All major climate policy agreements have stated that climate finance for developing countries will be ‘new and additional’. But new and additional to what? This article explores options for agreeing a baseline, and related methodological challenges. It identifies two viable baselines: ‘new funding sources only’ and ‘above pre-defined business as usual level of development assistance’.
Developing nations have long feared that attention to protect the natural environment would sideline efforts to meet basic development needs like health, education and economic growth. Gaining these nations’ cooperation to address environmental issues has often required promising for funding above current development assistance. Major climate policy agreements – the UN Framework Convention, the Kyoto Protocol and the Copenhagen Accord – have stated that climate finance for developing countries will be ‘new and additional’. But this term has never been properly defined. Agreeing a baseline from which ‘new and additional’ funding will be calculated is central to building trust and realising any post-Kyoto agreement.
Obvious criteria for setting climate finance baselines are additionality and novelty. Climate finance is additional if it leads to an increase both compared to present and projected development assistance. New funds are those that have not yet been promised for supporting developing countries’ climate or development actions. Other criteria for setting baselines are:
- Environmental and cost-effectiveness: A baseline is environmentally effective if it increases funds available for climate mitigation and adaptation compared to business as usual.
- Distributional considerations: A baseline adequately addresses distribution the more it shifts the burden away from developing nations, least responsible for the problem and least able to adapt.
- Institutional feasibility: To be institutionally feasible, a baseline has to be acceptable to Northern and Southern governments, within budget constraints and consistent with other international regimes.
- Political feasibility: A baseline will be politically feasible if it is expected to be acceptable to the major parties to the UN framework convention.
The current state of no transparency on novelty and additionality of climate finance pledges will perpetuate mistrust in the climate regime. Only two of the assessed baseline options do relatively well on the criteria above and are viable: ‘Above pre-defined projection of development assistance’ and ‘new sources only’.
- In relation to pre-defined projections, a formula can be used that takes into account countries’ real GDP growth in later years. The GDP dependence of the funds would be a disadvantage for developing countries, but by avoiding re-negotiation of the formula they would benefit from better predictability.
- The ‘new sources only’ baseline would count only assistance from novel funding sources – such as international air transport levies, currency trading levies or auctioning of emission allowances – as new and additional. This option is probably one for longer-term (post-2012) climate finance.
- Parties should consider these two baseline options instead of restating their old extreme positions of either no baseline or a threshold of 0.7 per cent of gross national income going to official development assistance.
- Discussion on baselines should be included in the Ad-hoc Woking Group on Long-term Cooperative Action under the Convention.
- If global agreement on a single baseline definition is not possible, the next best solution is to oblige each contributor to declare its own baseline definition.
