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Eurozone crisis could cause US$45bn climate change funding gap

Austerity measures could lead to a potential climate change funding gap of US$45 billion by 2015, according to Ernst & Young.

By Kari Williamson

Current austerity measures across the top global economies, including Germany, UK, US, Japan, and South Africa, already mean a climate change funding gap of US$22.5bn will open up by 2015 – but this funding gap could rise to US$45bn if the Eurozone crisis escalates, the analyst warns.

The report, Durban Dynamics: Navigating for Progress on Climate Change, shows that the prospect of fiscal constraint is allied with the expectation from the business community around the world that the forthcoming COP17 summit in Durban will not secure an effective global deal on climate change.

In a global survey conducted for the report of over 300 business leaders in over 50 countries, 83% think that a multilateral agreement is required to tackle climate change but, at the same time, only 18% of senior executives said they thought a deal was likely to emerge. This could have implications for economic growth because more than half (54%) of those questioned said that addressing climate change was an opportunity for their business, the analyst finds.

Juan Costa Climent, Global Climate Change and Sustainability Services Leader at Ernst & Young, says: “The conditions under which the Durban meeting will take place could not be more challenging. Policymakers head to Durban under storm clouds of fiscal austerity, a global focus on national interests, and widespread scepticism for the prospects of securing a legally binding successor to the Kyoto Protocol. The enormous projected funding gap revealed by this report suggests continuing economic uncertainty is pushing a low carbon economy further out of reach.

“Without a global agreement, rather than working out how to live in a carbon-constrained economy, the emphasis will be on living in a climate-constrained world. This will have enormous consequences for businesses and makes adaptation a key priority in addition to mitigation.”

Worst in Europe

The study shows that under current austerity measures, the climate change funding gap is set to be most pronounced in Spain, the UK, and France. Spain is forecast to spend US$5.1bn less on climate change by 2015, relative to a scenario in which government spending grows at an average historical rate, with the UK spending US$4.2bn less, and France US$2.9bn less.

In the event the Eurozone crisis escalates and leads to a new banking crisis, Germany would face the biggest climate change funding gap in absolute terms of US$8.3bn, Spain, Japan and the US would face a gap of more than US$6bn, and the UK and France would face a gap of over US$5bn.

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