Climate finance - moving beyond 'polluter pays'?

Author:Arndt, Channing

24 April 2015

Climate change adaptation funding is frequently characterized as reparations or compensation for costs imposed by historical emissions. This characterization derives from the 'polluter pays' principle. The flows associated with climate finance are thus frequently conceived of as payments owed that are distinct from, and logically additional to, traditional aid flows which are conceived of as investments in the wellbeing of poor people and poor countries.

The polluter pays principle (PPP) undeniably has intuitive appeal. However, perhaps now is the time to adopt a framework within which the logic of differential responsibilities between developed and developing countries remains intact, but which is based on variations in capabilities, rather than culpability for the problem of climate change.

Responsibility for the current levels of greenhouse gases in our atmosphere is skewed towards the developed world, especially when we consider emissions on a per capita basis. Even though developing countries are responsible for a relatively small share of cumulative emissions, the negative effects of climate change are widely regarded as very likely to be relatively greater in developing countries.

Further, there are a number of problems with PPP, and a number of potential benefits associated with moving away from it:

  1. There is a tension between conceptualizing climate finance as separate and distinct, on the one hand, and the broad agreement that climate and development issues are strongly interlinked and hence best tackled jointly, on the other.

  2. PPP has provided impetus for the widespread spawning of new funds and disbursement mechanisms, with a high potential for duplication and wasteful complexity.

  3. Private money must form a significant part of future climate finance, with public money increasingly used to leverage private funds. It is not easy to see how a system focused on compensation could be designed in such a way as to simultaneously help catalyse the necessary private sector financial flows.

These are serious, but perhaps not insurmountable, issues. However, there are also even more fundamental problems with the application of PPP to the climate problem.

How much should the polluter pay?

Assessing the liability of the polluter is crucial if PPP is to be successfully applied, for this we must be able to quantify the impacts of climate change. The numerous attempts to do so almost invariably compare futures under climate...

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