A New Architecture for Climate Finance Must Encourage Private Sector Investment

Posted on December 15, 2018 by bencanellys

“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 funds 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.

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.

What’s cooking in the COP24 kitchen?

Posted on December 13, 2018 by torihellwig

The Polish Presidency addressed observers this evening about what remains to be negotiated on the Paris Agreement Implementation Guidelines before their impending deadline. As the second week of COP24 comes to a close, tensions are high as the remaining items to be hashed out by high level Ministers run late into the evenings. This comes as no surprise, given the existential crises certain Parties are facing as a result of our changing climate. In the words of the Presidency, “discussions continue to happen in silos, as they try to ‘cook’ a balanced text” that is fair in the eyes of all Parties.

The remaining items to be negotiated include: Financial matters; Modalities, procedures and guidelines under the Paris Agreement (PA); Adaptation; Cooperative instruments under Article 6; Matters relating to technology; Response measures; NDC registries; and the Talanoa Dialogue and IPCC Special Report on 1.5°C. This is no small feat, given the mounting social, environmental, and economic pressures. A few prominent observer groups felt strongly about these items, and when invited by the Chair of the session did not hesitate to voice their opinions and confront the Presidency about their concerns.

The Environmental Non-Governmental Organization (ENGO) felt that responses in NDCs to the IPCC report remained inadequate, and feared that trading and compromise would not end favorably for “non-PAWP” related items. The Women and Gender group echoed these concerns, stressing most about the preamble of the pending 1/CP.24, because anything that does not reflect these principles “would be a fraught to humanity.” The Indigenous Peoples Organization responded to the Presidency by admiring the fact that while the COP is trying to “cook a balanced package,” they are concerned about human rights issues, and the IPCC 1.5 Report. YOUNGO called attention to the lacking mandate around enhancement of NDCs, and fears that the Talanoa Dialogue will not be preserved in the final process. Trade Union-NGO (TUNGO) group wanted clear recognition of the IPCC report as well, because “this is why we are here.” The IPCC report is the “why” and the “how” to address our climatic conundrum.

The Presidency responded to everyone’s concerns by reiterating what was said in the plenary earlier that day, and what he outlined in his introduction to this session. He directed observers to the Talanoa Call for Action that called for a rapid mobilization of a variety of social actors to respond to the climate goals agreed upon in the PA, and expects most of these issues to be preserved in the final text as well. While the Presidency hoped to console observer’s concerns, we all still wait in anticipation to see what the head chefs in the Convention kitchen have cooked up for the finale of COP24.

Voluntary Cooperation (ITMOs) the Unknown Monster

Posted on December 11, 2018 by christashute

An important item under negotiation at COP24 is the concept of voluntary cooperation in mitigation. This 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 Agreements – Governing 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. Because 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

Posted on December 11, 2018 by bencanellys

As with any massive undertaking, practice makes better. The Global Stocktake in 2023 is no different.
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.
Today’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.”

Using Blockchain to Avoid Double Counting While Empowering Everyone to be Part of the Solution

Posted on December 10, 2018 by christashute

Today’s side event at COP24 for Blockchain Technology for Enhanced Climate Action emphasized the importance of distributed ledger technology (DLT) to accelerate mitigation solutions for climate change and empower non-country parties to work together. The event featured the Climate Chain Coalition founded just one year ago but already bringing together 140 organizations with a mission to mobilize climate finance and enhance monitoring, reporting and verification of climate goals.

Blockchain technology is a form of Distributed Ledger Technology (DLT). (For a good explanation of this technology see this World Bank Group 2017 report.) It functions as a decentralized database that can securely store data and digital assets, like environmental credits or certificates. Transparency is increased because the data recorded on the blockchain is a permanent ledger that cannot be modified. Trust between parties is increased because the data is not stored in a centralized location but rather through peer-to-peer transactions. Transaction costs are reduced enabling much smaller transactions that are accessible to more individuals.

