I.O.U

July 6, 2009

Clean Development Mechanisms projects (offsets), Adaptation Fund, World Forest Carbon Partnership Facility (avoided deforestation), etc. are some of the ways developed countries are going to pay developing countries for screwing up the climate over the past 200 years. The money is also supposed to help developing countries avoid the high carbon route to economic development, a bit like how they bypassed landline connections for mobile phones in the past decade. But the economic crunch has meant that developed countries are too busy bailing out banks and bloated companies to be contributing much to the climate kitty. An interesting development that appears to pay the piper without breaking the bank is debt relief. The United States recently wrote off $30 million in debt owed by Indonesia in return for protecting its forests. The Indonesian Government is commited to placing the money in a fund for 8 years from which it will issue grants for forest protection and regeneration.

It does sound like a good scheme as it seems to provide the finances and donor verification but with the overall responsibility and accountability for forest protection resting with the Indonesian Government. But what is in it for the donor country? A $30 million publicity stunt is expensive even by U.S standards. It turns out that when donor countries write off a portion of the recipient country’s debt, it is counted as official development assistance (ODA) from the donor country.  In the 1960s economically advanced countries agreed (but not commited) that they must strive to provide developing countries with ODA to the tune of 0.7% of Gross National Income (GNI). Though overall the ODA has been increasing, very few countries manage to set aside the 0.7% GNI target. Thus, debt relief is a convenient way of meeting ODA commitments without emptying the treasury.

Another issue which makes this convenient for donor countries is that funds provided for climate change adapation and mitigation to developing countries is also counted as ODA. Many climate change activists are against this and want climate change funding to be additional to development aid. It is seen as a means to repay the cost of unsustainable development that fuelled progress in developed countries for the past 200 years and to convince developed countiries to eschew the same model. So far, the Netherlands is the only country that has pledged to separate climate adaptation funding from ODA. ODA money is also associated with geopolitics and this may prevent the disbursement of funds to the countires most affected by climate change. If developed countries do not come clean about climate change financing, they will be percieved with the distrust and suspicion usually reserved for scum such as unscupulous loan sharks and cunning village moneylenders.

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