100 billion / International climate finance

Six months to craft a roadmap to 100 billion

Ever since, back in 2009, at the Copenhagen climate summit, developed countries made the promise to ramp up climate finance so it reaches the level of $100 billion a year by 2020, developing countries have asked for a roadmap to show how the promise would be met. Ever since, developed countries have refused to do so.

This has now changed. The package adopted at the Paris climate summit includes, alongside the Paris Agreement, a range of decisions, and one of them (in paragraph 114) urges developed countries to present such a roadmap, and in particular also significantly increase financial support for adapting to the adverse impacts of climate change.

Climate finance outlook to 2020: Adaptation remains neglected

The left bar indicates where climate finance stood at in 2014, and how it may change by 2020, based on announcements made by developed countries and multilateral development banks in 2015, using their own methodology, counting finance at face value. The middle and right bar are our estimates for net assistance that specifically targets climate (middle bar) or adaptation (right bar). Source: Oxfam 2016

As it seems, developed countries have (finally) heard the call – and have begun internal consultations what this roadmap could look like. They have also reached out to developing countries, on the margins of the recent Bonn intersessional meeting that prepared the ground for the next UN climate summit in Marrakech (COP22) at the end of the year, to learn more about the expectations of the developing countries.

Here are a few thoughts from our side:

Process: The roadmap should not come as a surprise present to developing countries at COP22. Instead, it should be crafted with input from, and regular exchange of views with, developing countries. Ideally the final roadmap would be presented at the pre-COP, the annual ministerial gathering a few weeks before COP22. At the climate finance ministerial dialogue scheduled to take place during COP22, the roadmap could be the basis for agreeing further action to enhance climate finance.

Purpose: The roadmap’s purpose would obviously be to demonstrate that, and how, developed countries intend to meet their $100-billion promise – in other words: what is going to happen between now and 2020. The roadmap would also serve as an indication of direction of travel for developed countries when planning scaling up support over the next couple of years. And, perhaps most importantly, the roadmap would be tool to build bridges between developing and developed countries, enhancing mutual trust and confidence, but also identifying where further action is needed e.g. to overcome barriers to successful provision and deployment of climate finance.

Scenarios: Ideally, the roadmap would outline scenarios for the variety of instruments, channels and types of finance that developed countries aim to enhance over the coming years to meet their promise. These scenarios would include both qualitative (e.g. experiences made with different instruments so far and plans for the future) and quantitative (e.g. amounts to be provided or mobilised) information, but they could also identify barriers and actions to be taken to overcome those barriers, in order to make presented scenarios achievable. Scenarios could look at the range of multilateral funds available to channel money, such as the Green Climate Fund or the Least Developed Countries Fund, reflect on the role of the multilateral development banks, draw scenarios how bilateral assistance would evolve to or how to enhance direct access and country ownership, and also look into the various types of finance such as grants, concessional loans and innovative instruments, outlining perspectives on these.

Adaptation: Given the current (and often lamented) imbalance between support for adaptation and for mitigation, the roadmap should include a projection on planned increases of annual levels of adaptation assistance and establish a target level for 2020 within the overall $100-billion promise that would create more confidence among developing countries that adaptation will no longer be neglected. Such a target could be expressed in absolute terms (e.g. reaching at least $35 billion a year by 2020) or in relative terms (e.g. 50% of all public finance by 2020), accompanied with a set of actions needed to make it a reality, including more readiness and capacity building funding especially for the poorest and most vulnerable countries, which is critical to enable them to better identify their specific adaptation needs and formulate action plans e.g. around food and water security, or disaster risk reduction and management strategies.

Mobilised private finance: The roadmap now under preparation will also have to reflect on what will happen with mobilised private finance, i.e. private investments triggered by financial support from developed countries. Such mobilised private flows play a critical role in fostering low-carbon development but must not misunderstood as a distraction from the need to scale up public funding too. The roadmap should ensure that the current ratio between public (two thirds) and private finance (one third) remains intact through to 2020 or improves towards public finance – some of which would be used to trigger additional private flows. A key issue to address here is the attribution of mobilised finance – for instance, high leverage ratios are an indication that an investments is happening largely as the result of factors other than e.g. co-financing from developed countries, which means the amount that a developed country could claim to have mobilised could be considerably lower than the face value of a given investment. More generally, this part of the roadmap should also outline actions how future support can best be used to enable a country to transform and shift investments of its own private sector, focusing on small and medium enterprises rather than benefitting large multinational investors with little genuine interest in wider development issues.

New Sources: The icing on the cake would be a set of actions planned to meet the promise without further compromising finance provided to meet aid commitments and instead provide climate finance as truly new and additional finance. Proposals have been made on range of sources to generate new revenues, such as  revenues from financial transaction taxes, from auctioning permits under emissions tradings schemes (most notably the EU emission trading scheme under review now), or from levies on fossil fuel extraction.

Integrity: A critical task of the roadmap could also be to outline how financial flows provided (or mobilised) would be made fully consistent with keeping warming below the 1.5°C limit, in particular to avoid lock-in of low ambition. Specifically, financing for ‘clean’ coal has no role to play in the roadmap. Coal is never clean, and continued support for coal delays the inevitable transition towards a complete transformation to renewable energies. On adaptation, the roadmap could specify actions to prioritise finance towards the most vulnerable, and to enhance the quality of adaptation finance, e.g. by ensuring only those projects (or project components) are counted as adaptation finance that specifically aim to address identified resilience gaps (to overcome the problem of overestimating the adaptation relevance of projects).

The next couple of months will show how serious developed countries are about the task given to them in Paris. It is vital to avoid that the roadmap becomes a window-dressing exercise. Instead, the crafting of the roadmap should be an honest account of state of play, experiences, barriers and plans towards 2020. If that happens, the roadmap can become a key instrument for success at the upcoming COP22 in Marrakech – and thus help keeping the spirits from Paris alive.

Jan Kowalzig, Oxfam