Advancing on climate finance at COP24

UN Secretary General Guterres at the opening of COP24. Photo: Brot für die Welt

Climate finance is always considered a deal maker or deal breaker at the international climate change conferences of the UNFCCC. This is particularly true this year with COP24 in Katowice that has just started. Civil society organizations are therefore demanding clear progress on climate finance. Among the key issues are ensuring that the $100 bio promise is kept, agreeing on a new target, on defining the rules for accounting climate finance as well as anchoring the Adaptation Fund under the Paris Agreement. This article provides an overview of some of the key demands from different civil society organizations who are part of the website www.germanclimatefinance.de.

Climate Finance in the Paris Rulebook

A successful COP 24 outcome will depend on progress in negotiations on climate finance.  This is the overarching political battle which has hovered over nearly every COP.  Developing countries must be assured that developed countries are willing and sincere to provide sufficiently detailed quantitative and qualitative information on public finance – in advance, and after it is provided – in order to enhance predictability and accountability.

Predictable and accountable climate finance will build trust and confidence in the post-Paris regime and provide developing countries with the certainty they need to plan and implement their ambitious NDC commitments, many of which are conditional on additional finance provided by developed countries.

Enhancing predictability of climate finance

But this issue – and it’s a very technical procedural issue – may prove to be the biggest roadblock to a successful outcome at COP 24. The Paris Agreement contains a procedure for developed countries to provide information on the financial support they provide to developing countries, after they do so. But it does not contain a procedure for developed countries to submit information, in advance, on how much and what kind of support they plan to provide.

This means that there is nothing in the Paris Agreement Work Programme linking information on public finance to be provided by developed countries to information on finance actually provided.  Developing countries are demanding such a link, since advance information on how much and what kind of finance they will receive is crucial to whether they will be able to implement and how they will implement their commitments under the Paris Agreement.  This is of particular importance since developing countries are being urged, in the name of raising overall climate ambition, to further increase their levels of commitment, which, as noted above, are conditional on additional finance provided by developed countries.

Developed countries maintain that there is no mandate in the Paris Agreement to create a procedure to indicate the projected levels of financial resources they will provide to developing countries.  They view this as a purely technical communication exercise to be discussed elsewhere in the UNFCCC, and later.

Rules for accounting and reporting on climate finance

In the absence of an agreed definition of climate finance, countries continue to disagree on what can be counted under reporting on finance.  While it is in the interest of developed countries to widen the categories to include, for example, non-financial efforts such as capacity building measures and technology transfer, or finance provided as commercial loans, developing countries want to keep the focus on reporting of new and additional financial resources provided on top of official development assistance. In a similar way, there is a disagreement whether to count grant equivalent of loans or the face value of loans, whether to count non-concessional loans, guarantees, equity and whether the reporting of the climate-specific component on a project-by-project basis should become a general standard.

For a robust reporting mechanism, all countries should provide similar types of information for every channel and sources of climate finance. This way they can ensure comparability and coherence when informing on the mobilization of climate finance. While it is important to recognize national circumstances and availability of information (such as specificities of national budgets) and allow for a flexible process where countries can also provide some qualitative information where it is not possible to quantify the contribution , it is vital to agree on common format and timeline, thus allowing for a synthesis report on projected climate finance.

Setting a new target

While the 2020 deadline approaches for the USD 100 bn per year goal to be provided by developed countries for climate action in developing countries, recent analyses shows that governments lag behind in clearly demonstrating a credible plan on how to achieve that goal. Further analyses by CARE, Oxfam or our own analysis show that in most donor countries’ support to developing countries the share of adaptation is still far below 50%, and that there is an overall need to scale up public climate finance.

Heated discussions will also continue at COP 24 about when to start work on a new quantified collective goal on finance to be set by 2023 to scale up from the (still nowhere near close to being achieved) USD 100 billion per year by 2020, first proposed in 2009 at the disastrous COP 15 in Copenhagen, and which serves as the current baseline.

Anchoring the Adaptation Fund under the Paris Agreement

The Adaptation Fund has been playing an unique role in the international climate finance architecture and has supported concrete adaptation projects in developing countries since 2010. In the decisions accompanying the adoption of the Paris Agreement, it was agreed that the Fund “may” serve the Agreement. A year later, at COP22 in Morocco, Parties went a step further by deciding the Fund “should” serve the Paris Agreement. However, this needs to be finalized in 2018 with a final decision at COP24 which should also specify the Fund’s operating modalities, institutional arrangements, and safeguards.

Climate Finance in the Green Climate Fund (GCF)

Although not formally on the agenda, COP 24 will also see behind-the-scenes talks on whether developed countries, especially the European Union, Japan, and Canada, are able and willing to provide ramped up pledges for the first formal replenishment of the Green Climate Fund (GCF), which kicked off at its 21st Board Meeting in Manama, Bahrain in late October.

