A New Architecture for Climate Finance Must Encourage Private Sector Investment

Give a man a fish, and he eats for a day. Teach a man to fish, and he eats for the rest of his life.” In relation to climate financing, the Green Climate Fund (GCF) and Developed Country Parties, do both, and neither particularly well.  The recent IPCC 1.5 report has taken away all room for delay: the GCF cannot waste its valuable funding on unaccountable, inefficient disbursements. We need a financial architecture that will let us move much faster than we are.

This COP has highlighted Developing Country Parties’ concerns that they won’t have the capital to meet the requirements of the Paris Agreement. More specifically, that they won’t have the fOptimized-Plants and coinsunds to help pay for losses and damage expected from climate change and that they cannot afford to build the necessary infrastructure, such as renewable energy sources and other low-carbon technologies, that the IPCC 1.5 report warns are necessary.

The GCF relies on Developed Country Parties’ pledges to provide that funding. However, these Parties are hesitant to invest and bear the risk for the costs of climate change. Additionally, they are hesitant to grant funding to countries that are technically “developing,” yet have emerged as economic powerhouses.

This hesitation is exacerbated by irresponsible use of funds by the GCF. Experts argue that the use of climate grants, which make up 47% of the GCF’s activities to date, rather than direct investment, are a misallocation of public funds. They can actually harm markets by pushing out small-scale private actors, often going to those who could afford it anyway. Instead, GCF capital should be blended with government money in order to attract private investors and encourage market growth.Flood_Affected_Areas_of_Amreli_District_Gujarat_India_on_24_June_2015_2-768x512

Private investors are hesitant to invest in the face of unfamiliar risk. This includes vulnerabilities to extreme weather, droughts, and rising sea levels for coastal economies, but also inaction by governments that will exacerbate these effects. However, private investors are often moving into these markets anyway, which are slowly becoming more viable as investment options. To encourage this, public funds from the GCF and governments should be used to leverage investment from private actors. Instead of being given freely, by themselves, in the form of grant disbursements, proponents argue that they should only be committed in cases where they can encourage private investment at 10x or higher.

Many Developing Countries, LDCs, and SIDS require foreign aid to kick-start these markets. Private investment must be encouraged as part of that funding. There is simply not enough public funding to tackle the problem alone.


Voluntary Cooperation (ITMOs) the Unknown Monster

An important item under negotiation at COP24 is the concept of voluntary cooperation in mitigation. Screen Shot 2018-12-12 at 3.08.55 AMThis item is of huge importance as developing countries need funding and financing to engage in low-carbon development and adaptation but they don’t have mandatory mitigation targets. Developed countries are the ones with the economic resources but they also need ways to meet their mitigation targets. This is where the cooperation comes in: a developed country finances a project in a developing country and gets credit for some of the mitigation toward meeting their Nationally Determined Contributions (NDCs).   These are called Internationally Transferred Mitigation Outcomes or ITMOs. But what are the rules around when and how these transfers can occur and how they are accounted for? Transparency, accurate accounting and avoiding fraud are essential to creating a system of integrity. (See my previous blog on blockchain for part of the potential solution.)

Article 6.2 of the Paris Agreement is intended to provide some direction but it does so by leaving discretion to the Parties by saying that the framework should be consistent with guidance adopted by the COP. It does however specify that the framework needs to provide guidance to ensure that double counting is avoided. Michael Mehling of MIT released a report recently as part of the Harvard Project on Climate AgreementsGoverning Cooperative Approaches under the Paris Agreement. A concern identified by Michael Mehling is that this system could create a perverse incentive for developing countries to have low NDCs so that they can sell their ITMOs. Screen Shot 2018-12-12 at 3.09.35 AMBecause NDCs are by definition nationally determined this cannot be addressed directly. However, the report stresses that the parties should be careful not to over-regulate with restrictions as it may limit participation and increase transaction costs. Mehling stated that lacking ambition in NDCs cannot be compensated for with restrictions on the cooperative approach. “Whatever its final shape, the governance framework for Article 6.2 should avoid being too weak or too restrictive, as either outcome would diminish the very benefits that prompted introduction of compliance flexibility in the first place.” (Mehling from Summary Doc.)

The advantage to voluntary cooperation through ITMOs is that it effectively creates a market mechanism, it provides ways to achieve mitigation at a lower cost and should facilitate an overall increase in ambition. However, Juan Pedro Sira, a negotiator on this issue at COP24, said that when the concept was developed in Paris they didn’t know the kind of monster they were creating.

The key is that simple rules are created that are transparent and robust in terms of environmental integrity by addressing ambition, agility, and transparency.   This will help create predictability benefitting developing countries that want to create projects ready for this process and private investors that want to invest. The sense is that this issue is very complicated but extremely important to the success of increasing ambition sufficient to avoid our pending disaster.


