8 Climate change and development cooperation
| (24363)
7523/03
COM(03) 85
| Commission Communication on climate change in the context of development cooperation
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| Legal base | — |
| Department | International Development
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| Basis of consideration | Minister's letter of 24 August 2004
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| Previous Committee Report | HC 42-ix (2003-04), para 24 (4 February 2004)
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| To be discussed in Council | Not applicable
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| Committee's assessment | Politically important
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| Committee's decision | Cleared (decision reported on 4 June 2003)
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Background
8.1 In mid-2003, the Commission proposed an EU strategy (and a
detailed Action Plan) for giving climate change a higher profile,
"mainstreaming" it into development cooperation work
generally, and tying it to the UN Millennium Development Goals[9]
for reducing poverty.
Scrutiny
8.2 When we considered this Communication on 4 June 2003, we cleared
the document but asked the Secretary of State for International
Development (Mr Hilary Benn) to provide us with an update in due
course on the development of the strategy.[10]
We considered his update on 4 February 2004, when, along with
noting much successful work by the Development Cooperation Working
Party, he identified as controversial the issue of whether support
for the Clean Development Mechanism (CDM) — an international
greenhouse gas trading arrangement whereby investment in emission
reduction projects in developing countries would be rewarded with
tradeable permits that could be used to contribute to an industrialised
country's compliance with its emissions reduction target —
could be reported as overseas development assistance (ODA). He
stated that the Government was opposed to this notion, commenting
thus:
"Using ODA funds in this way can be interpreted as tied aid.
The primary objective of ODA should be poverty reduction and changes
in ODA resource allocation should not be made if the impact on
poverty reduction is compromised."
Given the political importance of this issue, we asked the Government
to give us an opportunity to scrutinise any such proposal before
the Council took a decision.[11]
The Minister's letter
8.3 The Minister has brought us up to date in his letter of 24
August 2004. He reports that the OECD's Development Advisory
Committee (DAC), which includes major non-EU donors, has been
examining whether ODA could be used (a) to purchase emission credits
and (b) to finance CDM projects. The former (which the Government
opposed) was ruled out. But the latter has been more troublesome.
Of the two options on financing CDM projects — no reporting
of public expenditure as ODA, and unrestricted reporting —
the UK argued for no reporting, on the grounds that the alternative
would compromise both the agreement made by parties in the United
Nations Framework Convention on Climate Change (that public funding
for CDM projects from developed countries should not result in
the diversion of ODA and should be separate from and not counted
towards the financial obligations of developed countries) and
the commitments made in the Monterrey Consensus (on increasing
the level of ODA to 0.7% of GNP). However, others — notably
Japan, the Netherlands and Denmark — strongly supported
unrestricted reporting.
8.4 Consensus finally emerged around a third option,
allowing ODA to be invested in CDM, but with the value of all
emission credits generated (whether sold or retained by the donor)
being deducted to arrive at a measure of net ODA. The Minister
says: "It was imperative that a compromise was reached, since
the default option effectively allows for unrestricted reporting".
The DAC accepted the compromise option in April 2004. What he
describes as "an informal task team, which includes a representative
from DFID" is shortly to begin work on the technical aspects
of this compromise.
Conclusion
8.5 We thank the Minister for the update, although
it would have been preferable for it to have been submitted —
as we requested — before, rather than after, agreement was
reached on the outcome.
8.6 It is also regrettable that the Government
position did not prevail, since it is soundly based. But the
unwillingness of such a major donor as Japan to co-operate effectively
doomed the "purist" position. And the outcome has at
least minimised the amount of Clean Development Mechanism expenditure
that can be claimed as overseas development assistance.
8.7 This document was cleared on 4 June 2003.
9 The development goals in the UN Millennium Declaration
include eradicating extreme poverty and hunger, achieving universal
primary education, promoting gender equality, reducing child mortality,
improving maternal health, combatting AIDS, malaria and other
diseases, and ensuring environmental sustainability. Back
10
(24363) 7523/03; see HC 63-xxiii (2002-03), para 12 (4 June 2003). Back
11
(24363) 7523/03; see HC 42-ix (2003-04), para 24 (4 February 2004). Back
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