As the GCF is the main multilateral fund under the financial mechanism of the Paris Agreement, early indications of increased support for the GCF’s next implementation period will be seen by developing countries as a litmus test of how sincere developed country promises from Paris really are. This could also help advance UNFCCC finance negotiations.

Loss and Damage

Loss and damage refers to irreversible loss (lives and livelihoods, land, cultural heritage) and recoverable damage (mainly infrastructure such as roads, buildings, power lines) related to the impact of events likely caused by, or made worse by climate change, including extreme weather and slow onset events.  It is one of the most sensitive issues at the climate change talks and again, the lack of financial resources provided and mobilized from developed countries to developing countries is the missing link.

While enshrined as an article in the Paris Agreement, loss and damage is not formally part of the Paris Agreement Work Programme (PAWC). At Bangkok, however, the issue made a surprisingly strong appearance. One group of developing countries urged that the PAWP must include the need to identify information on loss and damage in the rules of the enhanced transparency framework.  Expect developing countries, especially the small island developing states, to also push for commitments to address loss and damage in finance item of the Paris Rulebook.

With devastating extreme weather such as hurricanes, typhoons, flooding, and wildfires, and the related destruction and loss of lives a constant drumbeat in worldwide news coverage over the past years, and since the proposed focus so far on insurance solutions is too narrow and insufficient, the pressure will be mounting in Katowice to address this issue as part of the finalization of the Paris Rulebook.

Demands from civil society for COP24

COP24 therefore needs to achieve results on the following issues:

• Enough finance to reach USD 100 billion by 2020: Developed countries should provide concrete plans for how to live up to the collective commitment to provide US$100bn in new & additional climate finance per year by 2020. This should be balanced between adaptation and mitigation, with at least 50% of finance for adaptation, and should include indications for a strong replenishment of the GCF in 2019 significantly higher than previous pledges. The high-level ministerial on climate finance during the COP is an important opportunity to announce such plans.
• More gender responsive finance: Parties should increase efforts to promote gender equality through their bilateral climate finance as well as in multilateral mechanisms, so that by 2020 at least 20% of climate finance supports projects which pursue gender equality as a principal objective (OECD marker 2) and at least 80% as a significant objective (OECD marker 1).
• More appropriate accounting and reporting: On reporting past climate finance (Article 9.7 negotiations), Parties should agree to only count grant equivalent of loans; not to count non-concessional loans, guarantees, equity – as public finance or as mobilized private finance; to report the climate-specific component on a project-by-project basis, with separate reporting of loss & damage finance; and to exclude fossil fuel projects.
• Better predictability: Parties should also agree on mandatory reporting of projected climate finance (Article 9.5 and APA 8a negotiations) with a common format and timeline, allowing for a synthesis report to be produced and discussions to be held at a biennial finance ministerial.
• New finance goal: Parties should adopt a structured, inclusive, and balanced process to set the post-2025 finance goal (APA 8b negotiations).

Expectations from Germany

Germany has some important domestic tasks ahead of itself, in particular the increase in ambition on its climate goals and the exit from coal-On climate finance, Germany has promised a doubling of its public climate finance until 2020. This needs to be backed up by sufficient budget allocations where Germany still needs to increase its efforts and the doubling pledge should also be applied to German funding pledges to the Green Climate Fund (GCF). Germany can support progress on the replenishment of the Green Climate Fund (GCF) and on securing the financial stability of the Adaptation Fund by using the opportunity of the COP to announce additional pledges, possibly together with other donor countries.

In addition, Germany as one of the biggest providers of climate finance and a progressive actor in the COP should support the discussion on climate finance by supporting the agreement of clear and robust accounting and reporting mechanisms. Here Germany can build on the transparency standards it already applies i.e. with regard to project based reporting, while taking home important lessons where it can still improve, e.g. on applying stricter on the accounting of adaptation finance.

Lutz Weischer & David Eckstein / Germanwatch
Sven Harmeling / CARE
Liane Schalatek & Lili Fuhr / Heinrich-Böll-Stiftung
Sabine Minninger / Brot für die Welt
Christine Lottje

This article is based on the following position papers:
Heinrich-Böll-Foundation: https://www.boell.de/en/2018/11/27/whats-stake-cop-24
CARE: https://careclimatechange.org/publications/cares-key-demands-for-cop24/
Germanwatch: https://germanwatch.org/sites/germanwatch.org/files/GW_Weitblick_03-2018-181122-WEB-A4.pdf
Klimaallianz/VENRO: https://www.klima-allianz.de/fileadmin/user_upload/Dateien/Daten/Publikationen/Positionen/2018-10_PositionspapierCOP24-2018_WEB.pdf