House of Commons - DFID's Performance in 2008-09 and the 2009 White Paper

DFID's Performance in 2008-09 and the 2009 White Paper - International Development Committee Contents

3 Climate change

45. In June 2009 we published our Report on Sustainable Development in a Changing Climate which formed part of our submission to the White Paper consultation process.[81] We discussed and made recommendations on a wide range of climate change issues in that Report and have not therefore repeated our comments here. This chapter focuses instead on developments since our Report was published, particularly the commitments on climate change made in the White Paper and the outcomes of the Copenhagen Climate Change Conference in December 2009.

White Paper commitments on climate change

46. The White Paper notes that climate change will affect poor countries "first and hardest".[82] In some African countries, for example, agricultural yields are expected to fall by up to 50% if climate change is not addressed. There is also likely to be increased water scarcity, deforestation and sea level rises leading to flooding. Infectious diseases are also likely to spread more quickly due to temperature increases. These challenges threaten progress on poverty reduction. The White Paper sets out an objective of supporting poor countries to adapt to the impacts of climate change and to invest in low carbon growth. Published five months before the UN Framework Convention on Climate Change (UNFCCC) Conference in Copenhagen in December 2009, it argues that global collective action is needed to deal with the threat appropriately.

47. The White Paper said that the UK Government's aims for the Conference were to:

Agree a new global target for emissions cuts;
Allocate responsibilities for action between nations;
Set out ambitious new agreements on clean technology, finance, reform of carbon markets, forests, and adaptation for the poorest countries;
Ensure that the institutional architecture for implementing the deal is ready.[83]

48. The Government wanted the target for emissions cuts to be sufficient to limit global temperature increases to no more than 2°C. This would involve a 50% reduction in global emissions from 1990 levels by 2050. The White Paper stresses the need for developed countries to take the lead in reducing emissions. Developing country reductions should depend on development status: more economically advanced developing countries would be expected to make greater reductions. The Government also sought new agreements on developing and disseminating low carbon technology and reform of the carbon market.[84]

49. The White Paper emphasised the importance of ensuring adequate finance to help developing countries meet the costs of adapting to climate change and developing low carbon economies. We had made this point strongly ourselves in our Report, saying that substantial funding would be required and that this should be "new, additional and predictable".[85] DFID uses the UNFCCC estimate of required funding of US$120-$164 billion per year by 2030 and states that the UK will provide new and additional public finance for climate change over and above existing Official Development Assistance (ODA) commitments. It expressed the hope that this will convince other developed countries to provide additional finance. However the White Paper also states that DFID will "increase its poverty related expenditure on climate change recognising that part of the climate financing gap could legitimately come from ODA." It set an upper limit of 10% on the amount of ODA which could be used to fund climate change responses in developing countries.[86]

Copenhagen Conference: expectations

50. In our Report on Sustainable Development in a Changing Climate, we expressed concern that many countries were unwilling to put figures for greenhouse gas reductions on the table in advance of the Copenhagen Conference. We warned that "too many important decisions are being left until the last minute, with the danger that agreement may not then be secured."[87] In November the Secretary of State told us that he wanted a fair, effective and ambitious outcome, including a legally binding agreement.[88] At the time he thought the prospects for achieving this were good, although he acknowledged that negotiations would be difficult. He thought there was sufficient political will on the part of the important players such as the USA, China and India.[89]

Copenhagen Conference: outcomes

51. In December 2009 over 100 world leaders and many more officials and civil society representatives from around the world met in Copenhagen for the UNFCCC Conference to discuss a successor agreement to the Kyoto Protocol which expires at the end of 2012. After five days of heated discussions, at one point suspended when the developing countries withdrew their cooperation over the failure of developed countries to agree new emissions reductions targets, the Conference produced a non-binding political agreement—the Copenhagen Accord.[90]

52. The Accord includes a number of "intended actions" towards the goal of stabilising greenhouse gas emissions at a level which would limit the increase in global temperature to below 2°C. It does not set out specific emissions cuts or targets. Instead it asks countries to "co-operate in achieving the peaking of global and national emissions as soon as possible, recognising that the timeframe for peaking will be longer in developing countries." It asked the Parties to the UNFCCC to submit by 31 January 2010 their national pledges to cut or limit emissions of greenhouse gases between now and 2020.[91] This deadline was subsequently extended indefinitely by the then Executive Secretary of the UNFCCC, Yvo de Boer, who characterised it as more of a "soft deadline."[92] By 31 January, 12 Annex 1 countries and 26 non-Annex 1 countries had provided information to the UNFCCC.[93]

