Climate change: Funding the fight

Vietnam can gain access to a number of aid projects designed to assist developing
countries in tackling climate change and its effects.

This summer in Hanoi has been the hottest for half a century, with mid-June temperatures
in some northern cities hitting 45C. People were afraid to leave their homes. Air
conditioner retailers were busy and happy, with sales revenue reaching record levels.
But this isn’t just a Vietnam story. It’s a global story and it’s getting worse. The EU is
trying in vain to finance climate change projects, even as it grapples with its worst-ever
debt crisis. But climate change can’t only be addressed by EU members or developed
countries. The actions of developing countries like Vietnam also play an important role.
Global efforts
The latest round of global climate talks ended in Bonn, Germany, in early June. A key
issue was EU funding for short-term climate aid. The EU said it would deliver around 2.5
billion euros of fast-start finance annually over the next three years, more than it
promised at the Copenhagen last December.
The European Investment Bank (EIB), in its most recent climate change-related move,
announced on June 14 that together with European Climate Action Commission it would
explore a joint climate finance initiative for developing countries as part of EU
commitments made at the UN climate conference in Copenhagen. European Climate
Action Commissioner Connie Hedegaard said: “Adequate finance is crucial to agreeing
to and implementing an international agreement limiting global warming to 2C.”
The European Commission (EC) and the EIB are already cooperating in the
implementation of the Global Energy Efficiency and Renewable Energy Fund
(GEEREF). Launched in 2008, GEEREF has already provided finance to renewable
energy funds in Southern Africa and Asia.
The EIB last year lent nearly 17 billion euros in support of Europe’s climate goals,
including for renewable energy projects in Egypt, Kenya, Turkey and Vanuatu, among
other countries. It expects its lending outside of the EU this year to support investments
of some 2.5 billion euros in renewable energy and will consider further developing its
portfolio of carbon funds with other financial institutions.
The only real achievement at the Copenhagen Summit last December was a promise of
$30 billion over the next three years in climate aid from rich to poor countries, and $100
billion a year after 2020. Developing nations also expressed their interest by pushing for
$200 billion to help them tackle the effects of global warming.
In the US, however, energy giants like ExxonMobil, Chevron and ConocoPhilips are
spending millions of dollars fighting legislation to address climate change, curb carbon
emissions and create green jobs. As long as Americans believe that the war against
climate change is detrimental to their economy, global efforts to combat the threat will
always be inadequate.
Action in Vietnam
It’s sad to say that awareness about global warming in Vietnam is only improving very
slowly. A single company - Vedan - pumped thousands of cubic meters of untreated
water into a nearby river, in the country’s most publicized environmental scandal of
2008. Given that it’s unlikely Vedan is the only environmental vandal in the country, the
actual amount of industrial pollution must be huge.
Another disappointing fact is that average per capita forest coverage in Vietnam is
0.14ha, the world’s lowest. Increases in CO2 emissions in Vietnam, meanwhile, are
among the largest in the world, according to World Bank figures in 2009. In the 1995-
2000 period, CO2 emissions were 6.7 percent, then rose to 10.6 percent in the 2000-2005
period. Demand for power in Vietnam is growing by 17-20 percent a year because of the
country’s development plans, but this places a heavy burden on its efforts to reduce CO2
emissions.
Among developing countries, Vietnam benefits the most from climate aid. According to
figures from The National Target Program in Combating Climate Change, it has received
aid from Demark, the UNDP, the UNEP, and the ADB, totaling some US$120 million,
together with around US$800 million in soft loans from JICA, AFD, ADB, and WB.
The point is that billions of dollars worth of aid are available, but developing countries
must compete with each other with feasible proposals, plans, and initiatives to secure
funding and solve their environmental problems and determine how to best apply
renewable technologies.
In late 2009 the Ministry of Natural Resources and Environment put the funds needed to
combat the effects of climate change in Vietnam, especially in the Mekong Delta, where
rising sea levels may swamp one-third of the cultivation area, at about VND2,374 billion
(US$119 million).
Of encouragement to the government is Japan and France signing a US$134 million aid
agreement with Vietnam to help it deal with climate change, with US$110 million
coming from the former and US$24 million from the latter. In late 2009 Germany also
pledged US$180 million in soft loans, aimed at implementing projects on the effective
use of energy in rural areas.
According to Ms. Tran Thi Minh Ha, Director of the International Cooperation
Department at the Ministry of Natural Resources and Environment, “Vietnam is receiving
ODA to tackle climate change, mainly from Denmark, the UNDP, the UNEP and others,
at about US$120 million, and soft loans from JICA, AFD, ADB, WB and other countries
of about US$800 million. Vietnam is also actively seeking funds for reducing the impact
of climate change and implementing renewable energy adaption projects towards
sustainable development.”
Among the climate aid sources Vietnam is attempting to access, Climate Investment
Funds (CIFs) are a major focus. CIFs are unique financing instruments designed to
support low-carbon and climate-resilient development through scaled-up financing
channeled through the African Development Bank, the Asian Development Bank, the
European Bank for Reconstruction and Development, the Inter-American Development
Bank, and the World Bank Group, managing US$5 billion worth of aid. In December
2009 Vietnam submitted an investment plan to CIF, seeking co-financing of a US$250
million Clean Technology Fund for reducing national energy consumption relative to
business as usual projections by 5-8 percent by 2015, and expanding public transport to a
50 percent share of passenger-kilometers traveled by 2020.
Bureaucracy, though, is a barrier to implementing any available funds and pushing efforts
forward, with excessive steps at the provincial level bringing most plans to a standstill.
And there are yet to be any significant figures released regarding the disbursement of
climate aid. Vietnam’s sole focus appears to be acting more aggressively to attract aid
into the country.
But all is not lost. At a meeting at a property developer’s office in Ho Chi Minh City,
VFR witnessed the CEO talking about a smart and connected city, where every house has
a power generator using solar energy. Such green technology is the only way for
developing countries like Vietnam to catch up with developed countries. The developer
has already spent millions of dollars on applying green technology in new buildings. If
the government and businesses can be on the same page, we can win.
Side bar interviews - In cooperation with the International Institute for Journalism
(Inwent)

