Is $10 billion a big number?
There are two crucial elements to the climate negotiations. The first is nations’ pledges to reduce greenhouse gases (e.g. 20, 30, 40, 50% by 2020,30,40,50 etc). The second is how much cash the developed countries are prepared to commit to help developing economies reduce their emissions and adapt to the impacts of climate change. Over the next few days in Copenhagen, the focus will be on the financial side of the deal.
Developed nations have pledged to give $US 10 billion annually over the next 3 years as part of a Fast Start Fund until the successor to Kyoto comes into force. Talking about finance on this scale can be daunting, but is $10 billion a big number?
Here are a few interesting facts to put the issue in perspective:
- Level of Overseas Development Assistance (ODA) in 2008 – $120 billion
- European Union agreement on how much poor countries need to deal with climate change – $150 billion per year
- US funding for Marshall plan – around $ 90 billion
- Investment needed to meet global energy demand through to 2030 – $1.1 trillion
- Total development assistance to developing countries in last 50 years- $ 2 trillion
- World GDP in 2008 $60 trillion
- Cost to US of war in Iraq – nearly $1 trillion
Comparatively $10 billion seems like quite a small number. It’s about 10% of upper estimates of what developing countries need annually to adapt to climate change. It’s just 1% of the cost to the US of the War in Iraq and a tiny fraction of World GDP (60,000 billion in 2008).
But in other ways an additional $10 billion per year to developing countries in the very short term is significant. It is about an 8% increase in current annual overseas development funding. The latest figures show that ODA increased by a very similar amount (10% growth rate) in 2008. ODA is increasing markedly thanks to pledges by G8 in 2005 at the Gleneagles Summit to double aid to Africa. Developed countries are also boosting funding to meet their pledges on the Millennium Development Goals which are a set of key targets to be achieved by 2015. They are conscious that in just a couple of years they will be held to account at the Rio+20 summit.
So is $10 billion a big number? No, not on the scale of the problem we face globally in reducing emissions and adapting to climate change. However, in terms of present levels of development assistance, it is not insignificant, though probably by any measure it does seem a bit mean.
Donor countries are prepared to be far more generous in the longer term, but in the short term, from their perspective, they don’t want to see massive influxes of funding wasted inefficiently or cause distortion and further corruption within the system.