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Can new climate finance numbers clear fog around $100 billion goal

BARCELONA (Thomson Reuters Foundation) - New figures due out in early October are expected to show how much funding to help developing states address climate change needs to be drummed up to meet a 2020 pledge of $100 billion a year, dispersing the fog surrounding the numbers. The estimates, produced by the Organisation for Economic Co-operation and Development (OECD) and the Climate Policy Initiative (CPI), will be the first to use a definition agreed by donors, intended to avoid duplication and help clarify the complex picture of international climate finance. Ensuring wealthy countries are on the road to meeting their 2020 commitment, made at a U. N. conference in 2009, is seen as crucial to the success of Paris talks in December, expected to produce a new global agreement to curb climate change. Christiana Figueres, head of the U. N. climate change secretariat, recently said she expected donor governments to outline plans for reaching the $100 billion goal at a meeting of finance ministers in Lima on Oct. 9."Climate finance has been a source of some tension between donors and receiving countries. Donors always think they give and recipients always think they have not received," Giza Gaspar-Martins, an Angolan government official who leads negotiations for the least developed countries, told journalists in London this week. Rich nations are hoping the fresh estimates will help lay those tensions to rest. On Sept. 6, ministers and government officials from donor countries, including the United States, European nations, Australia and Japan, issued a statement outlining their common view on what should be counted towards the $100 billion goal. According to the statement, it will comprise public money provided by donor governments through a range of institutions and instruments, as well as private money for climate-relevant activities mobilized by public finance and public policy. The methodology would exclude money raised by developing countries, avoid counting funding more than once, and encourage the most effective use of the finance. "It's a useful step in the right direction," Gaspar-Martins said, emphasizing that the poorest countries had been calling for such an exercise for some time. CONTROVERSIAL FIGURES

For years, researchers have decried the lack of an international system for tracking climate finance, arguing that ambiguity in the numbers has undermined trust between rich and poor countries in the U. N. climate negotiations. The new methodology should go some way towards tackling that problem - though it may still have some flaws. J. Timmons Roberts, professor of environmental studies at Brown University, noted that developing nations were not involved in deciding it. Also it includes elements, such as non-concessional loans, that some may not agree with. "The good thing about it is that (donors) admitted the need for increased transparency in reporting," said Roberts. "It's a start but I am concerned that perhaps it cannot be a definitive number." Donors have already flagged this possibility, admitting that data and methodological limitations prevent them accounting for all flows towards the $100 billion goal, especially those resulting from public policies."Any near-term estimate produced will necessarily be partial, and will omit some – and possibly a substantial amount – of climate finance mobilized," the statement said. Barbara Buchner, a senior director with the CPI, said there was still much work to be done to collect and analyze data. More accurate estimates would only be available towards the end of 2016, she told the Thomson Reuters Foundation.

Recent advances by multilateral development banks in setting out their own methods for tracking climate finance had spurred on donor governments, she added."It took a long time because it's a very complicated issue," she said. Previous estimates of how much climate finance is flowing to developing countries - to help them cope with extreme weather and rising seas, and adopt clean energy - have varied considerably. But according to a well-regarded annual report from the CPI, the amount flowing from developed to developing countries fell to $34 billion in 2013, down $8 billion from 2012. Other estimates have been a source of controversy. For example, donors said they had exceeded their commitment to provide $30 billion in "fast start" funding between 2010 and 2012. Yet a study by international think tanks said almost 80 percent of this was also reported as official development assistance, causing experts to question whether it was "new and additional" as promised.

An analysis by Brown University found that less than half the $2.7 billion in aid OECD donors marked as targeting climate adaptation in 2012 was destined principally for that purpose. NO MORE TARGETS? The history suggests the new estimates of climate finance due to be unveiled on Oct. 9 - which are expected to show an increase for 2014 - may again spur debate on how much more donors need to raise to meet the $100 billion goal by 2020. Researchers suggest the Paris negotiations could set up a work program to further pin down the numbers, although there is already a committee tasked with doing this. And then there is the thorny issue of the amounts that will be needed after 2020, when the Paris pact is due to take effect. Experts following the negotiations say funding will clearly have to rise, but it may be in the interests of both rich and poor countries not to put firm targets in the new deal. At this month's round of talks, developing countries stressed that climate change scenarios could shift in the next five years, making it hard to work out now how much money will be needed to help them cope with warming impacts after 2020. Developed nations, meanwhile, pushed for poorer countries to create an "enabling environment", including better transparency and changes in policy to help them access financial resources and boost private investment in low-carbon projects."No one wants to put any numbers on the table, thinking, 'What if we ask for too little, or what if we offer too much?'" said Kashmala Kakakhel, a consultant working on climate finance with the Women's Environment and Development Organization.