53. The Accord also included:

A statement of intention that developing countries will voluntarily cut their carbon emissions;
A commitment to provide $30 billion in funding over the three years to 2013 to help developing countries mitigate and adapt, including funding for reduced emissions from deforestation and forest degradation;
Agreement to work towards the goal of achieving US$100 billion annual funding for developing countries by 2020;
Agreement that the governance structure for delivering funding should have equal representation of developed and developing countries;
The establishment of the Copenhagen Green Climate Fund.[94]

There was no agreed deadline for creating a new internationally binding agreement. However, negotiations involving all parties, and based on existing texts, are set to continue in 2010 in the hope of agreeing a legally binding treaty in Mexico at the end of the year.

54. There was almost universal consensus amongst commentators that the outcomes of the Copenhagen Conference fell far short of what had been hoped for. The Financial Times, for example, said in an editorial:

The agreement cobbled together by the US, China, India, Brazil and South Africa is merely an expression of aims. It recognises the scientific case for keeping the rise in global temperatures to 2°C. It calls on developed countries to provide $100 billion a year in support of poor nations' efforts by 2020, but without saying who pays what to whom. It appears to commit none of the signatories to anything.[95]

The International Centre for Trade and Sustainable Development expressed a similar view:

Despite achieving agreement among the major economies—also known as the major emitters—whose buy-in holds the key to addressing climate change, the agreement reached in Copenhagen is insufficient to resolve the most critical elements that will stabilize the atmosphere, protect vulnerable communities from harm, and ensure the continued sustainable development of developing countries."[96]

55. We are disappointed with the limited and non-binding outcomes of the Copenhagen UNFCCC Conference set out in the Copenhagen Accord. The UK had admirable objectives but these proved to be unachievable. Much was made in advance of the Conference presenting a "once-in-a-lifetime opportunity" but it manifestly failed to live up to public expectations. The weakness of the outcomes represents a failure by the international community as whole. What is important now is for the major players to submit their national pledges to the UNFCCC as quickly as possible and for all parties to prepare to make firm commitments on emissions and climate change funding at the conference in Mexico in December.

Funding for developing countries

56. Our 2009 Report stressed both the need for substantial funding to help developing countries respond to climate change impacts and the necessity that this should not have an adverse impact on the funding available for DFID's work on poverty reduction. We therefore view the White Paper commitment to limit the amount of climate change funding which can be taken from existing ODA funding to 10% as a key statement of policy. We asked the Secretary of State how this 10% limit was decided upon. He explained:

10% reflects the fact that there are a number of our programmes already where it would be the judgment of Job to try and say, "This is exclusively poverty reduction" or, "This is exclusively climate adaptation". Indeed, I would argue that the Chars livelihood programme that you witnessed and I witnessed [in Bangladesh] is probably an exemplar of that. Similarly the kind of work we are doing in terms of the livelihood and forestry programme in Nepal, another example of where I would argue uncontroversially there are very clear poverty reduction and climate adaptation benefits to that portion of money.[97]

In 2010, DFID expects to spend about £400 million on climate change out of its total ODA budget of £7 billion. This would work out at approximately 6% of ODA.[98]

57. Ahead of the Copenhagen Conference the Prime Minister announced the creation of a "fast track" fund which would be available for developing countries for the period 2010 to 2103. He initially pledged £800 million for assistance with adaptation and for payments to countries which take steps to reduce deforestation.[99] The sum was later increased to £1.2 billion and then again to £1.5 billion.[100] However the Government was less clear about whether this funding was additional or would be taken from existing ODA commitments. After some probing we were told: "The £1.5 billion for the Copenhagen Launch Fund is new finance, which has not been previously announced, but it is not additional to ODA." We were also told that it would be within the 10% limit.[101]

58. We are pleased that the Government has set an upper limit of 10% on the amount of Official Development Assistance (ODA) which can be used for programmes to respond specifically to climate change impacts. We reiterate our view that climate change funding must be additional to development assistance, as it represents a new cost to developing countries, and must not divert existing and much needed poverty reduction expenditure. We recommend that future DFID Annual Reports specify the amount of ODA which has been allocated to climate change programmes during the reporting year and set out estimates for subsequent years. DFID should also encourage other bilateral donors to fix similar limits on the amount of funding pledged for poverty reduction which can be used for climate change work.