The Pre-2020 Stocktake: Disappointment and Resolve

As with any massive undertaking, practice makes better. The Global Stocktake in 2023 is no different.image1024x768
In accordance with decisions at COP21, to implement enhanced action prior to 2020, and at COP23, emphasizing that enhanced pre-2020 ambition can lay a solid foundation for post-2020 goals, this year’s COP held a two-part assessment of global progress. The first event, held on December 5th, was a Technical Review, while the second event, held on December 10th, was a High-Level meeting of the Parties. Each session was composed of two panels. Each answered predetermined questions followed by an open plenary discussion where Member Parties could intervene.
The Technical Review’s first panel, consisting of the heads of the subsidiary bodies, considered “the work of the UNFCCC process related to the mitigation efforts up to 2020.” It addressed issues such as technology transfer, capacity building, and the IPCC 15 report. The second panel, made up of financial bodies and technical experts, highlighted “efforts of the UNFCCC process to enhance climate implementation and ambition up to 2020.” It focused on ease of access to climate finance, as well as on parties’ progress towards their finance commitments.
COP24-6Today’s High-Level meeting saw two panels made up of ministers of various Developed and Developing Country Parties: Poland, Grenada, the European Commission, China, & Australia in the first session, followed by Norway, Brazil, Germany, Ethiopia, Japan, & Finland. The panels began by discussing the pre-2020 efforts of Parties to mitigate greenhouse gases & ways to enhance efforts, and the provision of support for climate efforts and enhancing efforts, respectively.
Discussions in each session forced Parties to consider their efforts to implement mitigation strategies, make climate finance more accessible, and to meet the various commitments and ambitions in the pre-2020 period. While the aim of this stocktake was to “provide a space for holistic reflection by ministers and other high-level representatives,” it raised serious questions regarding gaps between Parties’ commitments and the reality exposed by the IPCC 15 and other reports.
While Panelists focused on the positive and what had been working thus far, such as finding the right incentives to delink economic growth from emissions, doubts were raised during the plenary. Most poignant was India’s intervention: “Are these pre-2020 actions adequate? Have we addressed the task before us?”
To which, it seems, the answer is “No. Not yet.”


Finance Flows For the Future of Forests

Screen Shot 2018-12-10 at 7.06.20 PMThe Paris Agreement seeks to achieve a balance between mitigation and adaptation activities.  Financial mechanisms are a highly sought out means of addressing this balancing act, both within the FCCC and beyond.  While the forest resource is certainly not unique in its desperation for tapping into potential funding pools, forests are currently undervalued and therefore underfunded yet vital resources for sustaining life on Earth.

All five of the speakers at today’s side event sponsored by Switzerland and the Climate Bonds Initiative (CBI) alluded to the need for an increase in private financial investments in conjunction with other public funding sources and policy initiatives to help address the pervasive effects of climate change on forests.  Julian Richardson of the Parhelion Underwriting Ltd. credited the lack of financial flows in large part to a deficiency in understanding for how to value ecosystem services.  In their publication distributed at Monday’s afternoon session (Forest Resilience Finance: Helping Forests Adapt to Climate Change), resilient forests are credited with providing: direct subsistence in the form of food and medicinal products; income generation from timber and non-timber-forest-products (NTFP); cultural traditions, rituals and recreation; and protection from natural extreme events and hazards (p. 6).  While the world at large certainly recognizes the existence of these services, the lack of monetary worth on many of them prevents standard ideas and management practices that would help stakeholders feel secure in making investments in forests and receiving timely returns on them as well.

eservices

Ms. Chiara Soletti of the CBI described the development of their Green Climate Bonds as a means of soothing investment concerns in this resource area.  In their “Fair-Trade” like labeling scheme for the green bonds, rigorous scientific criteria help bond investors quickly determine environmental credentials through compliance with the overarching climate bond’s standards (disclosure, i.e. project location and size), mitigation component (type or stage of forestry, i.e. sustainable forest management or NTFP), and adaptation and resilience component (risk assessments and strategies).  Projects must comply with both the mitigation and adaptation criteria in order to be funded, helping to address both investor concerns and those of the PA.

One of the biggest hurdles for overcoming a lack of ambition to invest in the forest resource is the typical short-term, quick return nature of investment opportunities in our current economic paradigm.  moneytreeForests do not provide outrageous capital returns in the same immediate time frame as some other “Wall Street” investment schemes on the market. But this mindset is greedy, unrealistic, and unsustainable, given the widespread value of forests in comparison to the quick and dirty stock market, and the call for a major paradigm shift in the most recent IPCC report. An investment in forests can also accompany an investment in a developing country’s resources, tackling two treaty birds with one stone.

Whether it be through green climate bonds and the private sector, or holistic sustainable forest management through municipalities and community groups, investing in forests is a surefire way to ensure our future is a green, clean, beautiful scene.


Adaptation and GCF at the Koronivia Workshop

Today was our delegation’s first day at COP24 in Katowice, Poland. The experience was a whirlwind. We all were figuring out where to go for meetings, identifying who was speaking for each Party, and how to best soak in all the activities of COP. We attended sessions in our area of expertise, and sometimes those sessions overlapped areas of expertise. The Koronivia Workshop was such a program with an overlap between adaptation and agriculture.

The Koronivia workshop was split into sessions: morning and afternoon. Both sessions included adaption and financing discussions. Presenters offered a PowerPoint about projects in their respective countries. The agenda can be found here.

