What does the Financing for Development conference mean for climate and development?

Image used under creative commons license (United Nations)

The Addis Ababa conference on Financing for Development this week is supposed to mark the start of a new era in efforts to tackle global poverty.

The meeting was designed to set the funding for two further conferences, in which the world is due to agree on development goals and measures to end climate change.

But as the conference approaches its end, there seems to be more evidence of positive rhetoric than of solid action to increase funding.

International development targets are likely to be expanded greatly in the coming months as governments seek to agree on a series of Sustainable Development Goals (SDGs) to take the place of the Millennium Development Goals (MDGs), which expire this year.

The proposed new Goals are more numerous than the ones they will replace and have a far wider scope, seeking to address the causes of poverty as well as its manifestations.

Achieving the new Goals will cost more than the MDGs and it’s clear that traditional foreign aid won’t be enough, even if it’s increased: the price tag of the new Goals has been estimated at over $10 trillion, while official foreign aid is currently around $160 billion a year.

Climate change adds a further problem, by making it even harder for poorer countries to overcome poverty: like the Red Queen in Lewis Carroll’s Through the Looking Glass, they will have to run faster just to stand still.

This is where the Addis conference comes in – and where the problems begin.

Sticking points

Around the conference halls, there’s no shortage of uplifting language about the need for countries to pull together and unlock the resources to end poverty everywhere.

And there are plenty of areas of agreement about where, in principal, money can be found.

No-one at the meeting seems to dispute that much of the funding to achieve the new Goals will have to come from the private sector. Even traditional critics, like Oxfam, accept that private money is needed, despite their concerns about inefficiency and human rights abuse.

But, when it comes to specifics, the conference is yet to show it can overcome crucial differences between countries to match the positive language.

The biggest sticking point throughout the discussions has been on tax reform. Poorer countries, as well as some middle-income ones like India and Brazil, want a seat at the table where global tax rules are decided, with the creation of a new UN body. Rich countries are resisting, preferring to keep the power in an OECD system.

As the conference draws to an end, it is looking unlikely that there will be an agreement on tax that satisfies everyone, making it seem inevitable that some countries will leave Addis with a bad taste in their mouths.

Climate change has provided another series of thorny issues. Some of these issues – like the introduction of a carbon tax or withdrawal of fossil fuel subsidies (opposed by the Gulf countries) – have been dealt with by fudging the language of the text so countries are encouraged to make changes only if it’s appropriate to their circumstances.

But on the central question of finance, whether rich countries will honour their commitment to provide $100 billion of climate finance a year by 2020 additional rather than replacing other aid, the conference seems to have made little tangible progress.

The text will reiterate the $100bn commitment, but it won’t tackle the crucial question of whether that money can replace foreign aid or whether it has to be additional. With the problems that many developing countries are already facing from climate change, it’s commonly argued that the climate money should be additional to other aid.

It’s a safe bet that the negotiators will reach whatever compromises, or fudges, are required to avoid the obvious failure of having no agreement at all – but some of those compromises mean the conference has achieved less in its efforts to increase financial market to tackle poverty.

New York and Paris

This has two crucial implications for the subsequent meetings this year on the details of the SDGs and climate commitments.

Firstly, the practical challenge of how any agreements will be funded remains largely unresolved.

When global ministers and their officials next see each other, in New York in September, many of the same questions about money will be on the table – and they will have even less time to answer them. If the SDGs are agreed without firm commitments about funding, they may lose credibility before they get started.

Secondly, there are implications for the delegates’ mood. If ministers from poor and middle-income countries leave Addis feeling they’ve been bullied into a weak agreement that does little to help them, they will be much less inclined to be helpful in the later negotiations on climate change and the development goals.

The latest word from the closed sessions is that rich countries have rejected a compromise offer on tax reform. While some kind of a deal still seems likely, it may not be one that sets the world on the right track for the months and years ahead.

 Leo Barasi

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