Climate Finance at COP17 Durban
This piece was written with Louise Brown, Research Analyst at WRI.
From November 28 to December 9, negotiators will gather in Durban, South Africa, for the United Nations Framework Convention on Climate Change (UNFCCC) COP17 meeting. An outcome on climate finance – funds to support climate change mitigation and adaptation activities in developing countries – is a key part of the overall Durban agreement. This includes agreeing on how the Green Climate Fund (GCF) will be structured and governed, setting in motion a process to identify how developed countries will meet their long-term finance commitment of $100 billion by 2020, and agreeing on the role, composition and functions of the Standing Committee, a body that will monitor finance flows and enhance overall decision-making on climate finance.
The Green Climate Fund
The GCF was established last year through the Cancun Agreements to deliver large scale financial resources to developing countries for climate change adaptation and mitigation. It is seen by many, particularly developing countries, as an opportunity to create a more legitimate institution that gives all countries – developed and developing – an equal voice. The GCF could also be a vehicle for scaling-up the delivery of climate finance to catalyze an economy-wide shift towards low-carbon and climate-resilient development, including by incentivizing major shifts in private sector investments.
Over the course of the year, a 40-member body called the Transitional Committee (TC) has met regularly to design the Fund. At its final meeting in Cape Town last month, the co-chairs of the committee produced a final draft report that sets out the proposed design of the GCF and the arrangements to make it fully operational.
The draft represented good progress and compromise by all members, but could not be adopted unanimously due to concerns raised by the United States and Saudi Arabia. The U.S. argued, for example, that the draft text did not give the Board of the GCF enough independence from the COP. As a result, the TC decided to forward the draft report – rather than a final decision – to the COP for consideration and approval in Durban.
In the absence of a unanimous endorsement by the TC, the risk rises that the delicate compromises reflected in the Cape Town text – on the Fund’s thematic windows, the institutions eligible for channeling GCF funds, and sources of the GCF’s funds – will unravel. Thus, the challenge in Durban will be to preserve the compromise reached, while finding ways to resolve outstanding issues without undoing the good work that has been done over the last 12 months.
At the 2009 Copenhagen COP, developed countries committed to mobilize $100 billion a year for climate change adaptation and mitigation by 2020. The resources are expected to come from “a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance.” Two years on, it remains unclear how these resources will be mobilized and the relative share of each of the sources identified.
A number of ideas for mobilizing the $100bn have been put forward, including by the UN High Level Advisory Group on Climate Change Financing, the IMF and World Bank, and even by Bill Gates. Options include pricing emissions from international air travel and shipping; auctioning emissions allowances in developed countries; eliminating developed country subsidies to fossil fuels and using these resources to support climate action; and putting a financial transaction tax on excessive speculative financial flows. Turning these ideas into reality requires developed countries to take action domestically and collectively, and they have yet to demonstrate that they are making progress towards this goal.
The lack of demonstrable progress has prompted developing countries to call for a decision in Durban clarifying how developed countries will raise long-term funds. The U.S. and some other developed countries have argued that reaching the goal should be left for them to determine outside the UNFCCC process, and are unwilling to discuss the issue further in Durban. But, many developing countries remain wary of the developed countries’ ability to follow through on their commitment, and this lack of confidence has been worsening with the unfolding economic and political events in some of the major developed countries.
The challenge in Durban, therefore, is how developed countries can assure their developing country counterparts that they do actually have a plan to get to $100bn by 2020. A roadmap that sets some key targets and deadlines for inputs from developed countries and other experts, and technical discussions on these plans, creates a process that could result in firm commitments by developed countries at the next COP.
The Cancun Agreements also established a Standing Committee (SC), a body of limited membership, to assist the COP in improving coherence and coordination in the delivery of climate financing, reconciling the role of different funds linked to the UNFCCC (including the Global Environment Facility, and the GCF when established, among others), mobilization of financial resources, and measurement, reporting and verification of support provided. In Durban, Parties will need to agree on the composition of the committee, and its specific roles and functions.
While arguably less divisive than some of the other topics, the SC is still contentious. Divisions exist over the nature of the role the SC is expected to play. Will it be an advisory role to the COP preferred by developed countries and seemingly consistent with the Cancun Agreements, or a supervisory role on behalf of the COP, preferred by developing countries as a way to exercise greater control over the climate funds accountable to the COP?
Either way, the COP and the SC need a mandate that bolsters their capacity to mobilize financial resources, ensure coherence and coordination among the proliferating funds and funding initiatives, and verify reported flows of financial support provided to developing countries. Accountability lines between the SC, the COP and the UNFCCC funds will also need to be clarified. The challenge in Durban will be to clarify these roles and responsibilities in a manner that makes decision-making on climate finance issues more effective and avoids overlapping mandates.
Successfully resolving these three issues in Durban will represent a major step forward in supporting developing countries’ transition to a low-carbon, climate-resilient development pathway. Developing countries need to have confidence that developed countries can and will meet the ambitious, albeit insufficient, target of mobilizing $100 billion by 2020 without a financing gap in the period between 2013 and 2020. An agreement on a roadmap for identifying sources of finance that will help them reach the $100 billion target will provide the confidence that this transition can indeed be financed. It’s important to note that even these funds are relatively modest compared to the estimated need – according to the International Energy Agency, around 1 trillion USD of investment will be needed annually to make this transition just in the energy sector, as we go out to 2035 and 2050.
Agreements on the governance and interim arrangements of the GCF, including seed funding to get its work started, as well as on the composition, role, and functions of the Standing Committee will also send a clear message that developed and developing countries are committed to building institutions that can deliver real change over the long-term. Collectively, these decisions will give developing countries the certainty that they need to develop holistic and long term policies, plans, and strategies to transform their economies, as well as send a signal to the private sector that their climate-friendly investments are sound and will pay off.