At the end of the afternoon session, countries and NGOs were able to contribute to an open discussion. The Co-Facilitators opened the floor to discuss three questions about the constituted bodies (CBs), useful modalities to implement outcomes from the workshops, and future topics that may arise from the outcomes. Suggestions from the countries were helpful and constructive, but there was no decision made on how to proceed. Check the blog tomorrow for more specific answers given to the above questions from our ag expert, Liz.

One concerning question was raised about the role of the GCF. A GCF representative was present; however, GCF did not give a formal presentation because the workshop was focused on Parties and CBs. The GCF is not a CB, so its role in Koronivia is not mandatory. But the GCF representative stated that many projects currently funded by the GCF are agriculture focused and expressed that the GCF will continue to fund similar programs. GCF addressed concerns about their funding process. GCF guided all Parties to provide more information about their projects to develop tailor-made funding efforts. GCF can, and will, support climate resilient agriculture. Each country needs to request to funding in order for funds to be dispersed to their project.

The workshop concluded with the announcement that there will be an informal consultation on Wednesday, Dec. 5, 2018, at noon to discuss some issues that were not addressed during this workshop. For information on the first session, and an overview of the Koronivia Joint Work on Agriculture, please see this blog post.


Adapting the Adaptation Fund under the Paris Agreement

Screen Shot 2018-11-29 at 9.01.36 PMThe future of the Adaptation Fund (AF) is among the dicey climate finance issues to watch as Parties seek to complete negotiations on the Paris Agreement Rulebook over the upcoming 2 weeks. While it is small, with total cumulative receipts of only $737 million, the AF is highly regarded and widely celebrated for the “relevance, efficiency and effectiveness of its work” and its “contribut[ion] to transformational change.”

The AF was created under the Kyoto Protocol, and thus subject to the CMP, not the COP. The requisite decision to have it serve the Paris Agreement came in 2017 at CMP13.

Screen Shot 2018-11-28 at 6.31.12 PMOn the eve of the Katowice climate change conference, concerns remain about whether, in its new life, the AF will retain the unique and innovative features that have made it so vitally important to developing countries. In particular, developing countries want to preserve:

  • Direct access (not having to access funds through multilateral institutions)
  • Grants-based funding
  • Full cost accounting of country-driven projects/programmes, and
  • A developing country majority on the AF board.

Negotiators have been grappling with two divisive issues that will impact these characteristics: 1) the AF board composition, and 2) how the Fund will be resourced.

The 16-member AF board currently includes 2 representatives from the 5 UN regional groups, 1 each from the small island developing states (SIDS) and Least Developed Countries (LDCs), and 2 each from the UNFCCC’s Annex I Parties and non-Annex-I Parties.Screen Shot 2018-11-28 at 6.47.17 PM

A proposal to eliminate the differentiation between Annex I and non-Annex I Parties and expand donor country representation on the board emerged during APA 1-6 in Bangkok in September. Developing country Parties want the make-up to remain unchanged and are pushing back hard. They fear undue donor country influence not only on funding decisions, but also on multiple other important aspects of governance and operations.

As for resources, a percentage of proceeds from the marketable emission reduction credits of the Kyoto Protocol’s Clean Development Mechanism (CDM) initially funded the AF. With CDM proceeds drying up in recent years, the Fund has had to seek voluntary contributions – not a sustainable mode. Currently, the Fund has only ½ of the resources needed to meet the amount requested in the most recent round.

Screen Shot 2018-11-29 at 8.07.46 PMWhile, across the board, Parties support establishing new innovative mechanisms to serve as revenue sources, most developing countries also want to continue the original model and link AF resourcing to the Article 6 international crediting mechanism(s) that will emerge from negotiations. Developed country Parties, don’t want to give up any value of the credits they secure from funding mitigation projects in other countries, and some have wondered why the Adaptation Fund should be continued at all, given that the Green Climate Fund provides adaptation financing. That perspective has little traction, and we are likely to see some rich engagement about resourcing.

Two just-released publications will certainly impact any climate finance negotiations: 1) the 2018 Biennial Assessment (BA) and Overview of Climate Finance Flows * (from the Standing Committee on Finance), and 2) the 2018 Emissions Gap Report of the UN Environment Program (Executive Summary is here).

According to the BA, climate finance flows to non-Annex I Parties reached a newScreen Shot 2018-11-29 at 8.39.43 PM high of $74.5 billion in 2016, still far short of the $100 billion per year by 2020 developed countries committed to provide and mobilize. Characteristically, too, adaptation funding remained less than 40% of that for mitigation in public climate finance flows for 2015-2016, with adaptation funding a rarity in private finance.

TScreen Shot 2018-11-29 at 8.28.30 PMhe emissions gap is the difference between the GHG emission levels needed to keep global temperature rise below 2°C or 1.5°C in 2100 (compared to pre-industrial levels) and the global GHG emission level the NDCs are expected to achieve if fully implemented by 2020.

Two of the many key messages from the Emissions Gap Report giving the climate community pause are that:

  • The “gap has increased significantly in comparison with previous estimates” and
  • “Global greenhouse gas emissions show no signs of peaking.”

Given the prospects ahead, poorer countries are expected to be unwavering on a strong funding foothold for the Adaptation Fund and a path to grow it.