59. In the Copenhagen Accord, developed countries have committed to provide new funds of US$30 billion to help developing countries in the three year period from 2010 to 2012. This sum is intended as short term funding before new longer term funds can be mobilised. There is no indication of who will provide the funds or on what basis. To date the EU has pledged $3.6 billion annually. The USA and Japan have also pledged contributions, as yet unquantified.

60. The Accord also gave an undertaking to try to mobilize $100 billion per year by 2020 to address the needs of developing countries in the longer term. It notes that this funding will come from a variety of sources, "public and private, bilateral and multilateral, including alternative sources of finance".[102] However it does not indicate the balance between these sources or the proportion of the funding to be provided by different countries. Questions remain about the willingness of developed countries to commit to this in the current economic situation. Speaking after the Conference, US Secretary of State Hillary Clinton said, "the important point was not to talk about how we would fund money that we haven't yet agreed to fund, but to make the agreement that that is what we're going to do."[103]

61. There are many different estimates of the total amount of funding required. However $100 billion per year is less than most estimated costs of adaptation and mitigation for developing countries. In 2009 the World Bank estimated that between $140 and $175 billion would be needed to help developing countries take appropriate mitigation measures to keep temperature rises below 2°C.[104] A group of 50 African states put forward a figure of US$67 billion a year by 2020 to meet adaptation needs and US$200 billion a year for mitigation.[105]

62. The undertaking to allocate $100 billion per year by 2020 to assist developing countries to deal with climate change is a step in the right direction. However, at present it remains simply an intention rather than a specific pledge. We are disappointed that the sum promised does not yet meet our criteria of being additional, adequate and predictable. The UK must continue to work to ensure there is a realistic plan for raising the funding, based on specific commitments by each developed country. The first step would be to ensure that measures are in place to meet the US$30 billion funding target for the period 2010-2012, and that the funds are disbursed quickly, since climate change is already a reality for many developing countries. We recommend that DFID report to us within 12 months on the progress that has been made in this regard.

MANAGING CLIMATE FINANCE

63. It is important that an efficient and effective body is in place to disburse and monitor the millions of dollars which will be made available to developing countries. However, the management of climate finance is a contentious issue. We discussed with DFID whether the World Bank was the most appropriate body, given that it is already the channel for the majority of UK climate change funding for developing countries, or whether a new body created by the UNFCCC would be preferable. DFID argues in the White Paper that the aim should be to build on existing institutions rather than to create new ones, and that there should be a high-level coordinating body to make sure finance is allocated where it is most needed. It does not explicitly identify the relevant institutions although it does suggest that lessons can be learned from the World Bank-managed Climate Investment Fund boards which have equal representation of donor and recipient countries.[106] The Copenhagen Accord establishes the Copenhagen Green Climate Fund as "the operating entity of the financial mechanism of the Convention" and contains a provision that the governance structure should provide for equal representation of developed and developing countries.[107]

64. A significant portion of the short-term climate finance agreed for the period up to 2012 is likely to be channelled through the World Bank. A number of civil society organisations have expressed repeated concerns about the Bank's capacity to manage climate finance in a "transparent, participatory and accountable" manner.[108] BOND for example stated that:

Any future role for the World Bank with regard to climate financing should be dependent upon appropriate institutional reform, a shift in the World Bank group investment portfolio to ensure it is supporting low carbon development and a fit with an overall financial governance system that ensure that all decisions on finance distribution (nationally, regionally, sectorally) are taken under the auspices of the UNFCCC.[109]

65. In our 2007 report on DFID's relationship with the World Bank, we questioned whether the Bank should seek to take on the role of a "bank for the environment" as we feared this would detract from its primary objective of poverty reduction.[110] Our report on Sustainable Development sought assurances from DFID that it would be able to monitor properly the funding which it plans to put through the Bank, since it would not have a direct role in determining to which projects or programmes it was allocated.[111] The Government told us that it had rigorous mechanisms in place to monitor the UK's contribution to the World Bank's Climate Investment Funds (CIF).[112] More recently DFID told us that the CIF would "begin to show that adaptation and mitigation finance is feasible through the multilaterals"[113] While it argues that the UNFCCC must be the authorising body for finance, it says that only the Bank has the track record to disburse such large sums of money effectively. [114] The Secretary of State told us:

Our position […] is to say we recognise the legitimacy of the UNFCCC process and the primacy of the UNFCCC process in this whole area of policy making. Indeed, there were some concerns expressed in relation to the strategic climate funds which we were, I hope, genuinely able to allay on the basis of misunderstandings as to what would be the role of the Bank and ultimately what was our vision of the Bank's role in the future, given the concerns that both NGOs and some governments have expressed in terms of the environmental track record of the Bank in the past. In terms of Copenhagen, which will be key in determining this whole issue of new and additional funding for climate finance, we are clear that we see the UNFCCC as being the lead.[115]

