Putting climate finance needs in context

Full points for the moderators of the Long Term Climate Finance discussions yesterday for trying to inject some energy into the rather stale discussions of scaling up finance to meet the commitment of US$100 billion by 2020. Their chosen format of “world café discussions” with participants encouraged people to circulate between the four small group discussions in Salon Beethoven.

ECO picked up some encouraging snippets from the conversation like “need for quantitative and qualitative aspects of pathways to $100 billion”,  “develop innovative sources like bunker finance and financial transaction taxes”, and “50% for adaptation is important.” Clearly something has to change to get something concrete and useful out of this process. Perhaps changing the frame of reference might be helpful.

ECO has heard some countries lamenting about how difficult it was to provide public finance at the scale of tens or a hundred billion dollars per year. Put in the context of the scale of investments and financial flows in the larger economy, the financing required to address climate change is indeed quite modest and would be entirely manageable, if climate change was given the importance it deserved.

Some examples of scale of financial flows and investments in the global economy:

$1.8 quadrillion: Amount of financial transactions in the UK in 2013.^[i]

$350 trillion: Global urban infrastructure and usage expenditures in dwelling and transportation for the next three decades.^[ii]

$100 trillion: Estimated amount of global Assets under Management (AuM) in 2020 (in pension funds etc).^[iii]

$63.4 trillion: Global stock market capitalisation in the 58 largest stock exchanges in November 2013.

$30 trillion: Global stock market capitalisation amount lost in 2008 and restored over the following 4 years.^[iv]

Examples of scale of public finance investments:

• $7.7 trillion: Bloomberg’s estimate of bailout from Federal Reserve to rescue the US and global financial system during the 2008 financial crisis.^[v] Other estimates go as high as $29 trillion.^[vi]
• $1.5 trillion Total global defence spending in 2014.^[vii]
• €1 trillion: Public revenue lost in the EU alone through tax avoidance, evasion and fraud.^[viii]
• $544 Billion: Global fossil fuel subsidies in 2012.^[ix]

Scale of Climate-related figures and investments required

• $125-145 trillion: Estimate for the total annual global ecosystem services in 2011.
• $5 trillion: Amount of annual investments needing to be “greened” according to the WEF.
• $700 billion: Amount of annual new investments needed in low emissions technologies in global energy sector, according to IEA.^[x]
• $400 billion: Amount of those investments required in developing countries (rough estimate).
• $100 billion: Amount developed countries committed to “mobilise” by 2020, including public and private, through bilateral and multilateral channels.

CAN asks for Public Finance

• >$100 billion: Per year, amount of public finance needed by developing countries to meet adaptation needs and to contribute to mitigation efforts for staying below 2°C.
• ~$100 billion: Amount of public finance that should be provided per year to developing countries as part of meeting above $100b commitment by developed countries.
• $25-100billion: Amount of public finance that should be be channeled through the GCF by 2020.
• $15 billion: Amount of public finance that needs to be pledged by November 2014 as part of the GCF initial resource mobilisation by 2014.

^[i] http://simonthorpesideas.blogspot.com.br/2014/03/uk-financial-transactions-in-2013-at.html
^[ii] http://www.wwf.se/source.php/1285816/Reinventing%20the%20City_FINAL_WWF-rapport_2010.pdf
^[iii] http://en.wikipedia.org/wiki/Gross_world_product
^[iv] http://www.businessinsider.com/wfe-world-stock-market-capitalization-2013-12
^[v] http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
^[vi]http://www.levyinstitute.org/pubs/wp_698.pdf
^[vii] http://www.ibtimes.com/global-defense-budget-seen-climbing-2014-first-total-increase-2009-russia-surpasses-britain-saudi
^[viii] http://www.euronews.com/2013/05/21/web-as-europe-faces-tax-evasion-worth-1-trillion-euro-meps-debate-solutions-ahe/
^[ix] IEA’s World Energy Outlook, http://www.worldenergyoutlook.org/publications/weo-2013/
^[x] http://www.pwc.lu/en/press-releases/2014/asset-management-2020-a-brave-new-world-en.jhtml