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German policy

Urgent action

Dirk Niebel, Germany’s federal minister for economic cooperation and development, sees the need for a paradigm shift towards the green economy. His agencies promote climate-friendly and climate-resilient development.

By Dirk Niebel

Climate change, with all its far-reaching consequences, is today one of the greatest challenges facing humankind. It was one of the issues recently addressed at the United Nations Conference on Sustainable Development in Rio de Janeiro. Ever more frequent natural disasters, increasing weather extremes, growing water scarcity, flooding of coastal zones, more rapid extinction of species – these are just some of the direct consequences being experienced by nearly all countries, particularly developing countries and emerging economies. A threefold challenge currently faces the developing countries. They have to
– fight poverty in these economically turbulent times
– whilst trying, at the same time, to develop their economies in a carbon-neutral and resource-friendly way, and
– they have to take steps to adapt to climate change.

Accordingly, they require additional financial support, once they have exhausted all their own financial options. Germany is firmly committed to the global fight against climate change. We also accept our responsibility to foster sustainable development – even in times of climate change and fiscal austerity.

Because one thing is clear: the global commitments to avoid greenhouse gas emissions, so far only made by the industrialised countries, will not be enough to halt climate change. We are still far from achieving the goal, generally accepted at the climate negotiations, of limiting the rise in global temperatures by 2050 to less than two degrees Celsius. The EU’s share of global greenhouse gas emissions has dropped to around 13 %. China’s carbon footprint, on the other hand, has grown to enormous proportions. This shows how the world has changed since the adoption of the Framework Convention on Climate Change in 1992. It is not only the industrialised countries but also the developing countries and emerging economies that must contribute to efforts to fight climate change. The poorest and most vulnerable countries are most in need of our support.

Progress at risk

Climate change is altering conditions for human development, with the least developed countries, the small island states and sub-Saharan Africa being worst hit. Often faced with geographical handicaps, economies heavily dependent on agriculture, and the problems of poverty and weak institutions, state and society in those countries tend to be particularly vulnerable. The adverse consequences of climate change can impact on fundamental human rights, especially those of groups who are already politically or economically worse off, such as women, children, the poor, marginalised groups and those living in disadvantaged regions. Climate change can hold development back or, indeed, reverse any progress that has been made. And it can fuel conflicts and crises.

Our development activities take place within the framework of the international climate negotiations. By 2015, it is planned that negotiations will have been concluded on a new global agreement, under which both industrialised and developing countries make a binding commitment to ambitious climate protection targets. The new agreement is to enter into force by 2020 at the latest. The industrialised countries remain firmly committed to mobil­ising an annual $ 100 billion as of 2020 from public and private sources, including innovative sources, to be used for effective climate change adaptation and mitigation measures.

We cannot afford to sit idly by until 2020. We need to act now. And that is just what the German government is doing. The fight against climate change is one of Germany’s top political priorities. By 2050 we aim to have cut our greenhouse gas emissions by between 80 and 95 %. We are currently engaged in the process of transforming our energy system, the aim being to systematically switch to renewable, low-carbon sources of energy.

Those efforts lend Germany credibility on the international stage. Other countries are keen to work with us so as to benefit from the technology we have to offer in the fields of renewables and energy efficiency. And it is not only technology we can offer, we can also offer our experience. By undertaking this transformation of its energy system, Germany has become a pioneer. We are exploring new avenues, from which other countries can also learn. Perhaps they will be able to avoid some of our mistakes.

German climate finance

Germany is already the second largest donor of climate finance. Between 2005 and 2011, its climate investments grew fourfold from € 470 million to a total of around € 1.9 billion. Under the fast-start finance scheme, the industrialised countries have assured the developing countries of funding up to $ 30 billion between 2010 and 2012 to be used for additional climate protection measures. The German government is making a major contribution to the fast-start initiative, providing additional funding of € 1.26 billion.

