By Julian Wong Dec.10.2009
In: capital and finance, climate change
4 comments

A Stern Warning?: No Money for China -- No Problem

This is a re-post of my recent contribution to Climate Progress.

The media headlines are screaming “U.S. Won’t Pay China to Cut Emissions” and “US Rules Out Climate Aid to China.” Todd Stern, the U.S. Special Envoy for Climate Change (pictured right), made clear in a press conference yesterday (Day 3 if you are counting!) in Copenhagen that the war chest for the initial fast track funds being considered now for climate change adaptation for developing countries would not be unlimited:

China, with a $2 trillion reserve and a revved-up economy, won’t be a recipient. “I don’t envision public funds, certainly not from the United States, going to China,” Stern said. “There’s inevitably a limited amount of money. The amount ought to be as high as it possibly can be, but it’s necessarily going to be limited. That’s just life in the real world.

Financing would instead be prioritized for the most vulnerable and least developed countries.  While a price tag in the neighborhood of $100 billion per year is what the likes of British PM Gordon Brown and UNFCCC General Secretary Yves de Boer are proposing for the long term (some developing countries are seeking as much as $300 to 400 million a year), there is also an emerging consensus to reach agreement in Copenhagen for fast-start financing of $10 billion for the near term, i.e. 2010 to 2012.  U.S. President Obama has already indicated that he is on board with this idea, agreeing to “mobilize $10 billion a year by 2012 to support adaptation and mitigation in developing countries.”

But Stern frames the constraints of such limited financing in frank terms:

“We would intend to direct our public dollars to the neediest countries, and China to its great credit, has a dynamic economy that has led it to sit on trillions of dollars in reserves,” he said. “So we don’t think China would be the first candidate for public funding.”

While some media outlets would like to play on the image of geopolitical drama here by pitting two mighty superpowers against —Eagle versus the Dragon—there is really nothing to Todd Stern’s comments because China is completely on the same page.

Earlier in the year, China and the Group of 77 were at the forefront of making demands on developed countries to contribute generous sums to aid developing countries’ adaptation and mitigation challenges to the tune of 0.5 to 1 percent of their collective GDP.  But yesterday at a press conference,  Yu Qingtai, China’s special envoy for climate change, made clear that China has never thought of itself as a “first candidate,” and that their main goal is to guarantee financial backing for an agreement to actually take effect.  Yu’s comments support statements by Liu Yuyin, Climate Advisor of the Chinese Mission to the UN, that China is pressing primarily for funding that will support other developing countries (see previous post “China in Copenhagen Day 3: Tuvalu Raises the Bar, China Reacts“).

One wrinkle to this stance is that China has been very consistent in saying no to subjecting domestic climate actions that are undertaken unilaterally without international technological or financial support to international reporting and verification procedures.  So China realizes that if it is eager to accept international financing, it would have to start “opening its books.”  The negotiations on measurement, reporting and verification (MRV) will be an important issue to watch over the remaining 8 or 9 days in Copenhagen.

While China is a tough negotiator, sticking to its guns with respect to seeking more ambitious developed country commitments and the principle of “common but differentiated responsibilities” (see previous post ““China in Copenhagen Day 2: Danish Distraction, Su Wei gets tough on the developed world”), it is also pragmatic and increasingly savvy about its emergence as a pivotal power in the international stage.  Last month, China pledged by itself $10 billion in general assistance to African nations, part of which would go into developing 100 clean energy projects.  While it is now clear that China does not expect to be the first recipients of international climate financing, one key question remains: In light of the governments of UK, Australia, Norway and Mexico proposal for a new set of principles for a global climate fund, can the discussion of whether China should be a potential recipient of such funds be shifted to whether China can be a significant contributor?  [UPDATE:  Not unexpectedly, the answer was No, by Su Wei in a press conference today (Day 4).]

Related reading:  Today, famed financier George Soros was in Copenhagen to tout a solution to meeting the $100 billion per year challenge based on a system of “special drawing rights”

Photo credit: Getty Images, via WSJ

Comments (4)

  1. Patrick Lynch Dec.15.2009@7:41 am Reply

    Glad to see your posts, wish you had wider exposure in the West.

    I am struck by how much Western MSM is trying to turn the negotiations into a China VS the US contest (while giving only the US side of the issues). It is pretty pathetic.
    Stern has been nasty like only a defense lawyer with a very guilty client can be.

    It is pretty scary to watch the US try to wriggle it’s way out of any serious commitments. It is not completely clear to me if the US intends to bring the whole thing to a halt while blaming China, or what.

    Money is of course a key. The sums demanded by developing countries are not that great in comparison to say, the sums given to banking robber barons….

    People toss around the idea that China has a $2 trillion reserve as if this were money in the bank that could be spent at will. Alas, most media people fail to understand economics. I think you guys could perform a service if you explored this idea in depth.

    I personally think that $100 billion is probably too little, but also feel that it would be helpful to explore how this money might be spent worldwide. One of the weaknesses of the developing countries position is that without providing details, it all ends up sounding like slush funds or something.

    Thanks for being there! (I am in Beijing, where we had beautiful, if cold, weather today, and clean air!)

    peace.

Trackbacks for this post

  1. Yale School of Forestry & Environmental Studies Blog » China in Copenhagen, Day 4: Back to BASICs! Dec.11.2009@4:42 am Reply

    [...] 3) Adaptation Assistance. The third point we want to draw out in the BASIC Copenhagen Accord is one that supports a point we made yesterday. The text specifies that a framework for adaptation should promote adaptation primarily in the least developed countries (LDCs), developing small island states, and African countries. We have heard from Ambassador Yu Qingtai and from the Chinese UN Mission Climate Advisor Liu Yuyin that China’s demand for a robust financial structure to an agreement is informed by China’s sense of responsibility in taking a leadership role among developing countries (see previous posts “China in Copenhagen Day 3: It’s getting hot in here – Tuvalu raises the bar, China reacts” and “A Stern Warning?: No Money for China – No Problem“). [...]

  2. Yale School of Forestry & Environmental Studies Blog » China in Copenhagen Day 5: No Country is an Island Dec.11.2009@6:14 pm Reply

    [...] the question again as to what his reaction to US special envoy Todd Stern said with regards to no financing money for China, Vice Minister He reiterated what Vice Minister Yu Qingtai said the other day: absolutely, [...]

  3. The Green Leap Forward 绿跃进 » How Did China Fare in Copenhagen? A Critical Analysis by Someone Not in the Room Dec.27.2009@4:21 pm Reply

    [...] that it is not the “first candidate” for such assistance (see previous post “A Stern Warning? No Money for China–No Problem“).  A more interesting question that was not pressed as much during the talks was whether [...]

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