Just a few days ago, the European Investment Bank (EIB), the financing arm of the EU and its 27 member countries, formally joined the ranks of other multilateral development banks and the World Bank in creating its own climate change fund — thus contributing to the proliferation of new climate funds, supporting the claim of other development organizations to be best equipped to manage large climate financing sums and thereby further undermining a future leadership role of the UNFCCC and its financing mechanisms in the emerging global climate finance architecture.
The new Interact Climate Change Fund, ICCF was established in cooperation with the French development agency (AFD) as well as a group of 15 bilateral European development groups organized in the Association of European Development Finance Institutions (EDFI). Focus of the new Fund, whose finance volume was not publicly disclosed, are private sector investments in climate change projects in Africa, the Caribbean and the Pacific, Asia and Africa, all to be undertaken in the course of this year, which the ICCF aims to support by matching investment amounts. The Fund will act as “catalytic lead investor” in renewable energy and clean technology projects to extend energy access and provide energy stability in developing and emerging market economies.
Partners will seek to demonstrate the financial attractiveness of climate-friendly projects to private sector investors in developing countries and emerging markets and will commit to act as catalyst lead investors to attract additional long-term investments.
No word on whether this basically involves a non-repayable financial contribution of the EIB which would subsidize private sector investment in climate change fighting activities. No doubt, the engagement of the private sector is needed to deal with a challenge the magnitude of global climate change. However, the private sector — at least in the past – has showed reluctance to invest in climate projects, especially adaptation-focused, that would directly benefit those societal groups most vulnerable to climate change, such as community-based or small-scale projects. A profit-orientation and large-scale, expensive projects, which will be the kind that the new ICCF most likely will support, are often diametrically opposed to supporting vulnerable groups in developing countries. “Trickle down” takes a long time, if it works at all…
Secondly, the additional EUR 2 billion for the EIB, which the European Union essentially earmarks for adaptation efforts, are not going to be given as non-repayable grants, thus not as the “new and additional” finance for climate change that the Copenhagen Accord stipulates, but will be provided as loans. This in itself is reprehensive and violates the spirit of the pledge. Developing countries, for the most part without the financial flexibility to repay loans for adaptation measures, historically contributed the least to anthropogenic climate change, but are suffering the most under its consequences.
No doubt, the EUR 2 billion in new EIB climate loans will appear in international accounting books, as OECD countries’ are rushing with creative accounting to ”fulfill” their pledge of providing $30 billion over three years, US$10 billion alone until year’s end, in fast-tracked new funding for climate efforts. Even if the EIB’s shareholders expect repayments from developing countries, eventually. All the while, the EIB’s new ICCF climate funding vehicle will mobilise increasingly scarce public funding to supplement private sector climate change investments — without forcing the public sector to share the profits from such investments or even mandate it to reinvest them in a climate- and socially friendly way.
Photo: Cedric Puisney with Creative Commons License
Tags: adaptation, climate finance, EIB, EU, mitigation
