06/02/2010 07:23 pm ET | Updated May 25, 2011

Climate financing: put the money on the barrel at the Bonn climate talks

One of the major issues at the climate treaty talks underway in Bonn, Germany this week is a big idea encapsulated in a simple phrase: "climate financing."

On the surface the idea behind climate financing is simple - it involves developed nations (like the US, Japan, Canada and EU countries) contributing to a pot of money that is then used to help developing nations (in places like Africa and Southeast Asia) move to a clean energy economy and also deal with the effects of climate they are already seeing or will be dealing with shortly.

One of the sad ironies around the effects of climate change is that most of the countries responsible for the vast majority of greenhouse gas emissions are in the Northern hemisphere where the effects of climate change will be the least. While the countries in the Southern hemisphere have the lowest per-capita rates of emissions, but will experience the greatest impacts and have the least amount of money to deal with the issue.

Climate financing is the mechanism in the international treaty that fixes this imbalance. And while it may be simple in concept there are major issues around who should pay what and how much and to who.

Should governments in developing nations foot the whole bill and, if so, how much is that bill? Should developing nations pay some and then hopefully it is enough to stimulate private investment? Can we trust that the money sent to developing nations is actually spent on its intended purpose? 

In the short-term while all the complicated long-term issues around financing are hammered out, developing countries agreed at the Copenhagen climate talks last year to provide $30 billion to developing nations from now to 2012 - the negotiating lingo for this commitment is "fast start financing."

For the long-term, there was a somewhat tepid agreement amongst developed nations to commit to $100 billion a year by 2020, but we remain a long way from seeing this become a reality as negotiators continue to try and figure out all the complexities with how this program will work. Even then, the amount pledged so far remains a far cry from the estimated $200 billion a year developing nations need to adequately deal with the effects of climate change and transition to cleaner sources of energy.

"Aiming for $100bn per year is a good start, but it must be the floor not the ceiling if a global climate catastrophe is to be avoided," finds a new report out earlier this week from Oxfam International. Their white paper called "$100 Billion Questions" [pdf] stresses the importance of this funding coming on track soon to help the world's poorest nations adapt and ward off the devastating effects of climate change.

"Climate finance is about more than compensating developing countries for the costs imposed on them by a problem they did not create. It is an investment between rich and poor countries in a common future. Rich countries cannot only fight climate change at home and win," says the report.

Climate finance is a huge issue and a very divisive one - at earlier talks last year the issue prompted the African nation representatives to walk away from the negotiating table - and it is one that lies at the center of a fair, legally binding and ambitious climate treaty.