The ethics of climate finance

Climate finance requires international consensus among countries. So, how is this consensus reached and what guides negotiations?

In order to answer these two questions, let’s look at climate finance through the lens of ethics.

In climate adaptation finance, ethical considerations are made when examining:

1. Distribution of costs and benefits of adaptation activities;
2. Compensation for residual damages;
3. Participation in decision processes.

Let us explain these in more detail.

1. Distribution of costs and benefits of adaptation activities

This is about the responsibility for climate change and how this is translated into funds and recipients.

The ethical arguments have been that those who have played a larger role in causing climate impacts, should be held responsible for them. This guides the international adaptation funding demands.

Outcome responsibility

This responsibility is called outcome responsibility. However, because of inadequate knowledge, it is difficult to assign responsibility on “outcome responsibility” only.

In the same way, there are those countries that are rightful recipients of climate funding for adaptation due to their severe social vulnerability to climate impacts, that they mostly did not contribute to.

Social vulnerability

The combination of outcome responsibility and social vulnerability contributes to the current assignment of funding responsibility for climate adaptation, to developed countries.

However, one could also argue for more neutral arguments, where there is no blame assigned for climate change. Rather the focus is on positive outcomes for all parties.

Therefore, to support the outcome responsibility no-fault forms of prospective responsibility, based on capabilities, are applied. The capabilities are for example better institutions, more technology, better infrastructure, skills and availability of financial resources.

2. Compensation for residual damages

Social vulnerability refers to placing the most vulnerable first. This vulnerability is assumed to be caused by the climate-irresponsible behaviour of developed nations.

This principle has been used as a justification for assigning the majority of climate funding to poorer countries. These countries are not able to fund or implement adaptation due to internal constraints such as lack of technology, or insufficient development of local institutions such as water management.

However, these poorer nations may also not be able to change their reckless behaviours such as deforestation, further aggravating adverse climate change impacts.

Therefore the question in climate justice is if, in addition to residual damages due to developed countries, developing countries should also be funded for damages from their own climate adverse actions.

3. Participation in related decision-making processes

This aspect of justice in climate adaptation finance is procedural. The agreements on climate funding are arranged through negotiations at global meetings. The negotiations require three principles:

1. Recognition of the problem – the responsibilities for climate change impacts and vulnerability are the main points for parties involved in adaptation funding participation – this means an equal status in the decision-making processes.
2. Participation covers involvement in negotiations, the right to information, the right to contribute to law-making, and the right to review the enforcement of laws made. However, the disproportionate contribution of adaptation funds by the North versus South may result in countries that contribute less not being heard or trusted in decision-making. This ties into the next principle.
3. Distribution of power – The procedures for adaptation funding should encourage fairness in the negotiation process. In addition, all negotiating parties (countries) should have access to knowledge and skills that are required for decision-making and governance.

From the above explanations, we have learnt that climate finance ethics is a science concerned with steps for getting climate finance (procedural) and to whom funds are given out (distributive).

These two dimensions are governed by different laws. When negotiations on climate finance structures are made, these parts of law need to be considered. A summary of a framework for ethics in climate finance is given in the table below:

Table 1: Summary of Dimensions and domains of justice, ethical imperatives, theories and principles of justice. (Adapted from Grasso M. (2010) pg. 79).

As you can see from the table, climate finance justice is connected to theories in law. These theories are beyond the scope of this course, so we will not go deeper into them. However, it is valuable to be aware that ethical considerations exist for climate finance distribution.

References

Fitzmaurice, M., 2003. Public participation in the North American agreement on environmental cooperation. International and Comparative Law Quarterly 52, 333–368.

Gardiner, S.M., 2004. Ethics and global climate change. Ethics 114, 555–600.

Grasso M. (2010) Ethical Approach to climate adaptation finance. Global Environmental Change Issue 20 pg 74-81.