Money from china then made in china, shipowners told

May 29 Chinese banks have sharply increased loans to global shipowners as European lenders retreat from the market but some are driving a hard bargain: the finance often comes with the condition that vessels be built in China. The financing has given China's shipyards a lifeline after new orders dropped to a seven-year low in 2012. The government wants Chinese yards to move up the value chain by building higher-quality vessels and to become a player in the offshore energy equipment industry, a lucrative sector in the generally depressed shipbuilding market. The role played by Chinese lenders has drawn the ire of some industry critics, who say an already oversupplied global fleet will only get bigger because shipowners are taking advantage of cheaper quotes from Chinese yards compared to other builders. Chinese shipyards won new orders of 11.57 million deadweight tonnes in the first four months of the year, up 57 percent from the same period in 2012, data from the China Association of the National Shipbuilding Industry showed. A key supporter has been the Export-Import Bank of China, a policy bank that provides financing to advance government economic goals."China Ex-Im is open to all clients who build vessels in China," said Chen Bin, deputy general manager of the bank's transport finance department."In this tough time we want to do as much as we can to help (Chinese) shipyards get orders from shipping companies," Chen told a Sea Asia shipping conference in Singapore in April. BIG GREEK ORDER Last month, Greek shipowners ordered 142 vessels, more than 60 percent of their global orderbook, from Chinese yards. Good pricing and Chinese financing were among the reasons, Greek Shipping Minister Kostis Moussouroulis was quoted by China's official Xinhua News Agency as saying at the time. Among them, Diana Shipping Inc, Angelicoussis Shipping Group Limited and Dynagas Ltd. got loans from the Export-Import Bank of China, the bank said on its website. The Ex-Im Bank as well as commercial banks such as the International and Commercial Bank of China and the Bank of China are some of the most active lenders. Together they doubled their share of the loan book of the top 40 lenders to the shipping industry in the last two years to 11 percent, or about $46.5 billion in loans, data from Norway's DNB, the world's largest shipping loan provider, shows.

Ex-Im Bank had about $13 billion in outstanding shipping loans in May, up 30 percent from the end of 2011, and planned to offer more, Chen told Reuters. He declined to give a target."The enticement to order at particular yards on the basis that you will get financed certainly attracted a lot of non-listed European companies," said Timothy Ross, head of Asia-Pacific transport research at Credit Suisse. Seadrill Co. Ltd, Sevan Drilling ASA and Singapore-based Frigstad Offshore Ltd, all of which have made orders at Chinese yards within the past two years, did not respond to requests for comment. But Larry Pupkin, director of Singapore-based Littoral Management, which helps shipowners find yards for construction and arrange financing, said Chinese quotes and financing terms were attractive. Chinese banks are not alone in helping their shipyards. Bankers and lawyers said policy banks in South Korea were also giving finance to shipowners to place orders at Korean yards, which topped China in the value of orders last year. In 2012, South Korea won contracts worth nearly $30 billion, while Chinese yards received $18.2 billion in orders, according to the World Shipyard Monitor published by Clarkson Research Services. Global new orders totalled $85.5 billion. So far this year, Chinese yards have won orders worth $5.4 billion for 184 vessels, compared to $11.5 billion in contracts for 125 new ships at Korean yards. In tonnage terms, China and South Korea were neck-and-neck, the Clarkson data showed."The view in the industry right now is, if you need money to buy ships, Chinese and Korean lenders will fund you," said Jon Windham, head of industrial research at Barclays for Asia ex-Japan.

PUSH INTO OFFSHORE EQUIPMENT The oversupply of vessels, low shipping rates and sluggish demand has drawn concern from some industry officials in China."Banks ... shipowners and cargo owners should take an extremely cautious attitude towards shipping investment under this catastrophically oversupplied market," said Zhang Shouguo, executive vice president of China's Shipowners' Association. In a letter posted on the organisation's website, Zhang estimated that global ship supply exceeded demand by 30 percent. Beijing has promised to help its vast shipbuilding sector develop as part of a broader effort to upgrade the country's massive manufacturing industry. In a 2011 document on the strategy to develop the offshore energy equipment industry, China's National Development and Reform Commission urged banks to increase financing to manufacturers.

Industry leaders in that sector are yards in Singapore and South Korea. But a number of Chinese yards, including Dalian Shipbuilding Industry Co. Ltd, Yantai CIMC Raffles Offshore Ltd and yards under state conglomerates China State Shipbuilding Corporation (CSSC) and China Ocean Shipping (Group) Company (COSCO), have started to challenge in the market for jackup rigs, which drill in water up to a depth of 150 metres (500 feet). Chinese yards had 35 of the 95 orders for jackups by the end of the first quarter, from fewer than 20 at the start of 2012, Norway-based Pareto Securities said. Singapore had 45. Seadrill, chaired by shipping tycoon John Frederiksen, placed an order last year for two barges and two jackup rigs at Dalian Shipbuilding, with a syndicated loan of $440 million in which the Ex-Im Bank of China took a sizable chunk, according to the bank. Even in the offshore equipment field, which has a good outlook thanks to rising expenditure on oil and gas exploration and production, some Chinese bank executives called for prudence."Offshore (equipment) is a huge market, but we are concerned about a rush into the market en masse," said Yang Changkun, managing director of shipping at ICBC Financial Leasing Co. Ltd, an arm of ICBC bank. Nevertheless, Yang told Reuters that ICBC Financial Leasing hoped to bring in 10 billion yuan ($1.63 billion) worth of ship finance deals this year, equivalent to what the company did in the five years since its establishment in 2007. HEYDAY OVER FOR EUROPEAN BANKS European banks still dominate lending to the global industry, although their share fell to 75 percent in 2012 from 83 percent in 2010, the DNB data showed. One major difference in strategy is that Chinese banks are happy to work with new shipowners, while European lenders appear to be working more with existing clients."There are European banks that are able to do new business, however, some of the same banks are also spending a lot of time managing their existing book," said Gregg Johnston, partner at law firm Stephenson Harwood LLP in Singapore. German lender Commerzbank last year said it would wind up its ship finance unit. France's Societe Generale sold part of its shipping loan portfolio to Citigroup ."I don't think European banks will go back to the strength they had before the crisis. Asian banks will very nicely fill the gap," said Mario Behe, co-head of ship finance for Credit Suisse in Singapore.