A new report issued this week by the Climate Ledger Initiative (a collaboration of several think tanks aiming to accelerate climate action) Navigating Blockchain and Climate Action identified three main areas where blockchain has the most potential to accelerate climate action: 1) next generation registries and tracking systems; 2) digitizing measuring, reporting and verification; and 3) creating decentralized access to clean energy and finance.

The UNFCC has identified blockchain technology as a disruptive technology that has the potential to solve the solution to the main challenge of “how do you attribute the climate contribution while avoiding double counting.” Under the Paris Agreement (PA), a country steps up by submitting their commitment to mitigation measures as their Nationally Determined Contributions (NDCs). Theoretically, the development and continued revision of these NDCs will govern the Parties and their climate commitments under the Paris Agreement. But the Paris Agreement also encourages developed countries to finance projects in developing countries. Who gets the credit toward the NDC – the country financing the project or the country implementing the project? How do we ensure that one country (or entity) doesn’t take credit at one stage of a project and another take credit at a different stage? The security and transparency of blockchain may be the solution. (However, keep a healthy dose of skepticism, said CEO of Goldstandard, Marion Verles, because many times technology solutions are being proposed that don’t actually solve the real world problem.)

Climate change is the seminal issue of our generation and requires all hands on deck. As Massamba Thioye of the UNFCCC said today, “We need to mobilize ALL stakeholders, suppliers, financiers, consumers, citizens, policy makers so that they make the right investment.” The challenge being faced is how do we all work on the solution and create market incentives. Ms. Verles identified the importance of DLT technology in the supply chain to help corporations get the critical data they need to make decisions on the impact that a good has on the planet (carbon impact, water impact, etc).

See GLOCHA – the Global Citizen Empowerment System for Full Poster

This information can move to the end consumer. If you knew, and could compare, the carbon impact of items you were purchasing, would you pay a little more to make a cleaner purchase? The bottom line is that blockchain has the potential to add a value stream to products that represents the intentional choices of individuals, companies, and countries to work toward a cleaner, safer planet.

(Note bitcoin uses blockchain technology in a very energy intensive manner that is not healthy for our planet – see fellow VLS student Ben Canellys blog here.)

Finance Flows For the Future of Forests

Posted on December 10, 2018 by torihellwig

The 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.

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. Forests 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.

Private Investors Help Fight Climate Change

Posted on December 9, 2018 by charliekuo

The IPCC 1.5 special report cannot be ignored. Our current pace of environmental degradation will lead to disastrous consequences. Now is not the time to put our heads in the ground and pretend that climate change does not exist. You cannot deny that some force is taking place, changing the inventory of our resources. I remember as a kid growing up in Niagara Falls, the first snow would start early October. Now, snow does not fall in my childhood town until January. Niagara residents would say that rain in October was supposed to be snow and that global warming turned the snow to rain.

Climate change is based on fundamental principles of equilibrium. If a process uses too much of a single resource, nature cannot catch up to replenish what was removed. We experience this principle in our day-to-day activities. Fortunately, we can take action. Through the will of concerned countries, the Paris Agreement was adopted. Delegates from countries committed to the Paris Agreement have gathered at Katowice, Poland for COP24. This meeting of the minds helps push climate change forward, albeit at a slow pace. However, technical, policy and financial experts come together and get the opportunity to address the world their findings.

In the wake of the IPCC 1.5 special report, it is becoming clear that the costs to combat climate change is too great for governments and non-profit financial organizations to bear. Financial experts echo this point of view and call out to private investors to help close the financial gap. After all, we are all in this together.

Financial institutions cleverly developed multiple mechanisms where investors can participate and get good returns. For example, investors can invest in new technology designed to minimize waste or shift to a low-carbon fund portfolio and invest in companies with low carbon emission processes. Financial revolutions occur in numbers, similar to switching to another service provider because of bad customer service, you can choose investments or products with low carbon footprints. Companies must evolve with consumer preferences and will be forced to make changes to stay viable.

Furthermore, ignoring climate change as an investor could expose significant risk and negatively impact returns. The Economist estimated that climate change would incur $4.3 trillion of losses in privately held assets from extreme weather. This means that investing in companies that have not protected their facilities from the effects of climate change may suffer significant costs that directly impact the return on investment.