Global perspectives on fighting climate change

Mr. Artur Runge-Metzger, Director of Climate Policy at the European Commission

and the EU’s chief negotiator in global climate talks

Quote box
“I do not think that a new legal agreement is on the cards in Cancun … I believe such
negotiations will, in an optimistic scenario, take at least another year.”

VFR: You have just returned from the latest round of climate talks in Bonn,
Germany. For the EU, one of the key goals at the Bonn meeting was to bring the
developed country targets and developing country actions submitted under the
Copenhagen Accord into the formal UN negotiating process. What are the key
issues here as we head towards COP 16 in Cancun, Mexico, in December?
Mr. Runge-Metzger: For Cancun, what we are looking for is a balanced and action-
oriented package of decisions.
This, we believe, would be a big step forward towards a fully fledged legal framework
for international climate policy. However, there is no agreement among the 194 parties
that are at the negotiating table on how such a balanced package may look.
VFR: Developing countries are worried by the euro crisis and the pressure it has
put on the budgets of EU member states. Do you see this having an effect on planned
climate change aid budgets, with there already being quite a debate over how to
distinguish climate change aid from development aid?
Mr. Runge-Metzger: Indeed, EU public budgets are under heavy pressure. Still, the EU
sticks to its promise made in Copenhagen and will deliver 7.2 billion euros for fast-start
finance over the next three years.
And there is an important debate: that this funding is additional and does not substitute
development aid.
VFR: Ensuring this is a key question, is it not?
Mr. Runge-Metzger: In the Commission we have taken this finance from the so-called
budget margin. This means it was not allocated for anything else and requires approval
from the European Parliament.
VFR: Let’s assume the money is there. What then do developing countries need to
do to get a good return? We understand that only one-third of climate change aid is
currently spent on adaptation projects that generate long-term returns. What is the
EU’s position?
Mr. Runge-Metzger: This is an important question, particularly during times of economic
recession. We must make sure that we spend public funds wisely, where they bring the
highest rewards in the fight against climate change as well as protecting us from the
adverse effects. This requires good planning and analysis of the issues. In terms of
balance, of course in the poorer developing countries the focus will always be on
adaptation, as their emissions are very small.

Mr. Jules Kortenhorst, Chief Executive Officer of the European Climate Foundation,
an independent think tank on climate issues

Quote box
“There is a big issue of trust here. In the past, the developed world has failed to live up to
its promises. That cannot happen here again.”

VFR: Mr. Artur Runge-Metzger, the EU’s chief climate negotiator, says he does not
expect the financing debate to be solved by the end of this year. What would be
“significant” progress?
Mr. Kortenhorst: Significant progress would mean that we see funds flowing; that we see
them in the magnitude that is in line with promises, and that it is largely new and
incremental. There is a big issue of trust here. In the past, the developed world has failed
to live up to its promises. That cannot happen here again.
VFR: How do you see Europe’s deficit crisis impacting on the financing issue?
Mr. Kortenhorst: No doubt the fiscal crisis in Europe is making all of this more difficult.
Not just in Spain or Greece but all over Europe governments are worried about their
fiscal deficits. What I would say is that the magnitude of the climate finance
commitments is such that they ought to survive deficit reduction policies by EU
governments. But we need to (and will) follow this very closely.
VFR: Will developing countries be able to afford and develop their own future
renewable technologies?
Mr. Kortenhorst: This is where developed and developing countries stand to benefit
together. There will be learning and new technology insights from the big solar plans that
India is rolling out, just as much as from the new wind power in China and from the
projects in the US and in Europe.
Learning will go two ways. But the breakthrough from our study is that with large scale
renewable energy countries can build reliable and cost effective power systems. Carbon
credit projects can play a role in this. It means that if Tanzania or Vietnam are rolling out
a renewable project and are emitting less CO2 as a result, then the developed countries
will pay a price per ton of CO2 reduction to Tanzania or Vietnam. Natural gas is a
wonderful transition fuel. It emits a lot less CO2 than coal and helps preserve the forests.
In the long run, however, we also need to find ways to do without natural gas. And it
would seem to me that in Tanzania solar and wind power can really provide all the
electricity the country needs.
VFR: The logging industry will be heavily affected and in developing countries this
is a big issue...
Mr. Kortenhorst: There is growing agreement on what a solution to deforestation may
look like among the 15-20 countries that really matter in this debate, in particular the big
forest countries and the largest developed countries that are willing to put up money to
help halt deforestation. I appreciate the impact on the logging industry. But is that truly
our biggest concern? Would we not like to move to sustainable forestry, instead of the
logging that now takes place? It would allow for ongoing export earnings, safeguard the
rainforests, keep jobs, and increase the price of hardwood. In all, I think it would be a
win-win.