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Photo credits: 1) https://www.adaptation-fund.org/; 2) Leolintang/iStock by Getty Images; 3) http://www.famu.edu/index.cfm?PreMed&ADVISORYBOARD; 4) https://www.customtermpapers.org/free-term-papers/term-paper-emissions-trading/; 5) https://indicaonline.com/blog/ways-marijuana-dispensaries-save-money/; 6) https://www.unenvironment.org/resources/emissions-gap-report-2018. Featured image: https://grist.org/climate-change/2011-08-25-neoliberalism-and-climate-change-adaptation/

(*The 2018 BA is a complex compilation that covers climate finance flows in 2015 and 2016, examines trends from 2011-2014, explores gains in measurement, reporting and verification of these flows, and considers the implications for global goals and efforts.)

 


Green Climate Fund Approves $1B in New Projects

GCF logoOn October 21, 2018, the Green Climate Fund (GCF) Board concluded its 21st meeting by approving 19 new projects, totaling $1.038 billion. This board meeting comes right after the IPCC released the Special Report on Global Warming of 1.5°C (SR1.5) (which we posted on here and here) and a little over a month before COP24. As UNFCCC Executive Secretary Patricia Espinosa told GCF Board Members at the start of their meeting, “Never has there been more need for multilateral cooperation. And never has finance played a more central role to the overall climate regime itself.”

GCF was set up by UNFCCC in 2010, as part of the Convention’s financial mechanism. When the GCF began to gather resources in 2014, developed countries, and some developing, pledged $10.3 billion. Initial mobilization lasts until 2018, while the Fund remains open for further contributions during this time from both public and private sources.

The GCF is designed to focus on climate change adaptation and mitigation, in part as a reaction to the broader mandate of the Global Environmental Facility (GEF), the original operating entity of the UNFCCC’s financial mechanism. “The Fund pays particular attention to the needs of societies that are highly vulnerable to the effects of climate change, in particular Least Developed Countries (LDCs), Small Island Developing States (SIDS), and African States.” Another key point GCF makes is that “[o]ur innovation is to use public investment to stimulate private finance, unlocking the power of climate-friendly investment for low emission, climate resilient development. To achieve maximum impact, GCF seeks to catalyse funds, multiplying the effect of its initial financing by opening markets to new investments. The Fund’s investments can be in the form of grants, loans, equity or guarantees.”

Green Climate FundWhen addressing the importance of this most recent GCF Board meeting, Executive Secretary Espinosa underscored that its outcome will impact the outcome of COP24: “Success here means sending a clear and unmistakable message of trust to developing countries that they can have confidence in the process going forward.” Espinosa’s remarks were well taken as the GCF approved the 19 proposed projects. See the full list of approved projects and monetary breakdown here.

Her comments came after the preceding GCF Board meeting failed to deliver its mandate. This contentious July 2018 meeting resulted in the resignation of GCF Executive Director, Howard Bamseyand, and no new project approvals. Tensions ran high at this meeting for several reasons. The first two had a direct impact on the Fund’s bottom line: the United States decided in 2017 to halt $2 billion of its Obama administration $3 billion pledge and inflation rates reduced the present value of commitments made in 2014.  In addition, policy gaps for prioritizing the numerous applications whose requests exceed the GCF’s capitalization hampered Board Members’ ability to make the tough selection decisions. The GCF currently has $10 billion pledged out of the $100 billion promised for 2020.

The GCF has been plagued with issues and controversy for the past year. In February 2018, GCF had a green-climate-fund_WEBboard meeting that approved $1 billion in projects. Although the willingness of GCF to approve more projects is hopeful, civil society organizations and parties saw it as problematic, given that the GCF has difficulty dispersing money for projects already approved. As of December 2017, the fund has only released roughly $150 million, or less than 6% of the nearly $3 billion it had committed up to that point. The GCF reported in the February 2018 meeting that this funding is going toward the 18 projects that are under implementation. The Board had approved of 53 projects by the February meeting. So what is taking so long for the Board to disperse funding? Who is receiving this funding? And how is the GCF now reporting that there “39 projects under implementation, worth $1.6 billion in GCF resources that are being deployed as climate finance in support of developing countries’ climate ambitions under the Paris Agreement?” The jump from 18 to 39 projects under implementation in eight months seems either overambitious or over-reported. The biggest question here is how these 39 projects are receiving their funding after the turmoil of the GCF in the past eight months. To take from Espinosa’s remarks again, “The outcome of [the October Board meeting] of the GCF will impact those negotiations in Katowice.”

Looking toward COP24: The GCF submitted a report to the UNFCCC on Sept. 17, 2018, for consideration at the upcoming COP24. Table 14 included in its Annex VII lists all projects approved by the Board to receive funding from the GCF as of July 31, 2018. In this table, the GCF does not report what has been dispersed, only the GCF funding and total project value.