Traditional methods of investment are no longer the status quo. Consumer demands and market changes must include climate change analysis as part of investment decision making. Although the estimated total investment to meet the 1.5-degree scenario may require up to $3.8 trillion from all parties, market demand and investment strategies are naturally moving to an environmentally conscious economy. We are moving to a place where the environment and the economy are no longer competing forces but can work synergistically. Financial experts are helping to build the mechanisms where the economy can continue to grow and lower pollution at all levels of industry.

Answering Tough Questions on Agriculture

Posted on December 4, 2018 by elizabethm

The Koronivia Joint Work on Agriculture (KJWA) met for a second session on Monday and anticipates an informal meeting tomorrow. The second session offered few answers to questions posed in the first session but highlighted country and organization experiences implementing work related to agriculture and climate change with the help of constituted bodies. Countries found the examples helpful but still lacked the clarity to move forward under the KJWA.

Zambia, in collaboration with the constituted body LEG, integrated agriculture into its National Adaptation Plan (NAP-Ag) project. LEG supports partners under a country-driven process to identify and integrate climate adaptation measures for agricultural sectors into national planning and budgeting processes.

Information on the Adaptation Fund can be viewed in my colleague, Amanda’s blog. The questions asked by the EU included how to link the services to the farmers and what the timeline looked like. It was answered with “ the timeline depends on the context in each country. They first identify user needs and tailor to those needs. Then, identify how the system works, what is missing to understand the market, the best way to deliver the information, and how to fund it.” “It takes around 2 years.”

Climate Technology Centre and Network Advisory Board (CTCN) Technical Assistance in Viet Nam provided assistance in bio-waste minimization and valorization for low carbon production in the rice sector, particularly in south-east Asia. Thailand asked, “how would you link this with the national programs as this is a local one?” Kenya stressed, “who is funding this project?” Which was answered with, “funding by donor countries and the GCF to be distributed by priority.”

Food and Agriculture Organization (FAO) of the United Nations provided examples of work with the Technology Mechanism: TEC and CTCN, CGE, LEG, and SCF. Questions Kenya included “when you look at the five workshops and with FAO being specialized body, how do you see the FAO helping countries to implement those outcomes and the current workshops in Koronivia? Think beyond 2020. What is the synergy? The answer included “supporting a country through GEF and refocusing climate change through the GCF.” “Also, working with a country with their problems and taking a realistic approach.” The second portion of this session focused on “looking ahead” and asked the questions talked about in Amanda’s blog.

Tunisa, on behalf of the African group, stressed that meeting with the constituted bodies to discuss how to integrate implementation of the outcomes of the five workshops would help address these questions.
The EU said “first, institutionalize involvement of the constituted bodies with KJWA and invite them to the workshops to keep the communication going.”
Brazil added “There is so much synergy and work KJWA can share.” “The Parties can strength the linkages to become available to them so KJWA can move forward.”
Uruguay, in line with Brazil spoke about how it is key to establish a two-way road between Koronivia and the constituted bodies. Strong communication is essential.
Kenya continued “ these are useful inputs, but curious why GCF did not present. (Amanda’s blog covers this top) The question of what to do with the outcomes of the five workshops and the five workshops under Koronivia was not addressed.

The presentations and discussions barely scratched the surface of questions asked. These lingering concerns most likely will be addressed at the informal session on Wednesday.

Adapting the Adaptation Fund under the Paris Agreement

Posted on November 28, 2018 by achristian

The 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.

On 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.

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.

While, 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 new 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.

The 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.)

Show Us The Money!

Posted on November 1, 2018 by achristian

Tension in the global climate finance community is mounting as the Katowice climate change conference approaches. The September effort to advance the Paris Agreement Work Program (PAWP) exposed deep historic divides on climate finance (reported here, here and here). And though the Green Climate Fund Board thankfully “righted its ship” a bit in October (see our close look here), the relief did not ease the larger systemic angst.

