International climate finance

Climate finance in Lima: Where do we stand? Where are we headed?


The climate summit in the Peruvian capital Lima from the 1st to the 12th of December 2014 is intended to pave the way for a new global climate agreement at the end of next year in Paris. This 20th Conference of the Parties (COP 20) to the UN Framework Convention on Climate Change (UNFCCC) thus represents the sprint to the finish. The initial situation for the Paris climate summit is very different from that of Copenhagen, where the parties failed to close a deal in 2009. At the summit in Lima, the international community must lay the essential groundwork for a well-designed and binding agreement next year. This includes making important decisions on climate finance for 2020 and beyond.

Closing the funding gap before 2020

With its decision on long-term finance, the Warsaw climate conference in 2013 established the process for international climate finance for the years 2014 to 2020. In Warsaw, the industrialized countries confirmed their commitment to continuously increase their funding for climate protection and adaptation to the effects of climate change in developing countries until 2020. The goal here is to mobilize 100 billion U.S. dollars annually from 2020 onward. A three-track approach was adopted:

  • The industrialized countries are called on to disclose their strategies for providing additional resources for international climate finance every two years. This was a compromise reached in Warsaw in response to repeated demands by developing countries to define a clear growth path for international climate finance. The presented strategies are above all intended to ensure transparency and build confidence while providing urgently needed clarity and planning security.
  • Recurring working sessions during official meetings of the parties to the UNFCCC have been slated to discuss current issues closely linked to the provision of additional funding.
  • A regular dialog at senior ministerial level will subsequently summarize the results of those working sessions every two years.

Lima will show to what extent the mandate of Warsaw has been put into practice. Closing the yawning financial gap leading up to 2020 will be vital. To ensure the continuous growth of climate finance as agreed in Warsaw, the industrialized countries will need to step up and commit to providing public financial resources for the years 2015 and 2016. The strategies for mobilizing additional resources presented so far by the industrialized countries have not brought the expected clarity, however – quite the contrary. To date, only the EU and New Zealand have outlined their plans, but without providing all of the agreed information. A roadmap must therefore be defined in Lima to provide urgently needed clarity on the growth of climate finance to reach the goal of $100 billion by 2020. The requirements for the next round of strategies to be submitted in 2016 must be strengthened to ensure that the Warsaw decision does not become an empty promise.

As the IPCC’s Fifth Assessment Report confirms, the costs of necessary adaptation to the impacts of climate change are far from covered by the public climate finance currently available. Pledges to the Adaptation Fund (AF) and the Global Environment Facility (GEF) are therefore urgently needed at the climate summit in Lima for the funds to continue their successful work beyond 2014. This is especially true for the AF, which has made tremendous progress in this area as a direct-access pioneer: the number of developing countries implementing projects with the help of their own national institutions has more than doubled this year. For this year, the AF has once again set a goal to raise funds ($80 million) that it deems necessary to continue financing projects in developing countries in the coming year. The second formal review of the fund, which will be completed at the conference in Lima, must also address the question of whether a more sustainable source of funding for the AF can be found, particularly in light of the fact that donor countries will be focusing more on the Green Climate Fund (GCF) in future.

The GCF made great progress in 2014. The multilateral fund is now ready to manage contributions and to begin the programming of funds for measures in developing countries. On the 20th of November, the donors’ conference for initial contributions to the fund was held in Berlin. In total, $9.6 billion were pledged. In July, the German government set a standard by pledging €750 million. Developing countries such as Mexico, Panama and Mongolia made their own pledges, while some industrialized countries (Australia, Russia) did not, or made only general statements of intent (Poland). More will therefore be required from the industrialized countries in order to exceed $10 billion, a symbolically important threshold. This would send a vital political signal and have a positive effect on the willingness of developing and emerging countries for serious negotiations.

Preparing the post-2020 financial package

The Lima summit must also prepare the financial package for the time after 2020. To this end, a basic framework of financial elements to be included in the Paris climate agreement in 2015 is needed now. The commitment by industrialized countries to mobilize $100 billion a year by 2020 must serve as the starting point for post-2020 international climate finance. A specific target for the provision of public funds is urgently needed to meet the challenges arising from the growing need for adaptation to climate change and increasing damage induced by climate change in developing countries.
To facilitate the transition to a lower-carbon economy, it will be necessary to divert infrastructure spending to the tune of $90 billion toward green, low-carbon infrastructure over the course of the next 15 years. Achieving this will require the involvement and commitment of all countries to create the political and legal framework needed to promote the right incentives for such a change – by moving away from public subsidies for fossil fuels, for example. The financial package for the new climate agreement must contain commitments to this end from all countries.

Financial contributions in the climate contributions

Industrialized countries and other major states are to present their intended nationally determined contributions (INDCs) for the new climate agreement by the first quarter of 2015; all others are set to follow by the middle of the year. While the decision of Warsaw does not specify anything to this effect, it is generally undisputed that these must include national efforts to reduce emissions. During this year’s interim negotiations for the new climate agreement, many developing countries and NGOs called on the industrialized countries to provide information on the provision of climate finance. The global responsibility of many industrialized countries goes beyond what they contribute nationally to climate protection by reducing their emissions. Given the fact that each country must make a fair contribution to the new climate agreement, this means committing to support developing countries financially in the implementation of their climate policies.

David Eckstein, Germanwatch