“A Collective Commitment”? Nailing down Climate Finance in Cancun and Durban

By J. Timmons Roberts & Martin Stadelmann*This article was originally posted on OUTREACH

The surprisingly positive conclusion at Cancun was as much about the process as the substance of the two key texts that are now in place to advance the negotiations over the next year leading to Durban.   There were standing ovations at the transparent and inclusive process that brought the year of negotiations to a close, putting some of the bad feelings of Copenhagen behind us.

However on the crucial details of climate finance, we are scarcely any further along, apart from some progress in establishing initial institutions for the new Green Climate Fund and enhancing transparency. In spite of many concerns expressed throughout the year, deeply problematic language was copied verbatim into the Cancun Agreements from the Copenhagen Accord text.  An opportunity was lost to clarify what has been agreed in Copenhagen.

Paragraph 8 of the Copenhagen Accord included seemingly impressive language on funding climate action in developing countries: a “collective commitment” to provide US$30 billion of “new and additional” funding over 2010-2012 for “fast start finance,” which would be “scaled up” to US$100 billion a year by 2020.  Behind these numbers are ten crucial phrases in the Accord which were meant to clarify what was meant in those pledges, but which unfortunately created “wiggle space” that would make any campaigning politician proud.

Each of the ten key phrases in the Copenhagen text provide criteria by which concrete progress building from the positive feelings at Cancun can be measured moving forward, and the work yet to be done can be weighed. Below we take up each briefly in turn.  Each is in fact a complex issue requiring much more clarification, and there are many more beyond these ten.  At the very end of the piece we will point to just one more crucial dimension: the need for transparency through monitoring and evaluation of all this new climate finance.

The Ten Phrases:

1. Copenhagen promised “Scaled up, new and additional“ climate finance.

1a. “new and additional”: Probably the most important phrase from Copenhagen, these words turn out to be surprisingly problematic.   They have been much debated since Copenhagen, and it has been pointed out that their meaning is not at all clear.  Still, they appear again in several places in the Cancun text.  The missing discussion on “new and additional” in Cancun show that parties do not want to touch this hot topic. The year of clarifications by contributor countries showed that the phrase “new and additional” was being thought of in remarkably creative ways in their national capitals. In the end, “new and additional” has to be defined at the international or each donor level, or alternatively, the phrase has to be given up and more precise project-level reporting of the financial flows has to follow.

1b. “Scaled up,” After years of the wealthy nations putting only token amounts of voluntary funding into the Global Environment Facility (GEF) Trust Fund, the Special Climate Change Fund, the Least Developed Countries Fund, and for a long time, the Adaptation Fund, developing nations pushed for real “scaled up” funding at Copenhagen.  This phrase is also coming to stand for the period from 2012, when Fast Start Finance ends, to 2020 when the pledges are on a ten-fold larger scale.  There is no language in Cancun discussing expectations of funding for this crucial “scaling up” period.

A lesson can be learnt from the 2005 Gleneagles promises, which also failed to specify intermediate targets, and by doing so caused much difficulty and loss of credibility along the way.  If the average over 2010-2012 is $10 billion a year, there will need to have over $11 billion added each year to get us to $100 billion per year in 2020.  There needs to be specific targets, and annual monitoring to assess how we are doing, to keep on track to meet the “scaled up” promise.  For example, for 2013 there needs to be a concrete target of about $21b; for 2014:  about $32b; 2015: $43b; 2016: $54b; 2017: $65b; 2018: $76b; 2019: $87b; and for 2020: $100b.

To truly meet the promise of “scaled up” funding, there needs to be “hammer” mechanisms that kick in when intermediate targets are not met.  For example, we would argue that if contributors fail to meet intermediate targets, international mechanisms would automatically engage one “innovative finance” source after another to reach the targets.  Otherwise, promises with targets are meaningless.

2. “predictable.” This phrase is essentially calling for clearer and better met targets, as we just discussed in the “scaled up” section. Predictability has, however, not increased since Copenhagen, as Northern governments find it difficult to muster the political support and taxes for increased climate finance under given economic circumstances. Until 2020, climate finance promises will also be dependent on private funding (see Number 7 below), which are hardly more predictable.  Predictability will have to be enhanced by either making fund sizes dependent on the economic cycle, or using new sources less linked to growth (such as energy taxes or auctioning of allowances).

3. “adequate funding”: This is one of the most worrisome elements of the Copenhagen/Cancun language.  To know if the pledges and delivered funds are truly adequate we would need updated and best-knowledge estimates of need for mitigation and adaptation funding. The World Bank’s 2010 World Development Report included estimates above $500 billion a year by 2030.  Why has $100b been allowed to count as “adequate” funding?  This is clearly a political decision, based on perceptions of what was feasible by key players.