At its core, climate finance is a highly political issue. For the most part, rich societies are suffering far less from climate change impacts than poorer ones, and have far more resources with which to respond to those impacts. Poor countries need substantial help from the developed world to do the same. Yet, many developed countries are not inclined to make the enormous financial investments required to address global climate change for outcomes that won’t be realized until the distant future and that will mostly benefit other countries. We get a glimpse of this reality in Climate Scoreboard’s just released Global Report #8, on which we reported yesterday.

Since the adoption of the UNFCCC, developed countries have committed to and provided some, but not nearly enough, climate finance to help developing countries meet the costs of mitigating and adapting to climate change. Their collective target of $100 billion/year by 2020, established in the 2009 Copenhagen Accords and reiterated in the Paris Agreement decision (1/CP.21), falls hundreds of billions short of predicted needs for mitigation and adaptation in developing countries. (Numbers are hard to come by, but the World Economic Forum projected a few years ago that $700 billion/year in climate investment will be required by 2020, while UNEP has estimated annual adaptation costs alone could reach $500 billion by 2050.) Additionally, many are questioning the likelihood that even the $100 billion/year by 2020 will be realized (see here, here and here).

All of this adds up to a lot at stake for climate finance in Katowice in December, where Parties have promised to bring the Paris Agreement implementation guidelines across the finish line.

One of the most contentious climate finance issues we have been tracking is whether Article 9.5 will be fully operationalized. It stipulates that developed country Parties, and others as they can, “shall” communicate, in both quantitative and qualitative terms, financial resources they intend to provide to developing country Parties (ex ante support). However, decision 1/CP.21 calls only for identifying the information Parties will report, and not the modalities to be used in accounting of those resources.

Some feel this was an oversight in the rush to adopt the Paris Agreement back in December 2015, since it is unusual for a COP to decide what Parties are to report without also deciding how the information will be reported and used. For instance, for Article 9.7, decision 1/CP.21 sets in motion identifying both the what and how Parties will report on financial resources they have provided and mobilized through public intervention (ex post support).

Developed country Parties contend that Article 9.5 is sufficiently clear and that no action is required. They want to use the existing general guidelines from 3/CP.19 for the biennial submissions they were requested to make on “scaling up climate finance from 2014-2020.” Notably, only 7 Parties and the EU made such submissions.

Developing country Parties assert that predictability and transparency are at the heart of Article 9.5 and that it must be fully operationalized by also specifying accounting modalities. In particular, Parties should decide how the information will be compiled, made publicly available, transmitted to the global stocktake, and be subject to technical review, none of which is addressed by the earlier general guidance on reporting ex ante support.

Currently, the battle for and against establishing modalities for Article 9.5 is being played out under agenda item 8a of the Ad Hoc Working Group on the Paris Agreement (APA).

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Stay tuned for more posts on climate finance issues for COP 24/CMA 1-3. And, may all Parties show up rich in political will.

A bottom up look at climate finance

Posted on October 29, 2018 by tbach

Amanda’s post on the outcomes of the recent Green Climate Fund board meeting gives us a constructively critical top-down take on climate finance in the run up to COP24, which will take place in Katowice, Poland fro December 2 – 14, 2018. This week’s Global Report #8 by Climate Scoreboard provides another. Innocuously titled “The Status of Climate Finance in Leading Greenhouse Gas Emitting Countries,” it is a crowd-sourced, bottom up, and critical account of where cli fi is and isn’t coming from that provides context for the GCF’s report on its own activities.

Climate Scorecard describes itself as “a participatory, transparent, and open data effort to engage all concerned citizens to support The Paris Agreement.” Its Global Reports are part of a “Spotlight Project” focused “on pressing the top 20+ greenhouse-gas emitting countries to meet the pledges they made in the Paris Agreement.” This campaign seeks to raise public awareness of these countries’ action and inaction on their pledges, to build national political will in each one that compels increased pledges before the Paris Agreement begins in 2020. Climate Scorecard is a collaboration of The Global Citizens’ Initiative (TGCI) and EarthAction, two non-profit organizations working on environmental protection and citizen engagement.

