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.”


Private Investors Help Fight Climate Change

Business man silhouette with tree an facade

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.


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.


Intentions and Realities: A case for better fund management

Uganda ChildrenOne of the biggest hang-ups to addressing climate change is finance.  How are research projects funded?  How are solutions funded so that they can be implemented at a meaningful scale?  While finance was not my area of focus at COP 23, it certainly came up concerning “agriculture, forestry, and other land use” issues (AFOLU).  One of the most impressionable moments I had at COP 23 concerned finance for adaptation in agriculture.

At a side event for “addressing climate change for a world free of hunger, malnutrition and poverty,” the conversation among the facilitators and stakeholders seemed collaborative.  Then, Kagandga John, the Executive Director of Kikandwa Environmental Association (KEA) of Uganda, spoke.  He started slowly, thanking the Chair and other members joining the roundtable discussion.  He expressed his gratitude that finally agriculture and food security were being talked about seriously.  Then his voice escalated.  “You sit here and talk about funding innovative projects in agriculture.  You even continue to suggest new pilot projects for our region.”  At this point, he became animated, his voice nearing a crescendo.  “But I will tell you now that WE ALREADY KNOW how to adapt our farming to climate change!  Stop funding new pilot projects!  Start funding projects that already work.  Come to Uganda, we will show you.”

Part of the financing problem appears to be the mismanagement of available funds.  Is this possible?  For developing countries like Uganda, this inefficiency must be very frustrating.  After the meeting, I spoke with Kagandga John.  I learned that the education center in the Mityana district of Uganda that educates children about the environment and climate change must close due to lack of financial support from the local and international community.

Surely there is a better way to manage funds for developing nations.


Lets get on the same page

Capacity Building Initiative on TransparencyThe Paris Agreement, ratified by 170 Parties, at last count, has a clear goal for the world: Hold the rise in average global temperature to “well below” 2 degrees Celsius. While the goal is clear, the solutions are complex and challenging. This is especially true for Least Developed Countries (LDCs). LDCs lack the capacity and technical expertise to tackle these problems.  The United Nations Convention on Climate Change (UNFCCC) recognized the disparity between developed and LDCs in article 4.9 and implemented mechanisms to assist LDCs build capacity.

One of the recent mechanisms to be implemented as a part of the Paris Agreement is the Capacity Building Initiative on Transparency (CBIT). The goal of this initiative is to “strengthen the institutional and technical capacities of developing countries to meet the enhanced transparency requirements of the Paris Agreement.” In this context, transparency is more than access to information; it also refers to accuracy and standardization. Transparency allows all Parties to measure and compare the collective progress made by each country’s pledged climate change actions.

CBIT calls for transparency on two fronts: the first is transparency of actions and the second is transparency of support:

  • Transparency of actions is completed through Nationally Determined Contributions (NDCs) as called for by the convention in Article 4.1(f). Simply, NDCs are a set of measures taken by a country to limit GHG emissions. But this task is a more complex process than it seems. In order to meet the requirements of the PA Article 13.5, NDCs need to be backed by scientific data that can be Measured, Reviewed, and Verified (MRV). LDCs need to develop expertise in the methodologies used for collecting data. As an example, the first NDC submitted by Papua New Guinea (PNG) presented data with “considerable uncertainty”. To address that gap, PNG received financial assistance through CBIT to hire the expertise needed to collect the data needed to MRV its pledged actions. As the NDCs are evaluated collectively, they are compared to the ultimate goal of the PA. In turn, as delegates meet annually, they can evaluate climate change actions against the goal more effectively.
  • The PA in Article 13.6 requires “transparency of support.” The PA tasked the Global Environment Facility (GEF) with administering fund distribution. In order to facilitate that, the GEF publishes a report that details the support given under the CBIT fund. In its recent report of early November, 2017, $17,389,995 in CBIT funds was distributed to fourteen countries for transparency capacity building. This report also lists funding from other sources, including almost $19 million in co-financing for these projects.

In terms of spending on climate change actions, the CBIT fund doesn’t readily draw attention. However, it is an important part of combating climate change. By providing these practical measures, in addition to the climate change policies, the COP and its entities provide more holistic solutions. CBIT can be seen as one brick in giant wall of solution options. I would like to think of it as a corner stone that supports this wall far beyond its size would indicate.


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.


Financing Loss and Damage from Climate Change

Loss and Damage (L&D) encompasses both sudden and slow onset events and is an incredibly important issue to developing countries at COP23. Although the economic costs of slow onset events have yet to materialize, sudden onset events have proved deadly and costly for developing countries. It is estimated that hurricanes wipe out 1% of the Caribbean’s GDP each year. From Hurricanes Irma and Maria in 2017, the devastation has been so extensive on islands such as Barbuda and Dominica that many people cannot return or have lost their homes. This displacement adds to countries’ L&D from climate change.

