Climate Finance Gap Will Be 32 Billion Euros In 2020
Date: 13-Nov-09
Country: UK
Author: Nina Chestney
LONDON - The world will face a finance shortfall of 32 billion euros ($47.99 billion) in 2020 to combat climate change, analysts at Societe Generale/orbeo said on Thursday.
The private sector will have to be mobilized to finance national measures to cut greenhouse gas emissions to bridge that gap, analysts said in a report.
Financing mechanisms to curb greenhouse gas emissions are being negotiated by world leaders in the lead up to a U.N. climate summit next month in Copenhagen.
Current mechanisms on the table include the use of carbon offset credits and international public funding, as well as a U.N.-market based forestry scheme called Reduced Emissions from Deforestation and Forest Degradation (REDD).
"Together these mechanisms could generate additional financial flows of approximately 68 billion euros in year 2020, which is far from covering the entire mitigation cost, estimated by the European Commission at 100 billion in 2020," the analysts said.
The European Union estimates that the carbon market could provide 38 billion euros of the 100 billion required.
However, demand for carbon offsets is likely to be 0.7 gigatonnes per year on average to 2020 and 0.9 gigatonnes in 2020, the analysts said.
"Therefore, using the current carbon price (15 eur/t) as an estimate, we think that a maximum of 14 billion euros could be raised through the carbon market in year 2020," the report said.
The total funding commitment for REDD actions reaches around 4 billion euros in 2020, the analysts said. Public funding would contribute around 50 billion euros a year, according to Societe Generale estimates.
"The shortfall needs to be filled by private investment, either domestic or foreign. Governments, however, have means to incentivize or provide horizon and certainty through policy rules that will foster higher investments in low-carbon technologies," the analysts said.
A carbon price of 30 euros a tonne in 2020 could make the shortfall virtually disappear, analysts said. Offsets would then raise 28 billion euros on the international carbon markets in 2020, while public funds could reach 65 billion euros.
(Editing by Sue Thomas)
