(7) Funding global action
Providing sufficient funds for reducing emission growth in developing countries is among the
biggest unsettled issues on the agenda. Industrialized countries will most likely take on binding
caps, and developing countries most likely will not. The key question for mitigation funding is
then who pays for abatement in developing countries (the implementing country, or developed
countries – whether through public funds or private carbon market transactions), and who
receives credit for the reduction in emissions (the implementing country, or the one that pays).
Three scenarios (and mixtures between them) are possible. Firstly, (1) NAMAs could receive
public funding from developed countries, with emission reductions credited to the implementing
country. Alternatively, the system could expand the use of market mechanisms beyond the CDM
process. With this option, (2a) NAMAs could receive (partial) public funding from developed
countries, and reductions could be (partially) credited to the financing country as offsets; and/or (2b) NAMAs could generate certified offsets which could be sold in the private carbon market. In
terms of burden sharing, the two latter mechanisms are a priori equivalent, since the market
buyers would be private entities from developed countries that purchase credits to meet their
domestic cap requirements. It would of course also be possible for (3) NAMAs to be funded by
developing countries, who then retain the credits.
Adaptation and mitigation funding involve different considerations and tradeoffs. Adaptation
presents a tradeoff between equity and willingness to pay in developed countries. It hence
resembles traditional aid negotiations, although the ethical obligation on developed countries to
provide funds is particularly compelling in the context of climate change, since the ability to
assist meets responsibility for damage inflicted. The EU’s, Japan’s and the United States’ current
negotiating texts are quite forthcoming on adaptation funding.
By way of contrast, in mitigation funding, important effectiveness and efficiency questions are
also at play. One may find it appealing on principle for developed countries to conduct most
emission abatement domestically, and technology development may be fostered by vigorous
domestic action. Yet, action may be more cost-efficient, and technology transfer may be deeper,
if there is a market element to international action. Furthermore, many studies illustrate how little excess capacity there exists in mitigation opportunities in the near term, and hence, how little
room for error the global community has in implementation. (McKinsey, 2009) The implication
may be that flexibility mechanisms are indispensable not just in terms of economic efficiency, but
indeed in terms of environmental effectiveness.