4.  “improved access shall be provided to developing countries…”. According to the Cancun Agreements the new Green Climate Fund may include “direct access” for developing countries, as has been under development by the Adaptation Fund Board.  This can be considered a step towards the idea that developing countries may be given easier access to money, without having to face conditionality criteria imposed by developed nations and long bureaucratic wait-times historically experienced when funds flow through major international organizations.

5. “balanced allocation between adaptation and mitigation.”  The fast start pledges we have seen thus far are 80-90 percent focused on mitigation, a ratio which can hardly be called balanced. Beside the fact that adaptation is emphasized in the Green Climate Funds (whose size is undetermined, see 10. below), there has been no progress on this issue.

6. “Funding for adaptation will be prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa.”  This point has set off a whole new set of debates among the G-77 and China countries, and positions seem to be polarizing rapidly about whether such a category can be scientifically derived by assessing susceptibility to natural hazards and social vulnerability.

7. “This funding will come from a wide variety of sources, public and private.” In spite of repeated complaints about this mixing of two very different types of finance, there is in the Cancun documents no improved clarity on what proportion of funding should be or must be publicly raised.  This raises critical issues of whether funds can be allocated to where they are most needed, and disbursed when they are needed, for appropriate interventions.  Without such clarity, the finance pledges are largely meaningless.

8. “Bilateral and multilateral, including alternative sources of finance.”  The first part of this language makes clear that contributor nations are protecting their right to funnel climate finance through their own bilateral agencies.  The second part suggests that Parties are willing to take on board so-called “innovative financial mechanisms” such as those put forward by the High-Level Panel on Climate Finance, which released its report just before Cancun.  However the question is entirely unclear on which of these mechanisms Parties will accept.  A series of international sources of fund-generation (such as currency transaction taxes or airline and bunker fuel levies) will be critical for the scaling up period and for the 2020 and forward.

The word “alternative”, however, has not be clarified in Cancun.

9. “New multilateral funding for adaptation will be delivered through effective and efficient fund arrangements, with a governance structure providing for equal representation of developed and developing countries.”  This issue has partly been resolved, as the new Green Climate Fund will have a board with equal representation.

10. “A significant portion of such funding should flow through the Green Climate Fund.”  The new Fund had most attention during and after Cancun. Decisions included its function (2nd operational entity of the UNFCCC financial mechanism beside the GEF), the World Bank as Interim Trustee, and the way it would be set up (that it shall be designed by a Transitional Committee, in which developing countries have a majority).

1 While the adaptation share may increase in the future, we have to consider that part of the US$100 Bn per year in 2020 will be private funding, which is more likely to be for mitigation than for adaptation. So we may end up with US$10 Bn of adaptation funding in 2020, and what is a significant share of that?  Industrialized countries have not committed any real money to the fund, and we may end up with another small “placebo” fund.

A Final Issue: Progress and Gaps in Transparency at Cancun

Notwithstanding the size of the Green Climate Fund, the majority of money in the next few years will flow bilaterally or through multilateral channels outside the UNFCCC funds. That is why  transparency and central accounting of financial flows are key, as we have pointed out in a Cancun issue of Outreach.

Copenhagen had no language about a climate finance registry, to log who was giving what and for what through what agency.  Realizing that this eroded the legitimacy of the Fast Start Finance pledges, the Netherlands set up a website to function in this fashion.  By the time of Cancun, however, only a fraction of the pledging countries had put their data up there.  By this writing (January 5, 2011), there were 21 contributors listed, including the EU and a number of its member states.  There is no common reporting format, the projects are deep in layers of websites, and there is poor reporting on the projects actually being counted by many contributors, which clearly points to the need for a standard system.  What is being developed, we would argue, is a non-system with no way to verify whether the climate promises of Copenhagen and Cancun are met.

While we are still far from our idea of contributors accounting for all climate finance flows separately from Official Development Assistance (in a new category we call OCF–Official Climate Finance), we have seen some major progress on transparency in the Cancun Agreements. Three important institutions are mentioned: a common accounting framework for industrialized countries’ financial support, a registry for matching NAMAs and support, and finally a Standing Committee, which should assist in “improving coherence and coordination in the delivery of climate change financing, rationalization of the financial mechanism, mobilization of financial resources and measurement, reporting and verification of support provided to developing country Parties”.  We hope so: all the promises of Copenhagen and Cancun need clarifying.  If the language is hollow, the promises should simply be revoked.

*Martin Stadelmann is a PhD candidate at the University of Zurich.

References

Ciplet, D., Chandani, A., Roberts, T.J., Huq, S., 2010. Fast-start adaptation funding: keeping promises from Copenhagen International Institute for Environment and Development (IIED), London.

ETH Zurich and University of Zurich.

Cross-Posted from Intercambioclimatico.com 

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