multilateral institutions, climate funds take the form of grants and loans. This means funds are owed to donors by developing countries, turning the obligatory relationship around. Worse, funds put poor countries further in debt.

Financial inadequacy and unpredictability are concrete results of the discretionary nature of funding. The cost of climate change action in developing countries is in the order of hundreds of billions of dollars per year. However, despite the proliferation of donor-controlled funding initiatives, the current level of actual or pledged funds do not approach even the most conservative estimate of the required funding level. Counted as part of donor Official Development Assistance (ODA), funds also do not represent new and additional funding in relation to developed countries’ long-unfulfilled 0.7 per cent aid targets to eradicate poverty and support human development in the developing world. This insufficiency and unreliability in climate funding is delaying urgent adaptation and mitigation actions in the poor countries, and hampers their compensation by the North.

Donors control the funds. The inequitable and unaccountable control of resources by the North and corporations is one root of the current climate crisis. This unfair arrangement is preserved in the governance structures and processes of existing climate funds.

The design of climate funds has been donor-driven. Poor and developing countries have been largely excluded from defining and setting policies and funding goals.

Donor country ministries control bilateral climate funds, with planning and disbursement to recipients occurring within existing, donor-influenced policy and partnership channels. Developed countries also wield effective control over almost all donor-funded multilateral facilities, despite affording representation to recipient countries in their decision-making bodies. In fact, any recipient representation in governing bodies may well be unimportant, as funding decisions would be made around measures built along donor-defined priorities, or programs with predetermined designs. The assessment of project feasibility and quality is donor-driven, and project flows are essentially restricted to autonomous staff and donor-selected implementing agencies (e.g. bilateral and multilateral development banks).

Funds influence domestic policy in favor of commercial and corporate-friendly solutions to climate change. Donors set criteria for recipient eligibility and selection, and make access to climate funds conditional to meeting these. Some such requirements include an active Multilateral Development Bank (MDB) program in the recipient country, and keenness to pursue policy dialogue on climate change with the donor. This means developing countries’ access to funds is contingent upon their agreement with donor policies and their commitment to align domestic policies with donor agendas on climate change.

The projects existing climate facilities are out to support spell out the climate agenda donors are pursuing in developing countries. Couched in the language of harmonizing environmental actions and economic growth, donors support technological fixes that allow for continued fossil fuel production and carbon emissions, all while creating new opportunities for corporate profit. Enshrined in the Kyoto Protocol, carbon trade succeeds in this twofold task.

Through capacity building and pilot demonstrations, donors disburse their funds to projects promoting developing country participation in carbon trading – specifically in the form of the Clean Development Mechanism and REDD (reducing emissions from deforestation and forest degradation) – and its integration into national policy and development strategies (see Box 1). By passing on the burden and impacts of mitigation to developing countries, these profitable mechanisms pose new risks to the poor, including the invasion of forests and displacement of indigenous and local communities. Likewise, it allows the North and corporations to sustain their inherently unsustainable high-growth, high-consumption industrial system.

The future climate change architecture is still being negotiated. But carbon trading and similar profit-centered mechanisms that absolve the North from their emissions obligations will have gotten enough traction in developing countries to leverage donor agendas in time for Copenhagen.

Put climate funds in the people’s hands

The current donor-controlled financial arrangement preserves the injustices that inhere in the overuse and the lopsided use of the planet’s common resources. It represents not only the North’s continued command over global resources, but also their power to define Southern agendas and direct Southern economies according to their needs.

In the place of corporate profits and infinite growth, social justice and people’s sovereignty must be at the center of the global climate change financial regime. Financing must redress the historical and social origins of the current climate crisis, and address the needs of those most affected.

Funding should be compensatory. The provision of funds by developed countries and corporate elites should be over and above the longstanding official aid commitment of 0.7 per cent of GNI. These funds should come in the form of outright fund transfers, not grants, loans, or any funding instruments that create debt. Financial flows should be sufficient, reliable, and mandatory.

Southern governments and peoples should have sovereign control over funds. Access to funding should not be tied with fulfilling policy conditions. The locus of funding decisions must be devolved to local levels, where funding priorities and strategies can be formulated with the democratic participation of communities. This should ensure that local needs are identified and prioritized, and existing local knowledge and initiatives are recognized and incorporated. This also requires transparency in funding processes, and efforts at mass information to enable marginalized groups to participate and make informed decisions.

To realize these changes will require people taking the lead in a sustained global as well as national response and action. To effect the democratic reorientation of climate funds, and to secure an equitable solution to the climate crisis in general, a people’s climate movement is needed. The People’s Movement for Climate Change (PMCC) is a movement that upholds the people’s rights for sustainable and equitable development now being threatened by climate change and the spurious solutions being put forward by the Northern establishment, including spurious climate funding mechanisms. With respect to climate finance, this movement asserts:

• The end to all bilateral and multilateral donor-initiated and -controlled climate funds.
• The end to the participation of International Financial Institutions such as the World Bank Group and regional development banks in climate financing.
• The rejection of debt-creating climate funds.
• The end to all policy conditionalities tied to climate funds.

The rejection of all funds and projects that promote the unsustainable neoclassical economic paradigm centered on corporate profit, infinite growth, and overproduction that has depleted the planet’s natural resources, exceeded the its carrying capacity, and increased social inequities.

The rejection of all funds and funding mechanisms that allow developed countries and corporations to sidestep their obligations to make large emissions reductions and reform their environmentally unsustainable economic models.

The rejection of all funds and funding mechanisms that privatize the common environmental space and threaten to displace local communities, including the trade in emissions and forest carbon offsets.

Endnote

1    Apart from funds in the Kyoto Protocol’s Adaptation Fund.