The Paris Agreement and the Green Economy

imagesThe adverse impacts of climate change are no secret. We are constantly reminded of the gloomy consequences that will arise at our continued rate of consumption without significant intervention. It is predicted that growing wage gaps combined with climate change will cause over 100 million people to fall into poverty. Moreover, this alarming statistic could impact the well being of children in Africa and Asia, causing 120 million to suffer from malnourishment by 2030. Current projections indicate that our urban footprint will likely triple, demand for food will increase by 35%, and the world’s water needs are expected to rise by 40%.The adverse effects of climate change are not exclusive to impoverished and marginalized communities. By 2030 global economic loss is expected to reach 3.2%, indicating that even the private sector is not immune.

With the Paris Agreement, the paradigm shifted to place international focus on the transition from a traditional economy to a green economy ̶ meaning one that recognizes the relationship between environmental sustainability, economic development, and climate change. Under the Paris Agreement, countries must submit their Nationally Determined Contributions (NDCs) to mitigating global climate change while operating within their national environmental and economic objectives. These NDCs set national targets by utilizing mitigation and adaptation mechanisms. Cumulatively, the commitments established by each country aim to meet the Paris Agreement’s objective of holding the increase in global temperature to “well below 2⁰C.” The implementation of mitigation and adaptation mechanisms require funding and corporate involvement to perform the work. In this manner, the Paris Agreement has propelled the green economy forward. As United Nations Secretary-General Antonio Guterres recently stated, “Those that will be betting on the implementation of the Paris Agreement, on the green economy, will be the ones that have a leading role in the economy of the 21st century.

The International Labor Organization (ILO) announced in its annual report, World Employment and Social Outlook 2018: Greening with Jobs, that 24 million new “green” jobs will be created globally by 2030. Likewise, within the same timeframe, the green economy is anticipated to offset predicted economic losses in traditional industries. The drastic advancements in renewable energy technology and innovation also support this assertion.  For instance, more development in solar and hydroelectric energy technology reduced the demand for coal-based energy in many countries. In addition to this, industry leaders such as Microsoft and Amazon developed cloud-based computing services that enable small companies to reduce 90% of their CO2 footprint. What is even more impressive is that the green economy’s net-worth now exceeds that of the fossil fuel sector (6% of the global stock market), according to a report by FTSE Russel. All of which lends credence to the words of ILO Deputy Director-General, Deborah Greenfield, who insisted that the green economy “can enable millions more people to overcome poverty and deliver improved livelihoods.”

Without a doubt, the green economy’s momentum shows no signs of stopping and has grown to exceed $1 trillion USD. However, this raises the question of how well-prepared are countries to handle the transition to a low-carbon economy. It is important to note even the green economy must be properly guided with the right policies.  The aggregate collaboration from countries committed to the Paris Agreement is promising, and could provide the impetus for such guidance and direction for a sustainable economic shift. Only time will tell.


We can do more!

earthobservation_earthAfter two weeks of negotiations in which we observed UNFCCC Parties, stakeholders, and all the people that make possible the Conference of the Parties (COP), I leave Bonn with several reflections.

Parties do have the ability to achieve consensus and adopt the necessary decisions towards the implementation of the Paris Agreement.

People all around the world are working to fight climate change. Universities, institutions, NGOs, and subnational governments like cities are individually trying to support the implementation of the Paris Agreement, for example by using and promoting renewable energy to reduce GHG emissions.

Volunteers and observers (like VLS) are there to encourage and support the negotiators in this journey 24/7. So, what are we missing to move forward in the implementation of the Paris Agreement? Why do we still think/feel that the negotiations are going too slowly?

Even though the Paris Agreement entered into force just 11 months after its adoption in December 2015, Parties agreed that its effects would only take place from 2020 onward while they worked to put in place the implementing rules needed to make the Paris Agreement operational.

But the implementation action plan is not clear yet. For example, the developing countries are still waiting for the developed ones to commit in matters relating to finance so that they can achieve their NDCs. In addition, it is not clear how Parties are going to register their adaptation communications in the public registry determined by the Paris Agreement.

Time is passing by. COP23 was important and some decisions were taken, but we need more. We need more commitments from the developed world. We need more people passionate about climate change. We need to implement more actions to pursue the global temperature goal, and limit the temperature increase to 1.5 ºC above pre-industrial levels. do-more-quote

What am I going to do? I want to keep doing what I am doing, even though sometimes it feels that it has no impact. I will talk to people (communities, schools, family) and explain to them how a simple action like turning off a light can mitigate the effects of climate change.Hopefully, if we start changing minds, we will stop changing the climate.


G77 + China: Perspectivas de la COP23

230202_600Compuesto por 130 países, el G77 + China representa el grupo negociador más grande en la Convención Marco sobre el Cambio Climático (CMCC). El día de hoy durante su conferencia de prensa, la señora María Fernanda Espinoza en nombre del grupo, expresó los retos y debilidades de la COP23, así como los resultados positivos de las negociaciones sostenidas durante las últimas dos semanas en Bonn, Alemania.

En cuanto a los resultados positivos, el grupo resaltó la creación de la plataforma para las comunidades locales y los pueblos indígenas , la cual busca reforzar los conocimientos, las tecnologías, las prácticas y los esfuerzos de las comunidades locales y los pueblos indígenas para hacer frente al cambio climático.

