International Development CommitteeWritten evidence submitted by Tearfund

This submission builds on Tearfund’s earlier submission (specifically paragraphs 3.18 to 3.2) to this enquiry:

Climate Finance for Adaptation, and the Private Sector

1. The onus is on the UK government to prove that private climate finance can deliver for adaptation. There is little evidence to date that this is the case. Nevertheless, private sector is increasingly championed as a solution that will plug the current gap in international climate finance. The UK government is a key proponent of this view. It has taken a lead in using its own public climate finance to explore how private sector finance can be mobilised, investing £110 million from the UK’s public climate finance (the International Climate Fund) in two commercial private equity funds which will leverage private co-investment as part of the UK’s Climate Public Private Partnership (CP3) Platform.1 It has also strongly supported the development of the Green Climate Fund’s Private Sector Facility.

2. Tearfund research2 suggests that private finance lends itself more naturally to funding mitigation in developing countries, rather than adaptation; furthermore, mechanisms for providing private sector finance for mitigation are better developed. The Overseas Development Institute recently compiled data around 73 climate finance investment initiatives totalling $8.5 billion by the UK, Japan, Germany and the US between 2010 and 2012 aimed at mobilising private climate finance. Of these investments more than 99% went to mitigation projects and there was virtually no direct investment involving the private sector that targeted adaptation to climate change. Eighty-four per cent of investment flowed to middle income countries.3

3. Evidence for private sector engagement with adaptation is minimal, and what little there is indicates a number of problems in relying on private finance to deliver adaptation for the poorest communities.

4. Analysis from private development financing suggests that Least Developed Countries (LDCs) and other low-income countries are unlikely to benefit from private investment, and that financing is unlikely to flow to the most appropriate sectors for adaptation. Therefore, governments cannot rely on private finance to meet the adaptation needs of the poorest communities and countries.

Climate Finance Diplomacy

5. The committee should interrogate the negotiating positions taken by the UK government at IMO and ICAO, as these hinder agreement on emissions levies which would raise climate finance namely:

Insisting that funds generated from emissions outside of national borders should be collected domestically and be part of national budgets. This is stopping discussions from progressing, without providing a workable alternative. Openness to considering innovative proposals from other stakeholders for levying a carbon charge on shipping and aviation globally would help break the deadlock.

Not recognising that shipping and aviation should contribute to adaptation to climate change, in addition to reducing their emissions (or at least not opposing such contributions as part of a global deal).

Not recognising that certain countries, including the LDCs, should be protected from disproportionate burden arising from carbon pricing of international transport (but not excluded as this would cause competitive distortions).

Scaling Up Climate Finance

6. The UK has yet to show clearly how it plans to scale up its share of climate finance from the circa £1 billion per annum earmarked for fast-start finance, to the circa £6 billion per annum which would be its “fair share” from 2020. The coalition agreement took forward the previous government’s policy that no more than 10% of ODA should be used on climate finance. Because it is addressing an additional issues, all climate finance should be additional to aid: the government must begin to show where this will come from.

June 2013

1 Tearfund, Private gain, public interest, (2013), p.15.

2 Ibid, http://tilz.tearfund.org/webdocs/Tilz/Research/Private%20gain%20Public%20interest%20-%20Tearfund.pdf

3 Whitley, Shelagh (February 2013). Five early lessons from donors’ use of climate finance to mobilise the private sector, ODI

Prepared 11th February 2014