International climate finance

Financial Support in the Draft Paris Agreement: no Commitments, no Predictability, no Adequacy

Will the Paris UN climate summit deliver a fair deal on climate finance? It doesn’t look like it.

Well, yes, it is indeed the task of the co-chairs of the Ad-Hoc Working Group on the Durban Platform (ADP), the body that negotiates the new climate agreement to be adopted in Paris in just a few weeks, to trim down the unwieldy negotiating text of 80+ pages. They have done that now, cutting it to a manageable length and simplifying it greatly. Next week at the ADP session in Bonn, negotiators will work with nine pages of text for the Draft Agreement, plus another eleven pages for the accompanying COP decision.

Perhaps the co-chairs felt they had to eliminate the breadth of proposals from all sides, keeping only those elements that they think are agreeable to everyone? As in: the lowest common denominator. Three quarters of the text are gone. Gone too, at least when looking at the current draft, are the hopes that the agreement will deliver for vulnerable people and countries. The text now is weak wherever you look: it lets countries with inadequate INDCs off the hook, it fails to deliver on adaptation for the poorest and most vulnerable, it merely notes the problem of loss and damage from unavoidable impacts – and it doesn’t offer much on financial support.

Article 6 (Finance): little more than thin air

Article 6, the one on finance, the one that we would expect to set out the mechanics of predictable and adequate financial support for poor countries under the new agreement has been cut down to about half a page. While brevity is welcome, in principle, the text has become hollow. To a degree that I’m probably not the only one wondering what use the article is at this point.

Most of what remains is generic and non-actionable, has already been agreed upon in the past, or is COP decision material, rather than provisions for an international treaty. When I spoke to an Annex 1 negotiator, he agreed. But, he also said, if we dropped the stuff that is not new or moved it to a COP decision, the article would disappear into thin air. And I guess that’s what rich countries are trying to do, eliminate their obligation to support developing countries as much as possible.

Indeed. Article 6 now has no concrete commitments to provide support, is void of predictability on how support will evolve, and does not provide any confidence that such support, especially for adaptation action, will reach adequate levels in the post-2020 world. The US is probably going to like the article. I have my doubts that the EU will challenge its gaps. Some of the emerging economies may not bother too much but use its weakness to ensure other articles in the draft agreement stay weak too. The poorest and most vulnerable countries that need a solid foundation for future support under the new agreement could well find themselves left in the lurch.

Commitments? Predictability? Adequacy?

Article 6 stipulates that developed countries shall or should provide support. Well, we’ve got that already covered, in the UNFCCC itself, albeit in a stronger version. Except perhaps that Article 6 introduces the idea that not only developed countries, but all countries in a position to do so would be asked to contribute. Even though countries with levels of responsibility and capability comparable to developed countries could indeed be asked to also contribute, the commitment itself remains vague.

Countries would also be asked to communicate projected levels of support they provide. We’ve got that already too: COP19 requested countries to communicate ‘expected levels’ of support. Now I am no linguist; but I have my doubts that there is a step change from ‘expected’ to ‘projected’, not least because it remains unclear what it refers to. Support projected to be available during the current year? Next year? Next five years? Please specify.

The draft article’s fifth paragraph stipulates that climate finance should be scaled up from the 100 billion US-Dollars a year that rich countries promised to reach by 2020. That’s a very generic statement; it would be a lot stronger if it said: And to implement this, collective targets for the provision of financial support shall be set, perhaps every five years. That would improve predictability, and contributing countries would know where they are headed when making their budget plans. Setting such collective targets has been repeatedly proposed by developing countries, is supported by the entire group of developing countries (the G77/China group), and can be found in their most recent submission on finance. To ensure that sufficient support is made available for adaptation, setting such targets should include separate targets for supporting adaptation action.

Adaptation going to be neglected again?

Article 6 then includes a few generic statements (as said, probably to give it a decent length, to cover up that rich countries continue to block robust provisions on financial support), for instance that climate concerns should be integrated into development assistance. Or that access to finance should be made easier for the Least Developed Countries (well, that’s ok). Or that countries should try to improve predictability. Yawn! That finance should be predictable is old news (from COP16 in 2010). Or that there should be a balance between mitigation and adaptation support. Again: Old news, COP20 in Lima (though the balance isn’t there, not at all: According to the OECD, just 16% of current flows are dedicated to adaptation). To give it teeth, Article 6 should say that at least 50% of financial support should be allocated to adaptation action, to help close the looming adaptation finance gap.

Deliberate mix-up to ease pressure on rich countries?

Article 6 includes a few lines on shifting investments. In fact, it mixes together the provision of financial support with the challenge to shift investments. The latter is needed too, no doubt, but it’s quite telling that developed countries, whenever they are confronted with asks for adequate financial support they throw the shifting-investments smoke bomb, to ease the pressure on them. Remarkably, this issue is the one that introduces a new commitment, including on developing countries, namely to improve domestic enabling environments to attract investments. As much as investments need to become increasingly carbon neutral or climate-resilient, or even better actively contribute to emission reductions and to adaptation, they are no replacement for financial support that will be needed at increasing levels in the post-2020 world. It would help, if the shifting investment pieces would go elsewhere, and Article 6 would be the one true article on the provision of financial support.

It’s not all doom and gloom!

To close with something I really like: The article commits countries to reduce international support for high-emission investments. I wonder if my government is going to like that. Germany is among the top five providers of climate-trashing export credits and guarantees for coal projects abroad. Its motivation is to support German companies, backed up with some flimsy arguments that German coal technology is more efficient, and that such coal finance is limited to countries that have a climate change strategy. That doesn’t help the science. Keeping warming below 2°C or 1.5°C means global emissions of the electricity sector have to go down to around zero over the next decades – says the IPCC’s fifth assessment report. Or: Public support to build new coal power stations, or to extend the lifetimes of existing ones, is actively working against the 2°C limit. High time Germany ended that practice.

Jan Kowalzig, Oxfam