Here are a few highlights from Climate Scorecard’s report that counter balance the GCF Board report:

Brazil’s new forestry sector policies are putting its international cli fi at-risk (and this was BEFORE the country elected a new president yesterday who is a climate skeptic!).
China needs to find funds in its national budget to make good on its pledges to help other developing countries.
France and the UK, both large cli fi donors, have experienced a decrease in assistance.
Japan’s accredited global climate finance institutions do not adequately to disclose their fossil fuel industry ties.
Mexico needs better monitoring and accounting of cli fi received, while Thailand needs to devise a better plan to attract it.
Russia has provided support to former Soviet Union countries, but can do much more.

For more specifics, check out the detailed country reports.

Green Climate Fund Approves $1B in New Projects

Posted on October 24, 2018 by amandac

On 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.”

When 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 board 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.

IPCC special report leaves the world in dire straits

Posted on October 10, 2018 by torihellwig

In response to an invitation from the Parties of the Paris Agreement (PA), and pursuant to the Article 2 efforts to limit temperature increases well below 2°C, the IPCC prepared a Special Report on Global Warming of 1.5°C (SR15), released Monday, 8 October, 2018.

Climate scientists sounded the alarm yet again, painting a dire picture of the future without immediate and drastic mitigation and adaptation measures worldwide. High confidence statements made by the panel include:

Human activities have caused approximately 1°C of global warming above pre-industrial levels
Current global warming trends reach at least 1.5°C between 2030 and 2052
Staying below the 1.5°C threshold will require a 45% reduction in GHG emissions from 2010 levels by 2030, reaching net-zero by 2050
Pathways to 1.5°C with limited or no overshoot will require removal of an additional 100-1000 GtCO2

Pathways of current nationally stated mitigation ambitions submitted under the PA will not limit global warming to 1.5°C. Current pathways put us on target for 3°C by 2100, with continued warming afterwards.

The ENB Report summarizing SR15 was able to shine a light on the good that can come from responses to this special report (not to mention upholding the ambition intended with the PA). SR15 shows that most of the 1.5°C pathways to avoid overshoot also help to achieve Sustainable Development Goals in critical areas like human health or energy access. Ambitious emission reductions can also prevent meeting critical ecosystem thresholds, such as the projected loss of 70-90% of warmer water coral reefs associated with 2°C.

Groups like the World Meteorological Organization (WMO) are intensifying their adaptive scientific support through a “fully-integrated, ‘seamless’ Earth-system approach to weather, climate, and water domains,” says Professor Pavel Kabat, Chief Scientist of the WMO. This “seamless” approach allows leading climate scientists to use their advanced data assimilation and observation capabilities to deliver knowledge in support of human adaptations to regional environmental changes. By addressing extreme climate and weather events through a holistic Earth-system approach, predictive tools will help enhance early warning systems and promote well being by giving the global community a greater chance to adapt to the inevitable hazardous events related to climate change.

Success ultimately depends on international cooperation, which will hopefully be encouraged by the IPCC’s grim report and the looming PA Global Stocktake (GST) in 2023. In the wake of devastating hurricanes, typhoons, and the SR15, it’s hard to ignore both the climate and leading climate scientists urging us to take deliberate, collective action to help create a more equitable and livable future for all of Earth’s inhabitants.

In Decision 1/CP.21, paragraph 20 decides to convene a “facilitative dialogue” among the Parties in 2018, to take stock in relation to progress towards the long-term goal referred to in Article 4 of the PA. Later renamed the Talanoa Dialogue, these talks have set preparations into motion and are helping Parties gear up for the formal GST, with the aim of answering three key questions: Where are we? Where do we want to go? How will we get there?

Discussion about the implications of SR15 will be held at COP24, where round table discussions in the political phase of the dialogue will address the question, “how do we get there?”

It won’t be by continuing business as usual.

RE100 Businesses Pave the Way for Transitioning to Renewable Energy

Posted on October 5, 2018 by charliekuo

Ambition, pace, scale—these are the themes in shifting to an economy recognizing climate change. Companies pioneering this economic shift incorporated climate change as an significant factor in conducting business.

