Cancun Climate-Change Summit

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  • April 18-19, Major Economies
  • Merkel Initiative
  • 1 July: Yvo de Boer replaced
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Underwater Museum
The Cancun Climate Summit, Mexico, (Dec. 2010)

Canún, Mexico: This summit will be about money, not about a legally binding agreement (see News). This is not just a bad idea, its the wrong way to think about cooperation.

Finance and "binding" must be linked. Little money will flow unless donor nations feel they are getting something in return. This is why there must be a "legally binding" link between the "Green Fund" and carbon pricing in the country's that receive the funds.

Here one approach

A Green Fund should be used to solve half of the "legally binding" problem. There is no world government, so as President Obama said, "Kyoto was legally binding and everybody still fell short anyway."

As Canada proved with it's open rejection of its Kyoto commitment in the middle of the Copenhagen summit, stronger incentives for compliance are necessary. There are two approaches: rewards and penalties — carrots and sticks. Penalties—trade sanctions—will eventually be needed for wealthier countries which break their commitments, but a Green Fund could be used to reward developing countries that comply with international commitments.

This would begin to break the vicious circle of distrust. With developing countries making and keeping substantial commitments, even if they are largely motivated by payments, the developed countries would find it easier to make commitments. But if money is given out for subsidies in poor countries and then, as so often happens even in developed countries, the subsidies become corrupted, this will exacerbate the vicious circle of distrust.

The Global Energy Policy Center explained why Copenhagen would fail a year in advance

An innovative approach for implementing such a Green Fund along with international carbon-pricing commitments has just been published in The Economists' Voice, and is described schematically here: Flexible Global Carbon Pricing. In a nutshell it works like this:

  • Internationally agree a single global carbon price (not on 100 caps).
  • Use money (a Green Fund) to motivate developing countries to comply.
    • Compliance by poor countries will clear the way for stronger policies in rich countries
  • A uniform global carbon price solves the problem of carbon-intensive exports.
  • Those who remain outside the system or cheat can be penalized with trade sanctions.
  • This approach is far cheaper and far more effect than NAMAs or any other.