Igualmente, destacó el trabajo que se ha realizado en el área de las pérdidas y daños con ocasión a los efectos de cambio climático en la que se están cuantificando los mismos para así definir los recursos necesarios para mitigación y adaptación y sobretodo recuperación después de un evento de cambio climático como los vividos en los últimos meses (Huracanes Irma y María).

Por otro lado, en lo que tiene que ver con las debilidades y los retos a los que todavía se enfrenta el grupo, Espinoza señaló que aún no está claro cómo las Partes van a cumplir con sus compromisos de adaptación y mitigación, en especial por los problemas de acceso a financiamiento y recursos, transferencias de tecnologías y el fortalecimiento de capacidades de los países.

En cuanto al financiamiento, resaltó que ocho años después de su creación el Fondo Verde Climático no ha recaudado el monto determinado para cada año y el acceso a este se hace cada vez más difícil, lo que pone en desventaja a los países menos desarrollados.

¿Qué está haciendo el G77 y China para mejorar el acceso al financiamiento y que las Partes puedan cumplir con sus metas de mitigación y adaptación? change_in_hand_2x3

El grupo presentó una propuesta ante la Conferencia de las Partes-COP23, en la que además de solicitar que el procedimiento para acceder a los recursos económicos sea más sencillo, se está solicitando un acceso real y consistente a los recursos que se necesitan por parte de los países.

Adicionalmente, se solicitó que estos recursos sean nuevos, predecibles y sostenibles en el tiempo para que se puedan financiar las actividades por medio de las cuales se busca cumplir con los compromisos adquiridos bajo el Acuerdo de París.

Así las cosas, y aunque se cumplieron algunos de los objetivos que se tenían para la COP23, los medios de implementación y en especial el acceso al financiamiento y los recursos sigue siendo “la pata débil” de las negociaciones.

Se espera que con la petición efectuada por el G77 y China, la COP continúe negociando y se llegue a un consenso para mejor el financiamiento que requieren los países menos desarrollados para cumplir con las metas propuestas bajo el Acuerdo de París.


Future of the Adaptation Fund: Developing Countries vs. Developed Countries

adaptation-fund-logoThe Adaptation Fund (AF) is a mechanism created through the Marrakesh Accords but funded through the Clean Development Mechanisms (CDMs) described in the Kyoto Protocol. The intention of the COP in the creation of the AF is the facilitation and funding of adaptation projects in developing countries to strengthen their resistance to climate change. Two percent of the funds invested in CDMs go to the Adaptation Fund where the money can then be divvied out to developing countries when they send in proposals. But the Kyoto Protocol was only intended to last ten years. Enacted in 2010, the Kyoto Protocol will reach its end in 2020 and with the end of the Kyoto Protocol comes the end of CDMs, and thus the end of the funding for the Adaptation Fund.

At COP23 there have been significant concerns about the future of the Adaptation Fund, where future funding will come from, and if that means the Fund will operate in the same manner as before. But these issues, as most do, draw a dividing line between developing countries and developed countries. In the most recent review of the Adaptation Fund in COP23, developing countries continued to emphasize the critical nature of the Fund in providing critical finasudanncial assistance as these countries attempt to adapt to the increasing effects of climate change. Many developing countries have emphasized the need for the increase in the scope of the Adaptation Fund, finding the review of the Adaptation Fund Board too narrow and limiting the abilities of these countries to acquire necessary funding. Developing countries also emphasized the need for certain aspects of the Fund that have caused them concern. This includes predictability, adequacy, and consistency. In particular, the Least Developed Countries negotiating group advocated for a further integration of the Adaptation Fund into the Paris Agreement in order to facilitate the continuance of the Fund and the assistance it provides to the LDCs.

Developed countries, on the other hand, had little opinions on the continuation of the Adaptation Fund. In the Marrakesh Accords, the purpose of the Fund was intended to assist in developing countries on their climate change resilience initiatives. No benefit was gleaned by the developed countries in the implementation of this Fund. And they will glean no benefit from the continuance of this Fund under the Paris Agreement. But there was no equal assessment in how to address the Adaptation Fund from the perspectives of the developed countries. Some countries enjoyed the small-scale implementation techniques that function well through the Adaburkina_faso_tearfund1_1ptation Fund. Other countries advocated for the continuous improvement of the Adaptation Fund to reinforce the constantly changing needs of developing countries. Overall, developed nations appeared to be ambivalent towards the Adaptation Fund and its future; striving forward to complete the agenda item with as little fanfare as possible.

The future could be bright for the Adaptation Fund. It has the ability to further the needs of developing countries to reduce the damage sustained in the ever-increasing extreme weather and natural disasters the world is facing. But if actions aren’t taken in COP23 and future COPs then when the Kyoto Protocol ends in 2020 those funds will be out of view for the vulnerable countries that need it.


Adaptation and Climate Resilience – Help Wanted

climate_change_adaptationA recent National Academy of Sciences (NAS) half-day seminar – Climate Change Adaptation Investments and Measuring Effectiveness – considered a pressing suite of interrelated issues. As Timmons Roberts of Brown University (one of the moderators) stated, “[t]his seminar is not an academic exercise.” Developing countries urgently need climate change adaptation help and they want and need to know if the commitments from developed countries are being met.