One of the leading organizations spearheading this movement is RE100. RE100 is a collaborative movement uniting over 150 well recognized companies across the world to commit to using 100% renewable energy. What is even more impressive is that these companies have acted on their own in addressing climate change, ahead of government direction. Remarkably, these corporations were able to shift to 100% renewable electricity, which garnered a competitive advantage enabling them to financially outpace their competitors.

A study by RE100 and Capgemini compared RE100 companies to non-RE100 companies by sector. It concluded that RE100 companies earn an average profit of 7.7% more than their competitors. Admittedly, the report’s analysis in no way suggests that switching to 100% renewable electricity is the sole cause of the profit difference. However, it is compelling that all RE100 companies have consistently outperformed the competition in their respective industries. Thus, it would suggest a strong correlation between switching to renewable electricity and above-average financial performance.

The switch to renewable electricity is done using multiple mechanisms simultaneously. Companies utilize a combination of energy power purchase agreements (PPA) and self-generated renewable electricity technology. Moreover, RE100 companies have developed new management structures, such as silo model, centralized model, and global model, to coordinate renewable electricity sourcing and efficient use infrastructure. The benefits of transitioning are significant.

For example, General Motors harnessed renewable energy sources from landfill gas, solar arrays, and wind farms. This combination has lowered operation costs by $80 million. The cost savings result largely from improved, cost-effective renewable technologies and government incentives. Landfill gas allows companies to lock into long-term prices that are cheaper and more stable than fluctuating natural gas prices. GM strategically built their own solar arrays and benefited from government feed-in-tariff programs. Finally, GM built wind projects in Mexico and Texas that generate over 34 MW, enough to power five manufacturing facilities.

Anheuser-Busch, another RE100 company, has procured PPAs for onshore wind projects to offset its dependence on traditional energy sources. Anheuser-Busch is in line to become the largest purchaser of renewable electricity and one of the forerunners in advertising renewable energy. The beer manufacturer uses its brand influence in its renewable electricity symbol campaign, where every pack of Budweiser will carry the symbol to celebrate its commitment to brew with 100% renewable energy.

The trend toward renewable energy is now gaining traction, and signals a tipping point to mass renewable. Since RE100’s inception, companies partnered through renewable energy purchase agreements have created 100% renewable energy demand of more than 184.6 TWh—enough energy to power Poland. Moreover, RE100 company surveys yielded that renewable energy costs have reduced significantly where it has been cost competitive against fossil fuels. Therefore the RE100 momentum would suggest that this trend is welcomed with open arms and significantly contributing to how other companies shape their tactics to address climate change.

A stumbling block at COP 23 – Finance

Posted on November 18, 2017 by yasin

The cost of mitigating climate change is estimated at 200-350 billion Euros (236-413 Billion USD) per year by 2030. It is a manageable sum in terms of a global burden, only 1% of global GDP. In terms of who pays and how much to pay, however, it becomes a disputed figure. For example, developed countries agreed in 2010 to “mobilize” 100 billion USD annually by the year 2020 in paragraph 98 of the COP16 decision 1/CP.16. Unresolved issues regarding this commitment remain, even in 2017.

Philosophically, this divide has on one side the developed countries as having the ability and the responsibility to pay. Developed countries use more energy than under developed countries. On the other side, the underdeveloped countries need financing and the know-how to ensure that future development in their countries is environmentally friendly and sustainable.

At COP23, this issue came to the forefront where it stopped the APA closing plenary dead in its tracks on Wednesday afternoon, the day the APA was scheduled to close. Negotiations lasted through the night. The underdeveloped countries, led by the G77, wanted developed countries to make concrete commitments through the biennial communication requirements as required by Article 9.5 of the Paris Agreement. The G77 also referred to Paris Agreement Articles 13 (transparency) and 15 (compliance) to make this requirement enforceable.

In response the developed countries argued that Article 9.5 is a procedural matter and that the G77 countries want to discuss the dollar commitments. They argued that this is beyond the scope of the Paris Agreement.

The result was to urge both sides to act on their commitments and to refer this matter to a High Ministerial Dialogue for further discussion. In other words, onwards to 2018.