Financing « Climate Equity

Ever since developed countries in Copenhagen at COP15 pledged significant short- and long-term financial support to help developing countries achieve their climate action goals, the discourse about climate finance – on how to fulfill the pledges from what sources, on which institutional channels to use or create, on how to balance and rationalize the global climate finance architecture and on whether and how to align the monitoring, reporting and verification (MRV) of climate finance with that of emissions reductions – has been a dominant driver of the multilateral climate negotiation process. COP17 in Durban starting this Monday will be no different. By some counts no fewer than seven or eight distinct decisions relating to climate finance are on the Durban schedule, all of them interwoven and interlinked in a complex web of conditionalities, reciprocities and political gamesmanship with the larger Durban negotiation package. The most prominent one, , the pivot in the view of many insiders, will be the confirmation of the design for the Green Climate Fund (GCF) and the approval of a transitional process as well as initial funding for its set-up by the parties. Without the GCF and its secured financial sustainability, there will be no Durban package. (more…)

The seven months long process to design a new Green Climate Fund (GCF), on which a 40 member Transitional Committee (TC) composed of 25 from representatives from developing and 15 from developed countries had embarked since the end of April, ended in Cape Town, South Africa on October 18th with – in the words of host and co-chairman Trevor Manuel of South Africa — a “sub-optimal” outcome, if not outright failure to complete its mandate, as some countries alleged. Tasked to come up with a draft governing instrument laying out the objectives and mission, the governance structures and core operational modalities of the new global climate fund, the 40 TC members failed to reach a consensus on the proposed text.

While most country members noted that they were unable to agree with some provisions in the draft governing instrument, but were willing to go along with it for the process’ sake, only the United States and Saudi Arabia rejected the document outright in its current form, asked for further negotiations and thus denied the unanimous agreement needed to recommend the text to the Conference of the Parties (COP) of the UN Framework Convention on Climate Change (UNFCCC) for adoption.

Instead, COP 17 in Durban will consider and approve a governing instrument that in all likelihood will be opened up for renegotiation – this time among the 194 members of the UNFCCC, instead of the narrower circle of 40 in the Transitional Committee, making consensus and an agreement acceptable to both developed and developing countries even more elusive. With this development, it is almost certain that the new Green Climate Fund will not be able to start its work in early 2012, if at all. And the obstacles for a successful outcome for global climate negotiations at the Durban “African COP” in early December, of which a carefully designed Green Climate Fund was to be a central piece, have become all but daunting. (more…)

So much disagreement, so little time: With three out of four scheduled meetings of the Transitional Committee (TC) tasked with designing the new Green Climate Fund (GCF) now completed after the recent one in Geneva, severe differences remain primarily, although not exclusively, between the 25 developing and 15 developed member countries about form and functions of the Fund. This despite the fact that some progress and convergence of opinions on some important matters is emerging, such as that funding decisions should be driven by and consistent with developing countries’ own national climate and development plans. However, the points of divergence and disagreement are too many and too fundamental in nature to simply hope for a rapid alignment or quick compromise between the TC members.

Given that there are just two full days of negotiations in the 4th TC Meeting in Cape Town on October 16th and 17th and a mere four weeks of behind-the-scenes hackling and drafting left to bridge that divide, it is hard to agree with the optimistic assessment of UNFCCC Executive Secretary Christiana Figueres that the TC “is now fully on track to conclude the design of the Fund for the approval by the UNFCCC’s Conference of the Parties in Durban” in late November. The road to Durban remains bumpy, and TC members have little time to cover a lot of distance. (more…)

Gender considerations are currently not systematically addressed in existing climate financing instruments; where gender appears, it is in bits and pieces.  Probably the main reason for that is that gender was not integrated into the design and the operationalization of these financing mechanisms from the very outset – as is the case for the World Bank’s Climate Investment Funds (CIFs) as well as for the Least Developed Countries Fund (LDCF) or the Special Climate Change Fund (SCCF) administered by the Global Environment Facility, and even the Adaptation Fund, which only started project funding last year.  This is where the Green Climate Fund, currently designed by the 40 members of the Transitional Committee, has a chance to do better:  It has an opportunity to be truly transformative and distinguish itself from existing funds by being the first to integrate a gender perspective from the outset. Gender as a cross-cutting issue must guide the discussions about the scope, the governance and operational guidelines of the Green Climate Fund in the Transitional Committee. (more…)

The first meeting of the Transitional Committee (TC), the 40 member body of negotiators tasked by the UN Climate Framework Convention to design a new Green Climate Fund (GCF), started in the same way that summarized the entire design process up to now: delayed.  Almost two months later than the Cancun Agreement had mandated, the TC delegates and close to 100 observers from multilateral and bilateral financial institutions, international organizations, academia, the private sector and other civil society groups convened in Mexico-City on April 28^th for the first time. Except that they didn’t, at least not at first.  Instead, the 40 countries representing the full UNFCCC membership of 194 (with 15 members from developed and 25 from developing countries) haggled in a non-public “non-session” for several hours fiercely over which countries should chair the process from now on.  In the end, a “troika” of countries was confirmed with Mexico (the current COP presidency), South Africa (the future COP presidency) and Norway sharing the TC leadership as co-chairs.  (more…)