66. We welcome the fact that the principle of equal representation of developing and developed countries has been acknowledged in the establishment of the Copenhagen Green Climate Fund. We share DFID's view that the UNFCCC should take the lead in determining arrangements for allocating new funding for climate change. It may be necessary for the World Bank to play a role in disbursing funds, in the absence of other competent mechanisms for channelling such large sums of money to developing countries. We would, however, reiterate our view that the World Bank's primary focus should remain poverty reduction. Moreover, DFID should take the lead in ensuring that steps are taken to allay the misgivings of recipient countries and civil society about the appropriateness of the World Bank taking on this role.

NEW SOURCES OF FUNDING FOR CLIMATE CHANGE

67. Our report on Sustainable Development suggested two different methods for raising funds through taxation to help developing countries in their response to climate change, including a tax on aviation.[116] The Government's response to our Report stated that the Treasury did not favour pledging money by law for a specific purpose, commonly referred to as hypothecation.[117] We were therefore surprised when a few months later we learned that the Government was considering a tax on financial transactions to help fund climate change response measures in developing countries. The Secretary of State told us there was as yet no agreement on this but that, as a result of the financial crisis, the policy space had opened up to have such a discussion at international level:

Traditionally, the British Treasury has not been the greatest advocate or the greatest fan of hypothecated forms of taxation generally, as the exchequer function likes the discretion to be able to allocate income against expenditure. In that sense I did see the Prime Minister's statement in St Andrew's as being an exciting opportunity rather than yet an achievement.[118]

A coalition of charities, unions and aid agencies has recently been formed to lobby the UK Government to push for a global tax on financial transactions, with the aim of raising up to £250 billion a year to be spent on tackling poverty and climate change and protecting public services.[119] The Prime Minister said in February that he hoped agreement could be reached on a "global bank tax" at the G20 Summit in Canada in June.[120]

68. New, innovative sources of finance will need to be found to help developing countries respond to climate change. Although there is as yet no international agreement on this, we broadly support the principle of a tax on financial transactions to raise money for this purpose. We recommend that the UK continue to work to secure agreement amongst its international partners in advance of the G20 Summit in June.

Transforming development practice on climate change

69. We have frequently stated that climate change should be central to DFID's work in developing countries. However, in our previous Report we commented that "we found that limited progress had been made on ensuring that climate change informs all policy decisions ('mainstreaming')" and that DFID needed to move on from discrete projects to comprehensive climate change programmes.[121]

70. The White Paper sets out how DFID envisages climate change will impact on the way it works in developing countries. It gives an undertaking to seek to integrate climate change into development policy and to conduct a strategic review of the UK's development programme to assess how it can improve its efforts. This will be piloted in eight countries and rolled out in all priority countries by 2013.[122] DFID told us it recognised that it had to do a lot more to integrate climate change properly "into the DNA of DFID" and acknowledged that it was "still climbing up the curve" on climate change.[123]

71. We have previously expressed our concern that DFID is not yet able to demonstrate that climate change is informing its policy decisions in all the countries in which it works. We have visited many of these countries and seen good examples of discrete climate change projects but less evidence of a fully integrated programme. We expect DFID to continue to build on its strengths and fully integrate climate change into the broadest spectrum of its work. The White Paper has made an important commitment to work towards this goal and to conduct a strategic review in eight pilot countries. We recommend that, in response to this Report, DFID provide us with more detail on progress with the review of its climate change work in the pilot countries.

81 Fifth Report of Session 2008-09, Sustainable Development in a Changing Climate, HC 177-I Back

82 DFID, Eliminating World Poverty: Building our Common Future, p 47 Back

83 ibid, p 48 Back

84 ibid, p 51 Back

85 Fifth Report of Session 2008-09, Sustainable Development in a Changing Climate, HC 177-I, Summary Back

86 DFID White Paper 2009, Eliminating World Poverty: Building our Common Future, p 52 Back

87 Fifth Report of Session 2008-09, Sustainable Development in a Changing Climate, HC 177-I, para 149 Back

88 Qs 125, 130 Back

89 Qs 125-126 Back

90 "Copenhagen climate summit negotiations suspended", 14 December 2009, www.bbc.co.uk Back

91 COP, Copenhagen Accord, 18 December 2009 Back

92 "Countries take first step to comply with Copenhagen Accord", 4 February 2010, www.ictsd.org Back