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International financial support is key to fighting climate change
In December this year, countries will gather in Paris for the 21st Conference of Parties (COP), in an effort to reach a universal, legally binding agreement that will push countries to combat climate change effectively and boost the transition towards resilient, low-carbon societies and economies
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n December this year, countries will gather in Paris for the 21st Conference of Parties (COP), in an effort to reach a universal, legally binding agreement that will push countries to combat climate change effectively and boost the transition towards resilient, low-carbon societies and economies.
The overarching goal of the convention is to reduce greenhouse gas emissions enough to limit the global temperature increase to 2°C above pre-industrial levels. As negotiators attempt to strike a deal in Paris, the issue of climate finance will be pivotal.
While cost estimates vary considerably, it is clear that global financing will be in the vicinity of several trillion US dollars. While the sums are huge, they are within reach. The Asia Pacific region, in particular, has significant resources. As a region, domestic fiscal revenues already represent US$4 trillion. In addition, there is as much as $32 trillion of combined private assets with the region.
The Jakarta Post's Hans Nicholas Jong recently talked with Haoliang Xu, Assistant Secretary General of the United Nations (UN) and Director of the Regional Bureau for Asia and the Pacific at the United Nations Development Programme (UNDP) in Jakarta about the issue of climate finance.
Question: How crucial is climate financing for the world to limit the global temperature increase to 2 °C?
Answer: I think different international conferences and negotiations have reached agreement on the importance of financing for climate change. International financial support is critical, that's why the Green Climate Fund was established and it's now operational, but I think it's important to see that an international financing mechanism can only provide partial funding. Most of the funding will depend on domestic investment and keeping temperature rise below 2 °C is not only a question of funding but also a question of collective commitment. So I think the Paris COP will really have a historical significance if it can reach an agreement on a binding emissions target. The financing aspect is the second question. It's critical, but it's to follow the goal.
Is there a gap between the finance needed for mitigation, adaptation and loss and damage and what is currently on the table? If so, how big is the gap? And how can that gap be closed?
One thing that we are promoting is that you have to look at climate financing as an integrated approach for sustainable development. I think this is important because if we look at the existing budgets of governments, investment in many sectors has an impact on climate change, whether it's mitigation or adaptation. What we need to look at is how these separate investments are connected and have an impact on climate actions. If you look at it from this angle, then the questions are not simple, such as how much money is needed or not needed. But look at existing resources and how to use them effectively. Climate financing is always a question of how large the historic responsibility is, and how large the responsibility of emission-producing countries is. That discussion is continuing. But we cannot wait for this discussion to be completed to take action. As the UNDP, we're trying to make our contribution by making government budgeting more effective when it comes to climate actions.
How big is the role of private sector?
There is a lot of research and studies on this kind of question. Some research shows that out of the existing proportion of climate financing, about 40 percent comes from the public sector and 60 percent from the private sector. This number changes depending on the years but more or less that's the proportion. That means the private sector already plays a very important role in terms of climate mitigation and adaptation. As the Indonesian Finance Minister said, the government can use policies and instruments to influence the private sector. So they can use subsidies and tax incentives to encourage investments into more climate-friendly projects. This is where the UN plays a role. Now the private sector will invest in a project that will bring financial return. They will do this with or without the government and the UN. So the role that the UN and the government can play is to encourage through incentives and also their own initiatives to come up with and implement more socially and environmentally responsible projects. This is what we can do. If there's a policy for renewable energy, the private sector will be willing to invest in this area. You can provide incentives for the private sector to take steps that otherwise will not be taken.
Across the globe you see a lot of initiatives and willingness from the private sector to contribute to socially and environmentally responsible projects. You can look at our collaboration with the palm oil sector to encourage them to look at environmentally responsible initiatives. Another example is in Sweden, where private companies are now reporting not only their financial results but also their social and environment results. So the private sector is willing to disclose not only their profits but also their contribution to society, and if this practice spreads it will change the behavior of the private sector. So I think there's enough awareness and this will happen more and more.
To date, developed countries ' and a few developing ones ' have contributed $10 billion for the Green Climate Fund. It's due to start distributing cash by the end of the year. How much of that money goes to Indonesia?
I don't know the details but UNDP is working with a number of governments in the region to prepare projects and have them submitted to the Green Climate Fund. But due to resource limitations this time, I think the expectation is that every region will have a number of projects approved and this will happen before the Paris COP. So I am optimistic to see the Green Climate Fund not only being established, but to some extent being capitalized on. I don't think Indonesia is in the first group of countries because we are focusing on the pacific countries.
What's the current status of the agreement between Indonesia and Norway for the latter to contribute US$1 billion for the former to reduce emissions through deforestation? How much of the funding has been transfered?
UNDP is a facilitator and partner in this. I think it is a pilot through an agreement between Norway and Indonesia and both sides are committed to this agreement. In fact, the minister of environment and the special envoy to climate change are leading delegations to Norway to discuss this issue and I have very high expectation that the next phase of this agreement will be implemented. In this process UNDP will once again play a role as a facilitator to ensure that the funds are allocated and effectively used. I am quite confident that this [agreement] will continue.
The Indonesian government has just announced a more ambitious emissions reduction target, which is 29 percent by 2030. What's your opinion on that?
It is admirable that the Government of Indonesia is establishing higher targets for emissions reductions ahead of the UN Climate negotiations in December. What all governments need to do is work in earnest to calculate and negotiate domestically their reduction targets ahead of the conference through their Intended National Determined Contributions [INDC]. Indonesia is leading in this regard and again this will help put pressure on others to do likewise. The number is up to countries to decide but the more important issue is whether countries have the relevant systems and structures to achieve the targets.
On the other hand, the Indonesian Environment and Forestry Ministry has been vocal in its opposition to the Indonesia Palm Oil Pledge. Do you think this will affect Indonesia's emission reduction target?
I don't know the details but I think the government recognizes that it can't rely on the palm oil commodity sector alone. Even if there's concern about the contribution to growth from the palm oil sector, the government recognizes that pursuing growth in that sector alone is not going to help. So the government now is acutely aware that it needs to diversify its economy and to direct investment to non-extractive industries and non-primary commodity sectors.
