International climate finance

Conclusions on climate finance in Lima

Photo: GuenterHH. This image is licensed under Creative Commons License.

Finance, as in previous climate meetings, was considered a linchpin for achieving an ambitious new climate treaty. The outcome of Lima proved this analysis – which has become an adage of COP forecasts of success – once again correct. If it hadn’t been for the first pledging meeting for the Green Climate Fund (GCF) in Berlin in late November, the COP 20 in Lima would not have had anything of significance to report on climate finance. Thank you, Berlin!

No progress for an agreement in Paris

However, the success of the Berlin meeting also enabled developed country governments to justify their blockade of the inclusion of any reference to finance in the decision of the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP) responsible for developing the post-2020 agreement in support of ambitious developing country intended nationally determined contributions (INDCs) with their earlier pledges for the GCF in Berlin. They also deflected calls for a pre-2020 roadmap to establish certainty on scaling up climate finance to the US$ 100 billion per year by 2020. Instead of anchoring verifiable targets for scaling up new, additional and predictable finance commitments over the next few years, the COP decision text on long-term finance makes due with a reiteration of the Cancun decision and the promise of annual in-session workshops and “welcomes with appreciation” the pledges to the GCF.

To put these in context: while the aggregate commitments of 29 countries for US$10.2 billion for the GCF over four years are welcome – in Lima, Norway, Australia, Belgium, Peru, Columbia and Austria were the latest to pledge – they are but a first crucial step to establish the GCF as the most important multilateral climate fund. And they can only be considered a small initial installment of what needs to be a long-term and scaled-up commitment to be fulfilled by those developed countries which under Annex II of the UN Framework Convention on Climate Change (UNFCCC) have financing obligations to support the mitigation and adaptation efforts of developing countries. That this is a matter more of political will than of tight purse strings, despite national governments’ lamentations to the contrary, is illustrated by a new Oil Change International report showing that the same Annex II countries continue to support fossil fuel exploration with US$ 26.6 billion per year – almost three times the GCF initial pledges, which are to last for up to four years. Of course, exactly this Annex II obligation to provide scaled-up public climate finance is under attack on the road to Paris. Industrialized countries in Lima urged “all Parties in a position to do so” to pay for the climate action of the poorest countries, while developing countries in the name of equity want to maintain differentiation in finance also for the new agreement post-2020.

What exactly can be counted as climate finance as well as the respective role for public and private sector climate finance remain unclear, despite the review of climate finance flows that the Standing Committee on Finance provided to the COP. Unclear is also the future of existing climate funds under the Convention now that the GCF is the new big kid on the block. In Lima, the Kyoto Protocol Adaptation Fund, whose pioneering role in allowing countries direct access to finance was recognized by Parties and which has struggled with a lack of sustained support by developed countries, received a short-term lease on life at the last minute with a EUR 55 million contribution announced by Germany. However, this is far from the predictable funding required to address the identified gigaton and adaptations gaps that can only come from mandatory assessed contributions of Annex II countries. The climate finance discourse in Lima has done nothing to increase their likelihood in a post-2020 climate regime

Liane Schalatek / Heinrich Böll Foundation