The negative externalities from activities that emit GHGs are not borne solely by the citizens of the countries where they are emitted, since they are exported to neighbouring countries, and to the rest of the planet as well. Similarly, the benefits of reducing GHGs are not enjoyed solely in the country that implements mitigation policies, but by people in all countries. Governments therefore have an incentive to behave like free riders, which is to say, to benefit from the GHG reductions of others without themselves contributing to reduction efforts that would impose costs on their citizens.
In order to eliminate this incentive and ensure that all countries live up to their commitments, it is logical to try to establish a binding international agreement that would impose penalties for missing targets. The need for an agreement to be binding, however, reduces the chances of signing one, since countries prefer voluntary, non-binding reduction targets.
The differing economic contexts of different countries also make the signing of a binding agreement very difficult. The principle of “common but differentiated responsibility,” which recognizes that all countries have a role to play but which takes into account the particularities of each, is a good illustration of the divergent interests of industrialized and developing countries.
Industrialized countries, which are responsible for the majority of GHG emissions to date, will have less impact in the future since the proportion of emissions from less developed countries is growing. Moreover, the impact of the climate change so far caused by the emissions of industrialized countries will be disproportionately felt in developing countries. Their lower adaptive capacity, which is proportional to wealth levels, makes them more vulnerable.
Industrialized countries will not sign a binding agreement without a non-negligible contribution from those who will have high growth rates in the coming years. For their part, poorer countries demand targets that are adapted to their situation, as well as financial support for their energy transition, since their current wealth levels do not allow them to forgo the affordable energy supplied by fossil fuels.
“Climate finance” is the solution envisioned. It allows for the transfer of financial resources from industrialized to developing countries for the mitigation of, and adaptation to, climate change.
Certain mechanisms, like the Adaptation Fund and the Clean Development Mechanism, created for the parties to the Kyoto Protocol, as well as the Global Environment Facility, already allow for the financing of climate change projects in countries that are in transition.
In the context of the 2015 Paris Conference negotiations, the Green Climate Fund, set up to help meet the UNFCCC’s objectives, will have a determining influence on the signing of a binding agreement that includes developing countries. Industrialized countries promised, in 2009 and 2010, during the Copenhagen and Cancun negotiations, to raise $30 billion for the 2010-2012 period, and $100 billion a year starting in 2020, for the energy transition of developing countries.(52) However, as of October 5, 2015, only $10.2 billion had been promised for the initial capitalization of the fund.(53)
52. Richard K. Lattanzio, “International Climate Change Financing: The Green Climate Fund (GCF),” Congressional Research Service, November 17, 2014, p. 4.
53. Green Climate Fund, “Status of Pledges and Contributions Made to the Green Climate Fund,” October 5, 2015.