BAKGRUNN (fra kommisjonsmeddelelsen, engelsk utgave)

Executive summary
The EU has set the most ambitious climate reduction targets in the world, with binding mechanisms already in place that guarantee a unilateral 20% greenhouse gas emission reduction by 2020 compared to 1990 levels. The EU is committed to increase this to a 30% reduction in the context of a fair and ambitious global agreement in Copenhagen, if other developed countries commit themselves to comparable reductions, and if economically more advanced developing countries contribute adequately according to their responsibilities and respective capabilities. But action by the EU alone is not enough. An effective deal in Copenhagen requires

– ambitious cuts by all developed countries - and many need to step up their current pledges,

– appropriate mitigation actions by developing countries, especially those that are economically more advanced, and

– an effective global architecture to give the right incentives to galvanise investment into a low carbon economy.

At the L'Aquila summit in July the Major Economies Forum (MEF), which includes key developing countries, recognised the scientific view that the increase in global average temperature ought not to exceed 2°C. The challenge in Copenhagen will be to translate this objective into concrete emission reduction targets. Science shows that this means a reduction of global emissions of at least 50 % compared to 1990 by 2050 and that global emissions need to peak by 2020. Science also shows that this means that developed countries need to have made cuts of 25-40% by 2020 and at least 80% by 2050.

A deal on financing will be central to achieving an agreement at Copenhagen. UN negotiations are dangerously close to deadlock. Developed countries expect developing countries, especially the economically more advanced, to contribute to the overall effort. At the same time, developing countries want to see a clear position from developed countries on finance for mitigation and adaptation. With less than 90 days left before Copenhagen, the EU needs to re-take the initiative to enable the negotiations to move forward.

This paper seeks to unlock the current impasse in the negotiations by presenting a blueprint on climate finance. In March 2009, the European Council made clear the EU's willingness to contribute a fair share to the global financial effort. The EU should now go one step further, and set out the likely sources of finance, how to define a fair contribution, and how to organise the financing. However, it should be understood that none of the figures in this paper represent formal EU proposals for commitments. They should be seen as indications of the order of magnitude of the finance that is likely to be needed in the event that Copenhagen achieves an ambitious outcome, with universal contributions from developed and economically more advanced developing countries, and a global carbon market that fully plays its role.

The European Parliament and the Council are invited to consider the following key elements:

– Based on the Commission's best estimate, finance requirements for adaptation and mitigation actions in developing countries could reach roughly € 100 billion per year by
2020. Domestic finance (public and private) in developing countries, the global carbon market and complementary international public financial flows should all play a role in meeting these requirements. Domestic private and public finance could deliver between 20-40 %, the carbon market up to around 40 %, and international public finance could contribute to cover the remainder. The more ambitious the overall agreement is in terms of mitigation, the more it will require financial support from developed countries to the developing world. At the same time, more ambitious and widespread cap and trade systems will also generate more resources for mitigation activities in developing countries;

– The international carbon market, if designed properly, will create an increasing financial flow to developing countries and could potentially deliver as much as € 38 billion per year in 2020. The Copenhagen agreement needs to establish a new sectoral carbon market crediting mechanism, while focussing the Clean Development Mechanism (CDM) on Least Developed Countries. The EU should create an incentive for this transition under the EU Emissions Trading System;

– Based on the Commission's best estimate, international public funding in the range of € 22 to 50 billion per year should be made available in 2020. From 2013 public funding contributions should be shared out on the basis of ability to pay and responsibility for emissions and include economically more advanced developing countries. On the basis of these assumptions, the EU share would be from around 10% to around 30% depending on the weight given to these two criteria. In case of an ambitious outcome in Copenhagen, the EU's fair contribution could therefore be between € 2 to 15 billion per year in 2020 depending on the overall size of the global financing agreed and the weight given to each distribution criterion;

– Support to adaptation should give priority to the most vulnerable and poor developing countries;

– International aviation and maritime transport can provide an important source of innovative financing, and should be further explored;

– Governance of the future international financial architecture should be decentralised and bottom-up. It must also be transparent, allow for effective monitoring, and should respect agreed standards for aid effectiveness. A new High-level Forum on International Climate Finance should monitor and regularly review gaps and imbalances in financing mitigation and adaptation actions;

– All countries, except LDCs, should prepare low-carbon growth plans by 2011, including credible mid-term and long-term objectives and prepare annual greenhouse gas inventories. The EU should present its own low-carbon growth plan for the period until 2050 by 2011.

– Between 2010–2012, in the event of a successful agreement in Copenhagen, fast-start financing is likely to be needed for adaptation, mitigation, research and capacity building in developing countries in the range of € 5 to 7 billion per year. To this end, and on the basis of the above-mentioned assumptions, the EU should consider an immediate contribution of € 0.5 to 2.1 billion per year, starting in 2010. Both the EU budget and national budgets should be ready to contribute to this funding;

– For the period after 2012, and as part of the package of proposals for the next financial framework the Commission would make a proposal for a single, global EU offer, including whether to fund such an offer from 2013 within the budget, or whether to establish a separate Climate Fund, as part of the package of proposals for the financial framework post-2013, or a combination of the two. In the event of using the EU budget, a temporary solution for the year 2013, covered by the current financial framework, would also need to be proposed. Direct contributions from individual Member States could also form an important source of EU funding as part of the overall EU effort. The Commission's clear preference would be to use the EU budget, which would also allow the European Parliament to play its full role;

– If the EU budget is not used, the sharing of contributions inside the EU should follow the same principles of contribution as the international level, taking into account the special circumstances of Member States.

The scale of international public finance contributions would be significant but should not be exaggerated. For example, the scale of possible EU public finance contributions needed would be substantially smaller than the likely receipts to national budgets from auctioning revenues. Furthermore, fighting climate change is in general terms much less costly than dealing with its consequences.