Their concerns go back to a key premise for the Paris Agreement (PA) – developing countries agreeing to compromise their own fossil fuel industrialization (a faster, less expensive path toward poverty reduction than leaping over it into renewables) in exchange for the promise of greater support for both mitigation and adaptation. This weighed heavily last month in Marrakech, especially with release of the controversial Climate Finance “Roadmap” by a subset of OECD countries just before the climate conference. In addition to objections to the Roadmap’s methodology (we touched on this here), the much greater support documented so far for mitigation over adaptation flew directly in the face of the balance between the two that had served as another “ground rule” for achieving PA consensus.Tracking-Climate-Finance-400x264

With that backdrop, this NAS seminar featured academic, investment, agency, and civil society perspectives from around the world that explored:

  • How adaptation action is counted, financed and evaluated, including in the context of climate resilient development;
  • The challenges of adaptation investment decision-making within competing and sometimes overlapping contexts (e.g., the relationships of strict criteria to vulnerability reduction to resilience building, and of adaptation finance to climate finance to development finance); and
  • How the effectiveness of adaptation activities and resilience building can and should be measured.ccrc_wordcloud

The discussion helped illuminate an evolution of terminology, concepts and experience at the intersection of adaptation science, practice and policy. The response to climate change is no longer just about mitigation and adaptation. The PA’s purpose (laid out in Article 2) clearly broadens that response to include climate resilience, while also omitting “adaptation” from the language on finance flows (i.e., making them “consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”).

This evolution is confounding decision-making around support and evaluation, which is in turn impacting the accounting of adaptation finance and the capacity of on-the-ground communities to adequatefieldly deal with climate change.

These are a few of the key takeaways drawn from the robust presentations and discussion:

  • The ultimate goal is that of reducing vulnerability, and the strategy is to build dynamic climate resilience (not just resilience to a certain set of conditions). Thus, resilience, as a goal, should be embedded into adaptation interventions/projects of every kind, with regular reviews tied to the results of resilience building activities.
  • A shared system of resiliency principles is needed to guide financial support and implementation, as opposed to a unified definition of adaptation (as crafted by a cadre of multi-lateral development banks) or a host of different definitions (currently being utilized by a broad set of agencies).
  • There is no convergence across the wide-ranging landscape of indicators of success and their associated metrics; but tapping other fields (e.g., evaluation) and establishing linkages between developers and implementers can significantly address this issue.
  • Lessons to date point to adopting flexible adaptation pathways and success indicators that: a) account for all system resources (economic and non-), and b) rely on iterative, stakeholder-sensitive decisions over time (built-in learning, decision-making under uncertainty).

Let’s hope these and other lessons rapidly translate into credible, applicable guidance capable of assuring finance support accountability and long-term effectiveness of on-the-ground interventions. Developing countries need both.


Mobilizing the Private Sector to Finance Adaptation

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Today at COP 22 the Japanese delegation hosted a side event at their pavilion about mobilizing the private sector to finance climate change adaptation. The panelists discussed ways to involve the private sector from regional, business, and public policy perspectives. The panelist from Bangladesh, Dr. Saleemul Huq, then present specific examples of how the private sector has helped mobilize adaptation finance in his country. The World Bank estimates that $70-100 billion will be need annually from 2010-2100 to adapt to the impacts of climate change. It also estimates that the private sector could mobilize $140-240 billion for adaptive measures annually during the same period. However, very few companies are pursuing these adaptive measures, due in large part to the lack of profitability. To mobilize the private sector, governments and international organizations must incentivize investments and enhance monitoring and reporting efforts to ensure sufficient return on investments. The private sector will only finance adaptation measures that are also good for their bottom line.

Dr. Saleemul Huq, director of the International Center for Climate Change and Development at Independent University and lead author of chapters in the IPCC’s Assessment Reports provided an example of a good adaptation measure and a bad, or maladaptation, measure. Both projects involved mobilizing private sector finance to adapt to climate change . But the latter created more problems than it solved. In the good example, a private agricultural business developed and sold salt-water resistant rice to combat the inundation of rice fields by salt water. The company turned a profit and made a vulnerable population more resilient. In the maladaptation example, a private aquaculture company bought up inundated rice fields, turned them into shrimping operations, and then leased the operations to the farmers. These shrimping operations are good for the companies, who turn massive profits, and the government, which taxes the shrimp exports. While this practice is aimed at adapting to an increasingly saline ecosystem, it is highly exploitative of the rice farmers, most of whom lost their jobs after selling their farms, and drastically altered the landscape by making it entirely salt-water based. The company turned a profit but the social and environmental impacts made a vulnerable population more vulnerable. These examples underscore the opportunities and challenges associated with mobilizing private sector finance to adapt to climate change. We have to remember that in board rooms and commercial banks, money talks and altruism takes the backseat. 


