Ever since the Copenhagen “grand bargain” on climate finance the issue has featured prominently on the political agenda. Yet, on the eve of Doha, the role of climate finance in building trust and instilling confidence seems fragile.
As the 2009-2012 Fast Start Finance (FSF) period draws to an end, developing countries are asking what funds will be available from 2013 to support actions that they are progressing at the national level? Seyni Nafo of Mali, spokesperson for African Group, has said that in Doha they need more than “an indication that funding will not fall off a cliff“.
Whether motivated by the promise of climate finance or driven by the realisation of the need for and benefits of actions to tackle climate change, post-Copenhagen developing countries are coming forward with nationally defined strategies, policies and actions. Climate finance would help accelerate and scale-up these actions.
Last week at a meeting in Costa Rica, I was struck by the level of political leadership within the region for tackling climate change. Chile, Colombia, Costa Rica, Mexico and Peru set out steps they are taking to strengthen national institutional arrangements and policies for scaling up low carbon investment. Decision-makers from the energy, transport, agriculture and crucially Finance and Planning Ministries, are now coming together around how to make most effective use of climate finance.
Ministers must put pledges, or at least timelines for future climate finance commitments, on the table in Doha to build trust and keep momentum for the 2020 deal rolling. (Source: Flickr/UNFCCC)
Governments in Asia also lead the way on creating enabling environments for climate finance. Earlier this week, at the OECD, I learnt how Indonesia’s Ministry of Finance are integrating mitigation costs within their national budget process.
As they develop a Mitigation Fiscal Framework they are identifying the most cost-effective mitigation options, implications for the national budget and the policies that can best incentivise investment by the private sector. Subsequently, the Government is building a more comprehensive approach toward ensuring different sources of finance best complement each other. I believe that such approaches will be necessary for maximising the transformational impact of climate finance.
At the same time, countries that are particularly vulnerable to the impacts of climate change are also working to build their adaptive capacity to create the enabling environments for the implementation of adaptation plans and measures that will be required to increase the resilience of their future development.
So now that developing countries are investing in their institutions for scaling up climate finance at the national level, a question on everyone’s mind is how developed countries are faring in their commitment for increasing finance towards the 2020 goal for mobilising $100bn/year.
Trouble at home
And this brings me to the bad news. Whether it is the sovereign debt crises in the euro zone, the fiscal cliff in the US, or prospects of negative GDP growth or flat-lining economies, the domestic situation in many of the FSF countries provides a gloomy backdrop for Doha.
At last week’s meeting of European Finance Ministers new pledges for 2013 were on the table – 15 Ministers were noticeable by their absence. Whilst disappointing, this should not limit EU Ministers from renewing their political commitment to the $100bn/year by 2020 nor should it tie the hands of negotiators from taking a constructive approach required to establish the rules and norms that would need to underpin this.
There are glimmers of hope that post-Obama’s re-election the US will start to show the leadership on climate action that has long been necessary. Readdressing the administration’s poor track-record in appropriation of climate finance will need to be part of that. Whilst new US pledges in Doha seem unlikely, US negotiators efforts towards realising the commitment that was made by Obama in 2009 for mobilising $100bn a year by 2020 will be key.
Ministers that are in a position to make pledges in Doha should also commit to channelling these through the Green Climate Fund (GCF) once it becomes operational. The prospect of countries beyond those that have provided FSF to come forward with pledges of funding in Doha is a promising one.
All eyes are on Qatar the COP hosts, who could, perhaps jointly with the South Korea as hosts of the GCF and Mexico which delivered the agreement to the GCF in Cancun could rally others from within their regions to pledge climate finance for the less developed and particularly vulnerable countries.
Momentum for a global deal
Putting aside financial pledges, Doha must also maintain momentum towards a 2015 agreement on a new legally-binding outcome for all. Given the importance of climate finance in building trust amongst countries Ministers arriving in Doha must signal a renewed political commitment around finance in the as one element of an ambitious 2015 deal. In this context there are several fronts on which climate finance can be progressed:
First, after a slow start, the GCF Board is now gearing up to make some key decisions on the funds business model, modes of access, and the private sector window. South Korea should be endorsed as the host country, and funding for the administrative functions of the Secretariat are coming forward.
Some Governments are increasing support for developing countries to prepare their “readiness” for climate finance. These welcome steps can be reinforced by Ministers, potentially coming together as “Friends of the GCF” to agree on sufficient resources are in place for the effective functioning of the GCF and for assisting countries with actions that will enable them to access the fund when operational.
Governments without a mandate for pledges in Doha should collectively announce a date by which they will do so in 2013.
Second, is the need to address the ad hoc reporting arrangements characterising FSF which has undermined trust amongst the less developed countries who point out that most funding has gone to support mitigation in a handful of sectors of middle income countries.
Countries will need to agree on how to ensure the transparency and accountability of climate finance. It is likely that developed countries entering into a second commitment period of the Kyoto Protocol will require reciprocal agreement for transparency and accountability of emissions reductions by those outside the Kyoto track.
Third, is the need to elevate the profile of adaptation finance. A recent report for the World Bank highlights some shocking implications of the 4 degree temperature rise likely under current trends.
The report urges “further mitigation action as the best insurance against an uncertain future.” Yet, the climate risks portrayed underscore the urgency for increasing resources to support the poorest and most vulnerable countries with measures for resilience to climate impacts.
In Doha Minsters should come together and commit to do more on adaptation finance and agree to the proposed mechanism on loss and damage.
Keeping the cash flowing
Lastly, but perhaps of greatest significance for climate finance in Doha, will be the response of countries to the co-chairs report on Long Term Finance (LTF).
The report neatly distinguishes between the need for a high-level political focus on sources and options for mobilising finance in the short, medium and long-terms, and more technical work that now needs to progress under various UNFCCC bodies.
At the Cape Town workshop that I presented at the co-chairs concluded by emphasising that the 2012 LTF work programme had been a journey rather than an end point.
I believe that the level of support by countries for the recommendations of the LTF Co-chairs, so that the political and the technical issues on climate finance proceed in parallel whilst also informing on-going work of the Durban Platform, could prove to be a bellwether for success in 2015.
Governments that want Doha to provide momentum for the journey towards a new legally-binding agreement by 2015 will do well to endorse these recommendations with a minimum of fuss. Let’s see if this proves to be the case.
Amal-Lee Amin leads the International Climate Finance Programme at the consultancy E3G.