x Abu Dhabi, UAEThursday 18 January 2018

Climate fund for poor nations 'challenging but feasible'

Rich countries may have to adopt new taxation measures if an annual US$100 billion climate fund, promised to poor nations last year, is to be created.

CANCUN // Reducing fossil-fuel subsidies, taxing financial transactions or attaching a carbon tax to international aviation and shipping are some of the measures that rich countries may have to introduce if an annual US$100 billion (Dh367bn) climate fund, promised to poor nations last year, is to be created.

The pledges, of $30bn between 2010 and 2012, and US$100 billion annually until 2020, were made last year at a summit in Copenhagen.

Yesterday, in Cancun, Ban Ki-moon, the United Nations secretary-general, said the task was "challenging but feasible, even in the context of the ongoing economic crisis".

His statements were informed by a report produced by a high-level advisory group on climate change financing, which the UN's top diplomat established in February. Members of the task force include ministers from China, Singapore, France and Mexico, as well as development-bank executives and the private investor George Soros.

The report, said Jens Stoltenberg, the prime minister of Norway and co-chair of the group, is "a menu of options" for politicians to consider.

"It is not a single solution," he said. "It is several sources, and we need a combination of them."

If the options in the report are aggregated, the amount generated would exceed $100bn, he said.

The report taps into new types of public funding, which could be provided by auctioning emission allowances in developed countries. Currently, governments allocate these to industry for free, and entities who wish to surpass their emission allowances are able to buy the right to pollute more. But if the allowances are auctioned, a total of $30bn per year could be raised, Mr Stoltenberg said.

Introducing a carbon tax on international aviation and shipping and re-allocating fossil fuel subsidies could each generate $10bn per year into the fund. All the above assumptions are made provided that between 25 to 50 per cent of the revenues from these measures are used for a climate fund.

The measures, said Mr Stoltenberg, "all have one thing in common and that is that they are different ways of carbon pricing".

"Carbon pricing is key, and it is very crucial," he said, explaining that while the practice can raise a lot of cash for the world's poorest and most vulnerable countries, it also gives wealthy nations financial incentive to reduce emissions.

"Climate finance is not one of many issues on the climate agenda, it is a key issue," Mr Stoltenberg said.