The 21st Century climate challenge

3Avoiding dangerous climate change: strategies for mitigationThe Kyoto Protocol and theframework provided by theUNFCCC provide the primaryplatform for addressingglobal cooperation onclimate change underUnited Nations leadershipour sustainable emissions pathway suggests thatan additional US$25–50 billion per annumwould be required for developing countries. 138However, this is at best an approximation.One of the most urgent requirements forinternational cooperation is the developmentof detailed national financing estimates basedon national energy policy plans.Whatever the precise figure, financialtransfers in the absence of cooperation ontechnology and capacity-building will beinsufficient. The massive new investmentsrequired in developing countries' energy sectorsover the next 30 years provide a window ofopportunity for technological transformation.However, technological upgrading cannot beachieved through a simple process of technologicaltransfer. New technologies have to beaccompanied by the development of knowledge,capabilities in areas such as maintenance, and thedevelopment of national capacities to climb thetechnology-ladder. This is an area in which internationalcooperation—including South–Southcooperation— has an important role to play.Strengthened cooperation on financing,technology and capacity-building is vital forthe credibility of the post-2012 Kyoto Protocolframework. Without that cooperation, theworld will not get on to an emissions trajectorythat avoids dangerous climate change. Moreover,developing countries will have little incentiveto join a multilateral agreement that requiressignificant energy policy reforms on their part,without providing financial support.History offers some important lessons.Perhaps the most successful of all internationalenvironmental treaties is the 1987 MontrealProtocol—the agreement forged to cut backemissions of ozone-depleting substances.Prompted by alarm over the expansion ofthe ozone hole above Antarctica, the treatyset stringent time-bound targets for phasingout these substances. Developing countries,participation was secured through a multilateralfund under which the incremental costsof achieving the targets were met by developedcountries. Today, no countries are significantlyoff track for achieving the Montreal Protocoltargets—and technology transfer is one of theprimary reasons for this outcome. 139 The benefitsof international cooperation are reflected in thefact that the ozone hole is shrinking.Experience under the Montreal Protocolhas informed the multilateral response toclimate change. Under the UNFCCC, theGlobal Environment Facility (GEF) becamea financial instrument to mobilize resourcesfor climate change activities in mitigation andadaptation. While overall financing has beenlimited, especially in the case of adaptation(see chapter 4), funds controlled under theGEF have demonstrated a capacity to leveragelarger investments. Since its inception in1991, the GEF has allocated US$3 billion,with co-financing of US$14 billion. Currentresource mobilization is insufficient to financelow-carbon transition at the pace required.Moreover, the GEF continues to rely principallyon voluntary contributions—an arrangementthat reduces the predictability of finance. If theGEF is to play a more central role in mitigationin support of nationally-owned energy sectorreforms, financing provisions may have to beplaced on a non-voluntary basis. 140Building international cooperation onclimate change is a formidable task. The goodnews is that the international community doesnot have to start by reinventing the wheel.Many of the individual elements for successfulcooperation are already in place. The KyotoProtocol and the framework provided by theUNFCCC provide the primary platform foraddressing global cooperation on climate changeunder United Nations leadership. The CDM hasprovided a mechanism linking the mitigationagenda to financing for sustainable developmentin developing countries. This is done throughgreenhouse gas reducing projects that generateemission credits in developing countries whichcan be used by developed countries to offsettheir own domestic emissions. In 2006, CDMfinancing amounted to US$5.2 billion. 141 Atone level, the CDM is potentially an importantsource of carbon financing for mitigation indeveloping countries. At another level, the CDMsuffers from a number of shortcomings. Becauseit is project-based, transaction costs are high.Establishing that CDM emission reductions154 HUMAN DEVELOPMENT REPORT 2007/2008