Financing for adaptation: the polluter pays

Speech by minister Koenders (Development Cooperation) in Nusa Dua, Bali, Indonesia

Mr/Madam Chair, ladies and gentlemen,

We are here today at this important meeting to work towards a framework for the post-2012 climate change regime. And let me make one thing clear: adaptation needs to be an important part of this framework. While aiming for ambitious mitigation targets to avoid dramatic long-term climate change, we cannot close our eyes to the impacts being felt right now. Indeed, we must “avoid the unmanageable and manage the unavoidable”. That mandate was laid down in the original UNFCCC itself, but is also part and parcel of a much broader global commitment – the commitment to fighting poverty. It would be unacceptable for climate change to hamper or reverse progress on the Millennium Development Goals – our aim of halving world poverty by 2015. That risk, ladies and gentlemen, is the reason I am here in Bali this week. The fact is, the most vulnerable countries such as the Least Developed Countries and Small Island Development States contribute least to global emissions but will suffer most. My mission here is to make their viewpoint heard.

The risk to the MDGs, Mr/Madam Chair, is real. Developing countries, and especially the poorest ones, are the most vulnerable. We are already seeing natural disasters wiping out the progress they have made with development. And it is happening over and over again. Millions of people are facing the consequences of more severe and more frequently extreme weather. Millions are facing growing water stress. And millions are finding it harder to make a living from the fragile natural resource base. These more frequent, more severe disasters could tip them over the edge into chronic famine and forced migration.

Clearly, there is much that can be done to reduce the impacts of climate change. In the Netherlands, we are already starting to adapt water management and our coastal defences to take account of the new situation. It is not easy, nor does it come cheap, but we can do it. For the poorest of the poor however, climate change brings a different reality. A reality with even harsher effects – and a reality without the financial resources, know-how and infrastructure to adapt.

That brings me to financing for adaptation. While climate change is a global problem, not everyone bears equal responsibility for its root causes. Industrialised countries such as the Netherlands have been, and still are, responsible for the lion’s share of global emissions. Yet we don’t suffer the worst impacts. Instead, those who have contributed the least pay the highest price.

That injustice cannot be wiped away merely with an extra effort on the part of the most vulnerable, or by diverting Official Development Assistance, which has already been committed to fighting the global inequalities that exist regardless of climate change. Instead, financing for adaptation should primarily come from an additional stream of funding, based on the “polluter pays” principle. Under that principle, if a factory in the Netherlands pollutes the local environment, it must pay for the cleanup. On the same basis, those polluting the global environment should pay for the consequences, in this case especially the consequences that affect those least able to cope. We should commit here in Bali to including in the post-2012 agreement an effective financial mechanism to support adaptation in developing countries.

But, Mr/Madam Chair, let me be very clear: adaptation is not only a matter of more money. It is also a matter of better planning, better policies, and better practice. Of being smarter in what we are already doing, mainstreaming climate risk reduction into our development efforts.

Mainstreaming, again? I can already hear the scepticism about yet another topic to be integrated into development. So let me be very clear: climate change adaptation should not become another conditionality for development aid. Instead, I firmly believe it is an opportunity to achieve better poverty reduction. Slightly changing the design or location of new infrastructure is, for example, much more effective than stand-alone protective measures. It is better to pay a little extra to integrate disaster risk reduction and early warning into new investments than to face a rising toll of relief and reconstruction. Equally important, integration helps us to avoid the risk of maladaptation. We all know too many examples of development that destroyed the natural resources that buffered an area from the risk of flooding, or new infrastructure that triggered population growth in risky areas, putting more and more people in harm’s way.

In line with the Paris Declaration, this is not an agenda that can be driven by bilateral aid agencies. Developing countries themselves need to step up to the plate. From that perspective, the Netherlands is very happy with the OECD DAC initiative to develop guidelines on the integration of adaptation into development assistance, and we are pleased to be co-chairing the Task Team on this issue. The last thing developing countries need is ten well-intentioned donor agencies (plus one or two UN agencies) coming at them with ten different adaptation planning tools.

Taking a closer look at my own direct responsibilities, we have done “quick scans” of our assistance to three partner countries, Bangladesh, Bolivia and Ethiopia. These were rather informal and sketchy analyses of the climate risks facing the development objectives and programmes we are supporting there. Not a fancy intellectual policy exercise, but a low-cost effort that identified activities at high risk, and demonstrated concrete options to reduce vulnerability, with clear development benefits.

Mr/ Madam Chair, the quick scans also underlined the fact that mainstreaming adaptation is more than simply re-labelling all kinds of ongoing activities. S ome people have argued that all development assistance is in fact support for adaptation to climate change, as poverty reduction is the best way of making people less vulnerable. I do not disagree with that. But I would say that in order to be effective at poverty reduction itself, we now need to take climate change into account.

Let me emphasise that adaptation is not limited to government activities. It is about people, about businesses, about civil society.

For instance, the Red Cross/Red Crescent has been mapping out the consequences of climate change for their humanitarian work in a growing number of developing countries. Their volunteers and staff witness the changing climate from close by, and realise that they need to increase their assistance to the most vulnerable. They also realise that relief and reconstruction are not enough, and are helping vulnerable communities to adapt to the changing risks. Integrating climate change into their humanitarian work is not rocket science, but it is not business as usual either. The Dutch government has been happy to support these efforts, and counts on many other organisations such as these to facilitate adaptation, particularly at the local level.

Mr/Madam Chair, that brings me to a final point that brings together some of the issues I have touched upon so far. I have mentioned that the Netherlands believes adaptation needs to have a prominent role in the post-2012 negotiations, and that financing for adaptation should be organised according to the “polluter pays principle”. I also discussed the need to integrate adaptation into poverty reduction, not just by relabelling our poverty reduction efforts as adaptation, but by truly being smarter and doing things differently to proactively manage the growing risks. But for both purposes – our discussions here in the UNFCCC, and better climate risk management within development planning – we need better insights into the costs and benefits of adaptation to climate change. Along with my colleague from the UK, I have launched a global effort to define them, with a menu of adaptation options per region and sector.

Some people have been sceptical about such calculations. But let’s face it – adaptation comes with a price tag, and we need to know what it is. For instance, rough estimates show that to achieve MDG target 10 on water and sanitation, US$ 10 billion a year will be needed between now and 2015. And that is without taking climate change into account. Using IPCC climate scenarios for the coming years and decades, and generalised assumptions on the costs of extracting groundwater, building additional surface water storage capacity, installing desalinisation plants, and reclaiming water, a similar annual investment would be required to continue meeting the original MDG target. Such generalised assessments provide an indication of the scale of the challenge we are facing. However, they do not yet inform in-country decision-making, which needs to weight different options in one particular locality. The new assessment of the costs and benefits of adaptation should take that extra step, thus informing both global and local decision-making.

Mr/Madam Chair, ladies and gentlemen, as the African Development Bank recently pointed out, climate change is, paradoxically, not just a very serious challenge for development, but also an opportunity. An opportunity to address the weather-related risks that have been ignored for too long. An opportunity to muster the power of the private sector, including innovative risk transfer instruments. And most importantly, an opportunity to enhance partnerships. Partnerships between government departments, the private sector, non-governmental organisations, and national and international providers of scientific information.

In that spirit of partnership and opportunities, the Netherlands aims for a strong adaptation component in a post-2012 agreement. I look forward to further discussions on this topic, both here in the UNFCCC and in the OECD DAC.

Thank you.