Financing for L&D has overshadowed COP23’s discussions around the slow but steady work of the Warsaw International Mechanism on Loss & Damage (WIM) Executive Committee. According to Julie-Anne Richards with the Climate Justice Program, the WIM has a “clear mandate” to enhance Action and Support for loss and damage but as yet, the WIM has largely focused on financial instruments, like insurance, rather than finance mobilization. Richards posits that while insurance mechanisms for sudden onset events may assist developing countries in addressing L&D, insurance mechanisms simply cannot address slow onset events (SOEs).

Causes-and-Effects-of-DesertificationDavid Simmons of Willis Towers Watson risk management company explains that the insurance industry currently focuses on short-term risk – the only type of insurance that deals with long-term, inevitable risk is life insurance. However, for this reason, Simmons argues that insurance could be reconfigured to address SOEs. Julie-Anne Richards, on the other hand, argues that other instruments such as funds or levies are more appropriate ways to finance SOEs. An example of a fund working on an SOE is the Land Degradation Neutrality Fund, which pools capital from the public and private sector to finance projects that both prevent land degradation and support revitalization of degraded land. The UN Convention on Combating Desertification estimates that 12 million hectares of land are degraded each year, which is around a third of Germany’s land area. This adds to the bank of 2 billion hectares of already degraded land, which is around the size of the South American continent. Desertification, soil degradation, and the loss of ecosystem services that comes from degraded land are all considered slow onset L&D.

Julie-Anne Richards and the Climate Justice Program are currently working on a new form of finance for L&D – the “Carbon Levy Project.” A tax would be placed on the extraction of fossil fuels, which would then be distributed based on the level of development of the country. If the fossil fuel is extracted by a developing country, the money from the tax would be kept for use domestically. However, if the tax is collected from a developed country, a large percentage of the funds would be placed into a global L&D Fund managed by the WIM.

There is general agreement that L&D needs to be addressed and that this will take money. However, there is divergence on how to finance L&D. From insurance mechanisms and global funds to more innovative approaches, there is momentum behind this issue.


Money doesn’t grow on trees

moneytreeWalking into the COP, observer and party delegations alike are given a bar of chocolate. And while the candy bar does not give its holder a Golden Ticket, it does draw chocolate-lovers’ attention to an important message for the Trillion Tree Campaign. That campaign is spearheaded by Plant-for-the-Planet, an NGO launched in 2007 by a nine-year-old boy to plant a trillion trees on the world’s degraded forest land. Such efforts are priceless when it comes to climate change: trees are the only “machines” on earth that can store carbon. Plus, they provide invaluable resources (like cacao for the COP’s beloved chocolate).

The Paris Agreement highlights the importance of forests, as well. Article 5 of the Agreement calls for parties to take action in reducing emissions from deforestation and forest degradation, and to conserve and enhance sinks and reservoirs of greenhouse gases. Programs like REDD+ aim to reduce emissions from deforestation and forest degradation. Working under the UNFCCC, REDD+ provides technical and financial support for developing countries to reduce emissions and enhance the removal of greenhouse gases.

The biggest challenge for REDD+ is now moving to implementation. At the COP, parties are discussing–and will soon decide–what implementation should look like in terms of governance: should the UNFCCC create a new body or structure to govern REDD+ implementation, or do the existing structures suffice? Should parties continue to meet in voluntary meetings that support implementation of activities that contribute to mitigation actions in the forest sector, or have these meetings already served their purpose?

One argument put forth by many developed countries–who are against future voluntary meetings–is the Green Climate Fund’s (GCF) recent decision to allocate $500 million to results-based financing for REDD+ activities. This decision, as the argument goes, shows that the financial landscape for REDD+ implementation is now in place, and that parties and entities have taken the Paris Agreement (particularly Article 5) quite seriously.

Under the program, the GCF pays at most $5 per ton of CO2eq of emissions reduced. The pilot program applies to projects showing results between 2013-2018, and thus is still open for developing countries.

The decision is a result of multilateral negotiations, which were not–and are never–perfect or easy. But the decision took into account a large spectrum of national interests. Many countries do not want to compromise this decision by reaching alternative conclusions in future voluntary meetings for REDD+.

With a scorecard indicating the highest standard for REDD+ activities, developing countries now have a gold standard for the program that sets the bar high for financing. For the sake of REDD+ and the Paris Agreement, it is important that results-based financing has become a part of GCF’s portfolio: this provides GCF with the opportunity to test the waters of this approach while also inspiring a race to the top in implementing REDD+.


Wheels of climate change policy roll on in Bonn

trump+climate+environmentWhile angst about the pending Trump decision on the Paris Agreement (PA) remained a subtext of the annual intersessional climate meetings that wrapped up last week in Bonn, Germany, the technical work trundled on.

More than 3,300 (negotiators, observers [including a VLS delegation], plus secretariat and other agency staff) participated in:

  • the 46th sessions of the Subsidiary Body for Scientific and Technological Advice (SBSTA) and Subsidiary Body for Implementation (SBI),
  • the 3rd part of the first session of the Ad Hoc Working Group on the Paris Agreement (APA1.3),
  • several COP-mandated companion events (e.g., indigenous peoples, climate finance reporting, capacity building), and
  • more than 90 side events.

