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Innovative financing for development is essentially used in the health sector but can be used in other fields as well. The purpose of the second workshop of the Conference, chaired by Christian Masset was therefore to establish ways to mainstream the use of the mechanisms in new sectors through several examples which are currently under way and planned for the future.

1- Climate change and innovative financing for development

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The first session of Workshop 2 discussed how innovative financing mechanisms (carbon market and earmarking a portion of proceed to development projects in developing countries, debt-for-nature swaps, carbon tax) can be used to tackle climate change and to conserve the environment.

Supported by Germany’s experience, the auctioning of greenhouse gas emission permits and the voluntary allocation of a portion of their proceeds to development (following European negotiations on the climate and energy package) provided an important opportunity to finance adaptation to climate change in developing countries.

The presentation given by Manfred Konukiewitz, Head of the Global and Sectoral Policies Directorate in the German Federal Ministry for Cooperation, showcased the German Government’s success in selling greenhouse gas emission permits to the private sector and allocating a portion of the proceeds to climate efforts in developing countries. In 2008, such sales raised over €800 million. €120 million were allocated to the development budget in 2009. The proceeds greatly vary according to the carbon price per tonne: following the economic and financial crisis, carbon prices per tonne fell from €25 in 2008 to €15 today. Yet Germany’s forecasts are optimistic.

Laurence Tubiana, Head of Global Public Goods at the French Ministry of Foreign and European Affairs, underscored the importance of innovative financing in achieving low-carbon economic growth and in ensuring the huge efforts required to transform our economies. She indicated that financing these efforts is a difficult issue against a backdrop of limited national budgets. Among the sources under discussion, a common fund has been mentioned, similar to the Global Fund, and systems based on the carbon market, possibly financed by auctions. Ms Tubiana explained how important it is to find a solution to move forward on the issue of adaptation to climate change in developing countries. The challenge now is not only to be successful in Copenhagen, but especially to begin transforming our economies into green economies.

Lastly, Marie de Longcamp, Senior Program Officer of Conservation Finance at the WWF, presented an external debt conversion mechanism for financing recurrent expenses related to support for biodiversity. It is a concrete example of an older mechanism developed in the 1980s but which has not yet reached its full potential: the principle of a voluntary swap between creditors of debts and their debtors whereby a portion of debt is forgiven in exchange for financial investment to help protect nature and biodiversity.

For example, in Madagascar, the proceeds from debt relief which was negotiated in 2008 was allocated to a new Foundation for Protected Areas and Biodiversity.It is a genuine innovative financing mechanism: sustainable, predictable and consistent with the mandate of support for global public goods.

22 June 2009

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