In Cancun, EU Chooses Loans Over Grants for Climate Finance

The European Union’s proposal of using loans over grants in providing climate financing to poor nations was met with resistance at the ongoing climate summit in Cancun, Mexico.

Artur Runge-Metzger, the EU’s chief climate negotiator at the summit, said the approach is “a win-win situation.”

“When it comes to mitigation actions you find that … consumers can repay loans, in other words, finance can be used like a revolving fund. In that way funds can be repaid and used by others. You don’t need grants. It would be a waste of money because the individual pays for itself. You have to make best use of peoples’ money,” he said.

But aid groups and poor nations said the loans were not acceptable on principle, the Guardian reports.

“Climate money for developing countries must come from grants, not loans – [loans] will simply shackle developing countries with more debt,” said Asad Rehman, Friends of the Earth’s International climate campaigner.   

The disagreement emerged as participants of the Cancun summit started negotiating a new green fund, where climate financing for poor nations will be channeled through 2012 and beyond.

About the author

  • Ma. Rizza Leonzon

    As a former staff writer, Rizza focused mainly on business coverage, including key donors such as the Asian Development Bank and AusAID.