The Earth Negotiations Bulletin gave its usual comprehensive (if dry) lowdown of the meetings. By many reports (here, here, here, and here), the negotiations moved rather smoothly. In particular, positions on APA agenda items got clarified, even though negotiating texts are still out of reach. The APA must deliver a Paris rulebook by December 2018.

Aside from the Trump question, the media coverage (e.g., here, and here) spotlighted the contentious tussle over conflict of interest (read: corporate/fossil fuel industry influence on climate policy). But that shadow side of the SBI’s imperative to “further enhance the effective engagement of non-Party stakeholders,” was not the only thing we watched.

A few of our observations:

  • APA round tables got a thumbs up for the airing and clarifying of views and could speed introduction of “contextual proposals” for PA rulebook pieces. Five will be held ahead of COP23, though observers will be excluded.

  • Parties are determined to understand, manage and capitalize on the linkages between Paris Agreement articles, and between the APA work and PA work of the subsidiary bodies. This is important and rich ground for cohesiveness.
  • More frequent interventions are coming from the new “coalition” of 3
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    Marcia Levaggi, Argentina, speaking on behalf of Argentina, Brazil and Uruguay (Photo by IISD/ENB | Kiara Worth)

    contiguous South American countries – Brazil, Argentina and Uruguay. They constitute 3 of the 4 members of Mercosur, the Southern Common Market, which is on track to a free trade agreement with the European Free Trade Association. We’ve known them as part of multiple different negotiating groups: G77+China (all 3); Coalition of Rainforest Nations (Argentina, Uruguay); BASIC (Brazil); Like-minded Developing Countries (Argentina); and BRICS (Brazil, Russia, India, China, South Africa). We’ll be keeping an eye on this development.

  • The Long Term Climate Finance workshops (LTF) may catalyze concrete COP consideration of strategies to address the confusing
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    Breakout during LTF event. (Photo by IISD/ENB | Kiara Worth)

    multi-lateral climate finance architecture and developing countries’ challenges in accessing finance. (See the World Resources Institute new pub out on this issue.)

  • The SBSTA’s agriculture agenda item hopped on a rollercoaster, disrupting the 4-year stalemate between developed and developing countries over adaptation vs mitigation. The excitement generated by delegates’ Week 1 mantras (“very substantive dialogue,” “feels like a family”) landed with a thud in the end. No mature elements moved forward to the SBI; nor was an agriculture work programme recommended. We do see slightly positive prospects looking ahead, given the Co-Facilitators’ non-paper. Stay tuned for our deeper dive on this.
  • The Gender Action Plan workshop wasn’t covered by anyone, but you’ll get the in-depth story with our next post.

Next up? Thank you, Carbon Brief, for the chart of steps toward COP23.Screen Shot 2017-05-25 at 1.11.43 PM

 


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.


A Numbers “Crunch” – Trump & The UNFCCC

Number-crunchingLike most every other institution around the globe, for a while now, the UNFCCC has been called on to do more with less. This is clearly reflected in the Executive Secretary’s recent budget presentations that report contributions to UNFCCC trust funds have declined significantly for at least the last 5 years. In fact, 2016 contributions are just 43% of the 2012 level. And all the while, the COP has added new tasks, including, most recently, the raft of work associated with the 2015 Paris Agreement.reduce-boost-graph SmallbizTrends

At a COP22 informal session on November 11, Espinosa shared that the Secretariat, with its mandated zero-growth budget, will be unable to fully deliver on its current mandates. So, all countries are being called on to meet their full commitments and to increase their voluntary contributions.

It just so happens that the U.S. is a big piece of this budget picture, contributing (as of October 21) more than 20% of the total $30.3 mill* in 2016 receipts for the 3 non-Kyoto Protocol related funds. These include the Trust Fund for the Core Budget (with country-specific contribution levels based on UN-determined proportions) and two voluntary funds: Trust Fund for Supplementary Activities and Trust Fund for Participation in the UNFCCC Process (the latter to help developing country Parties attend COPs and other meetings).

Screen Shot 2016-11-17 at 11.50.06 PMAnd, of course, there is the ongoing U.S. climate funding via appropriations from Congress, development finance, and export credit, which totaled $2.6 billion in 2015. That was before $500 million was transmitted to the Green Climate Fund earlier this year in partial fulfillment of the $3 billion U.S. promise (that constitutes 30% of that fund’s total pledges). All of it adds up to a very big number in the climate finance world.

Then, on November 8, from stage right: enter President-elect Trump.

While the potential impact on the climate regime is about more than money (check out our Monday story), the finance implications are indeed great. Considering Mr. Trump’s campaign pledges, the Republican Party’s platform position, and the Transition Team’s recent statements, when it comes to climate funding, those calculators only subtract.

Many negotiators and high-level ministers attending COP22 from around the world have been cautioning against hasty speculation on U.S. policy post-January 20, 2017. Behind the scenes, however, and certainly within the Secretariat, the number crunching has doubtless turned to nail biting.

 

* Based on 11/17/16 EUR-USD exchange rate

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