LDCs – Concern, yet hope, entering Week 2 of COP22

Courtesy www.afd/frAt the end of the first week, many were expressing concern that Marrakech’s purported COP of Action wasn’t measuring up for the world’s most vulnerable countries. Yesterday morning, Least Developed Countries (LDC) Chair, Tosi Mpanu Mpanu, identified troubles on key issues of ambition, adaptation / loss & damage, and climate finance. In particular, he noted that:Screen Shot 2016-11-15 at 3.37.17 PM

  • The Paris Agreement rulebook development is being stymied and strong action on pre2020 commitments is not materializing.
  • Adaptation needs of the most vulnerable, exploding as a result of inadequate mitigation by developed countries for decades, are not being addressed in a balanced manner, with even the adaptation registry being complicated. And, foot dragging on other seemingly simple decisions, such as the review of the Warsaw International Mechanism for Loss and Damage (WIM), is eroding trust and confidence that the global community will concretely respond to the very real and devastating losses and damages increasingly suffered by poor countries on the front lines of climate change impacts.
  • Developed countries have been blocking the Paris-mandated inclusion of the Adaptation Fund in the Paris Agreement rulebook, and the developed country recent “roadmap” to reach the promised $100 billion/year by 2020 lacks credibility – – unfortunate circumstances in the face of developing countries’ low-carbon climate resilient development needs now estimated to collectively exceed $4 trillion.

Work did continue yesterday, while heads of state and ministers arrived for the high-level segment. By the end of the day, among some positive developments were two improved draft decisions on the WIM (here and here). (More on these to come.) Additionally, the Green Climate Fund expedited grants for Liberia’s and Nepal’s National Adaptation Plans. Climate finance remains a hot topic on this week’s COP22 agenda, in particular, the upcoming High-Level Ministerial Dialogue on Climate Finance; so, Screen Shot 2016-11-15 at 3.09.30 PMhope remains for new and encouraging news on that front. (Check back with us on this, too!)

 

Photo credits: Action Time courtesy www.afd/fr; Informal negotiations courtesy iisd enb


Counting On Big Bucks for Adaptation – More News from SB44

Time to Adapt - ClockFinancing Adaptation was a big topic in Bonn at SB44 last month (see our SB44/APA1 overview here), and rightly so, with the newly released UN Environment Program (UNEP) 2016 Adaptation Finance Gap Report. The report states that current international public finance flows for adaptation are only one-third to one-half the amount needed right now. Additionally, the roughly $22.5 billion in 2014 adaptation finance flows to developing countries will need to be 6-13 times that in 2030, or $135-$292 billion, and 12-22 times that by 2050. That’s $270 billion to nearly half a trillion per year.

In Bonn, we witnessed the launch by the Subsidiary Body for Scientific and Technical Advice (SBSTA) of its process to develop an accounting framework for climate finance under the Paris Agreement (per Decision 1/CP.21), a long-sought goal of developing countries. Other UNFCCC institutions and the secretariat held adaptation finance workshops and updates related to various COP directives. And, side events extended the dialogue, providing attendees insight into the principles of and country experiences with fossil fuel subsidy reform and fuel levies to fund adaptation activities, as well as the critical and growing role of private finance for adaptation programs and projects.newsletter_article_photo_1

Among the UNFCCC events was the second of two (one each in 2015 and 2016) in-session half-day workshops on pre-2020 long-term finance, held in accordance with 5/CP.20. Executive Secretary, Christiana Figueres, opened the workshop – one of her last activities before stepping down from her celebrated 6-year post on July 6. There were presentations, panel discussions, and breakouts covering topics ranging from enhancing the understanding of adaptation finance and the role it plays in meeting developing country needs, to scaling up and enhancing the transparency of that finance. (Presentation slides and audio can be found here.)

Three of the key needs identified in the workshop represented adaptation financing themes that reverberated throughout the Bonn meetings:

  • Scaling up of availability of funds – The UNEP Adaptation Finance Gap starkly underscored this need and buttressed arguments for fossil fuel subsidy reform and fuel levy policies to support adaptation finance.
  • A clear definition on adaptation finance to move tracking forward – Though not the most contentious negotiation point in the SBSTA’s agenda item 12 on developing modalities for climate finance accounting (referred to above), the informal consultations were marked by developing countries’ objection to using an un-vetted definition of climate finance (sourced from the 2014 Biennial Assessment and Overview of Climate Finance Flows Report of the Standing Committee on Finance (SCF)). We may see this issue come up again in Parties’ and observer organizations’ submittals of their views on the development of modalities (due by August 29) and in the in-session workshop now planned for SBSTA 45 (Nov. 2016). (Watch for our fuller coverage coming soon on the Bonn negotiations regarding “modalities for the accounting of financial resources provided and mobilized through public interventions” under Article 9.7 of the Paris Agreement.)
  • Private sector engagement – This major thread, building on the focus leading up to and at COP21 (see here and here), grew steadily across SB44/APA1, and we expect it’s continued weaving into approaches to address climate change across the board – in mitigation, adaptation and loss and damage. Many are hanging their hopes for sufficient adaptation finance on this sector.

Climate-change-adaptation.2jpgIt remains unclear, as yet, how the fast growing requirement for adaptation finance will be met, especially given how far behind current needs the flows already are. We are looking forward to the SCF’s 2016 Biennial Assessment and Overview of Climate Finance Flows, along with a number of adaptation finance events leading up to COP22 to help shed some light on the range and reach of the pathways. Many working on this critical issue are well aware that the price of inadequate adaptation is the tragedy of loss and damage.