With just a few negotiation days left and the high-level segment of the COP 16 in Cancun now officially started, ministers and their teams face a stark choice in deciding what kind of global climate fund they should throw their support behind – one that will largely continue the traditional donor-recipient relationship between industrialized countries and developing countries and mimic development aid flows (model of the World Bank climate investment funds) or the one which puts that relationship on a new footing and restores developing countries’ faith in the seriousness of the developed countries commitments (a larger scale and improved Adaptation Fund model).  Given this introduction, it is not difficult to figure out which of the two strongly opposing options I personally favor…. (more…)

Well, let’s start with the good news first: the European Union and its 27 member countries have been good to their word and delivered a summary report on fast-start-finance commitments in time for the COP 16 in Cancun.  It is to be EUR 2.2  billion in 2010. As such, the EU — and the member countries who have taken the exercise serious enough to provide specific individual project information – have to be commended, and I give them a B+ for effort and initiative.  It cannot be easy for the EU Commission to try to bring 27 rascally students, pardon, countries, to order and make them do their homework in time.

Other industrialized countries, such as Japan, the United States or Australia have likewise joined in a mad scramble pre-Cancun — maybe as part of the peer pressure the early EU commitment for such a report created — and offered their take on how they are contributing to fulfilling the collective political pledge  industrialized countries made a year ago in Copenhagen to come up with US$ 10 billion in “new and additional” fast start money for climate change action in developing countries for 2010, 2011 and 2012 respectively.

Alas, the execution of these reporting efforts is still insufficient.  I’ll give the EU effort, the most comprehensive of the FSF reporting by industrialized countries, a C – at present, but hold out hope for, and encourage,  improvement, both short-term (for the next report) and long-term (in the way climate funding is delivered).

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…. this is the condensed conclusion of the final report – recently released – of the UN Secretary-General’s High-level Advisory Group on Climate Change Financing (AGF), which was tasked with trying to find ways to raise US$100 billion per year by 2020 for mitigation and adaptation actions in developing countries.  This number — far less than what many experts believe is really needed — was the sort of political compromise, the lowest common financial denominator, leaders came up with at last year’s international climate negotiations in Copenhagen. 

Just a few short weeks before the international climate negotiations head into the next big round of  talks at the COP16 in Cancun, Mexico, the panel hopes that their guardedly forward-looking assessment – it would be too optimistic to call it optimistic — on how the long-term climate funding promised in the Copenhagen Accord can be pieced together, might move global climate talks forward by securing. if not a comprehensive climate deal, so at least a financing package. 

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On the road from Copenhagen to Cancun, climate negotiators from around the world will meet in Tianjin, China, from October 4th to October 9th for a last round of negotiations prior to the next COP in Mexico at the end of November.

ClimatEquity asks Chinese climate expert Yu Jie, who has participated in UNFCCC negotiations and COPs since 2004, about her expectations for Tianjin and Cancun.

CLIMATEQUITY: What do you expect will happen during the UNFCCC talks in Tianjin? Will we see any progress? Will climate finance be one area where there might be some high expectation for Tianjin and Cancun? What is the Chinese position on climate financing resources?

YU JIE: At the last session in August in Bonn, the parties in the working group on long term cooperative action (AWG LCA) finally agreed on the new chair’s text to work on. Currently, this text with 70 pages will have to be cut down to more manageable size, although it will be an extremely though job to remove hundreds of brackets, particularly when the thread to connect these pieces is missing. This missing thread is strong political will which in reality, seems to have been sapped by the domestic legislative process in the United States. Therefore, I agree with the view that climate finance could be an area where a substantial result in Cancun seems possible. Tianjin will then be one of the stops to build consensus towards Cancun.

The Chinese government holds the same position as the G77 on finance, but in contrast to many developing countries, it is pretty neutral on issues related to finance such as the debate who should govern a Global Green Fund. On providing resources for financing, China thinks they should come from a global carbon tax, rather than from carbon market proceeds.  (more…)

In 2007,  Ecuadorean President Rafael Correa first suggested that his country would forgo oil exploitation in its Yasuni National Park indefinitely if the world community would compensate the Ecuadorean people for half of the unrealized income of US$ 7.2 billion via contributions to a special trust fund. This innovative idea for a new way to help a resource-rich but income-poor country like Ecuador overcome its resource-curse and develop in a more sustainable and climate-friendly way “post-petroleum” was greeted with a lot of enthusiasm.  Germany, having long established development cooperation ties with Ecuador, was one of the first countries signaling their support for such a fund.  In 2008, the German parliament, in a rare display of unity across the aisles, confirmed its willingness to appropriate funding.  Fast-forward three years:  Ecuador has been able to transform an innovative idea into a legally sound mechanism.  In early August, the Yasuni Ishpingo Tambococha Tiputini (ITT) Trust Tund, which ismanaged by UNDP, became a reality and ready to receive major contributions… 

But what is not (yet) happening, is major donor country support.  Especially, the recent refusal of Germany’s Development Minister Niebel to pay into the Yasuni Trust Fund is a setback.   One cannot underestimate the bad signal it sends to other potential donor countries hinting that the Trust Fund might, well, not be trustworthy. On top of it, Germany does itself – and its aspirations to global leadership in issues like climate change and institutions such as the UN Security Council – a huge disservice.  Let’s hope that the setback is temporary – and Germany’ can embrace the Yasuni Trust Fund in a major way after all.  There are many good reasons, why this innovative development financing tool is worth the world community’s support and generous financial contributions by countries such as Germany. (more…)