The German government has also launched a new and innovative financing instrument: the Special Energy and Climate Fund. The Fund was launched in 2011 with the aim of achieving an environmentally-friendly, reliable and affordable energy supply in Germany whilst also strengthening Germany’s activities to fight climate change in developing countries and emerging economies. In 2011, the Special Fund made available additional funding of around € 490 million for climate change mitigation and adaptation and for the conservation of biodiversity and forests in developing countries. It is fed from revenues from the auctioning of carbon credits under the European Union Emission Trading Scheme.

The Special Fund provides an additional source of financing for international efforts to fight climate change. Obviously, the more ambitious the targets set in the climate negotiations and the more emissions are to be cut, the more valuable carbon credits will become. And the more money they will raise that can then be channelled back into the Special Fund.

Germany’s expertise in climate technologies is in great demand in the developing countries. That is why we have created the German Climate Technology Initiative as an instrument specifically aimed at mobilising the potential for innovation that exists within German businesses. Under this initiative, a total of € 590 million was made available in 2011 from the Special Energy and Climate Fund in the form of loans and grants. These are being used, for example, to support the expansion of solar thermal power plants in Morocco and an investment programme for energy-efficient, climate-friendly sewage plants in Brazil.

Bilateral and multilateral approaches

The backbone of the BMZ’s climate finance is its bilateral projects in cooperation countries. BMZ stands for Federal Ministry for Economic Cooperation and Development. In 2011, € 1.3 billion was made available for these projects. That bilateral cooperation is then complemented by our multilateral cooperation. In 2011, the BMZ’s contribution to multilateral funding mechanisms amounted to some € 260 million. It is one of the biggest donors to the World Bank’s Climate Investment Funds and the Global Environment Facility, and constructively contributes to the design of their strategies and policies. These international funds perform an important function as a forum in which participants can exchange practical experience and address or revisit basic concepts, such as the standards that apply to cooperation on climate-related issues.

The Climate Investment Funds were established as a transitional mechanism and as learning instruments. The aim was to rapidly provide funding for climate investments in developing countries and emerging economies until a new mechanism was up and running. That new mechanism, to be established under a new climate agreement under the auspices of the Framework Convention on Climate Change, is the Green Climate Fund (GCF).

The Green Climate Fund is to become a central new pillar in the international climate finance architecture. It will provide developing countries with financial support to help them make the transition to low-carbon development and adapt to the consequences of climate change. Of the $ 100 billion that is to be made available annually as of 2020, a large part is to be channelled through the GCF.

The Green Climate Fund has the potential to foster a paradigm shift towards low-carbon, climate-resilient development. And it will adopt an innovative approach. The main added value, to our mind, is the chance it gives us to work with renewed ambition on achieving a true transformation. That includes a focus on results in the allocation of funds. A private sector facility will be designed to mobilise additional private funding. The beneficiary countries are to have direct access to the funds. That will give them greater ownership and place them more in the driving seat in their efforts to protect the climate.

The GCF will supplement existing bilateral and multilateral instruments, allowing synergies to be maximised and ensuring complementarity between all the various instruments. Germany will contribute to the Fund both financially and politically and also help shape its strategies and principles. That is one reason why it has put in a bid to host the Green Climate Fund (http://www.greenclimatefund.de).

Ensuring effectiveness

If the large sums of money available for climate change mitigation and adaptation and protection of forests and biodiversity are to be effectively used and properly targeted, we need to approach the issue from several angles at once.

Germany, as a donor, intends to focus on its special strengths: renewable energies and energy efficiency, forest protection, adaptation, agriculture and water. We will draw on our experience in our own country, including our experience of trans­forming Germany’s own energy system, to show our partners in developing countries the opportunities they have if they want to pursue climate-neutral, sustainable development in the face of climate change.

At the same time, we need to focus our support more on institutional, economic and social transformation. This will establish the enabling environment we need for development cooperation on climate-related issues to be truly effective. Countries need to develop climate-friendly development strategies and adaptation plans. And they need to put in place the necessary legal and institutional framework to allow these processes to take place. Those are areas in which we can offer our support.

At the same time, when planning and implementing all these climate change mitigation and adaptation programmes, it is essential that we enhance our transparency and improve coordination and division of labour between the donors, as agreed under the Busan partnership. We are determined to tackle these global challenges, drawing on our fifty years of experience in development and contributing it to the global fight against climate change.