UNFCCC / 100 billion / Adaptation Fund / International climate finance

Climate finance at COP23: results at a glance

COP23 delivered only little progress on climate finance Photo © IISD/ENB | Kiara Worth

COP23 delivered only little progress on climate finance. Photo © IISD/ENB | Kiara Worth

At the Bonn World Climate Conference COP23, once again, climate finance proved to be a sticky topic. Two sensitive issues delayed the closing of the conference until the early hours of Saturday. Overall, little has been achieved, developed countries prevented progress on some of the issues – but credit must be given to some that made new finance pledge at COP23. The climate finance results of the Bonn talks at a glance:

Adaptation Fund

When the governments of Paris adopted the new agreement in late 2015, some of the multilateral climate funds were anchored into the new agreement, including the Green Climate Fund or the Least Developed Countries Fund. The future of the Adaptation Fund, however, remained unclear. After much wrangling, the COP23 has now opened a path for transferring the Adaptation Fund from the Kyoto Protocol (under which the fund has so far operated) to the Paris Agreement. Until recently, the developed countries had resisted making such a decision, because they feared, among other things, an automatic mechanism that could force them to regular replenish the fund. Until the next conference (COP24) in Katowice completes the anchoring of the Adaptation Fund under the Paris Agreement, these and other questions will be further discussed. In this undertaking, we hope for Germany to play a constructive role, as Federal Environment Minister Barbara Hendricks had pledged a further 50 million euros for the fund at the opening of COP23. Further commitments came from Sweden, Ireland, Italy and the Belgian regional government of Wallonia.

Loss and damage

Increasingly, the poorest and most vulnerable countries are facing economic loss and damage as a result of climate change – droughts cause crops to dry up, typhoons devastate the land, rising sea levels contaminate coastal agricultural soils and freshwater resources with salty water. Although the Warsaw International Mechanism on Loss and Damage (WIM) has been established existed at the Warsaw World Climate Change Conference (COP19), it remains, for now, little more than a working group to explore the subject. At COP23, the vulnerable countries attempted to start a working programme to specifically consider the financial aspects of dealing with losses and damage, such as need assessments, ways to mobilize funding and explore channels to deliver it – but the developed countries weren’t having any of it, not least driven by the fear that sooner or later they might be confronted with new financial demands or even compensation claims by those suffering from worsening climate impacts they had no role in causing. The somewhat disappointing result of COP23: A one-off “expert dialogue” next year, probably combined with the hope of developed countries to get rid of the difficult topic for some time that way.

The 100-billion goal

Since the Copenhagen summit in 2015, when developed countries promised to raise climate finance for developing countries to $100 billion a year by 2020, they have been under pressure to live up to that promise and provide credible evidence of progress, especially as there is some criticism of the methodologies applied by developed countries to calculate their numbers. COP23 has now taken two decisions with regard to the 100-billion goal: Firstly, developed countries are called upon to focus their next iteration of a regular report on ex-ante information about future climate finance specifically on plans around meeting the 100 billion promise. Secondly, the next two COPs (COP25 and COP26) will take stock on pre-2020 action, and this includes taking stock of financial support provided by developed countries. Both decisions are good starting points for progress on climate finance – that however can easily be ruined by the developed countries if they do not seize the opportunity. Painting a comprehensive – and honest – picture where they stand on meeting the 100-billion goal could have a positive effect on the planned first review of the overall ambition under the Paris Agreement, the Talanoa Dialogue.

Predictability of climate finance

Paragraph 5 of Article 9 of the Paris Agreement requires developed countries to biennial provide information on planned and future support for developing countries. Back in Paris, the modalities as well as what information would be required under this exercise remained unclear. In Bonn, delegations became entangled in the question of how the issue will be dealt with. The group of African countries wanted to comprehensively negotiate the modalities in the (as such fully justified) hope for more reliability and predictability of future climate financing. Developed countries feared that this may be but the first step leading to regular financing cycles with de facto binding commitments every two years – a red line especially for the finance ministers of developed countries. COP23 didn’t sort the issue out, except that now, in May next year (at the regular interim conference in Bonn), at least the possible information in the context of the obligation under Article 9.5 will be discussed – but not the modalities. The latter will most likely be picked up again by the group of African countries at COP24; new disputes are almost certain.

New financing target for post-2025

The Paris decisions of 2015 stipulate that the 100-billion goal will be extended until 2025 and that a new target will be set no later than 2024. In Bonn, developing countries tried to start a process to negotiate on the post-2025 goal over the coming years. But since developed countries did not want to hear about it, nothing was agreed on this front, so the issue will be raised next year again – rightly so, because the disputes about the 100-billion goal show how useful it can be to have a proper discussion before a new target will be set, so that there is ample time and space to discuss the level, nature and scope of such a new target. For instance, adopting a target matrix that would contain both qualitative and quantitative elements, could prove to be a lot more effective and useful than continue with a rather one-dimensional target such as the current 100-billion goal.

InsuResilience Global Partnership

On the sidelines of the negotiations, the new InsuResilience Global Partnership was launched. The partnership, for which Germany had already secured broad support among the G20 countries during its G20 presidency, aims to provide comprehensive financing and insurance solutions for climate and disaster risks in poor countries. At COP23, the BMZ committed EUR 110 million to the partnership, which is (at least to the best of our knowledge) at least largely fresh money (albeit included in the current 2017 budget). The effectiveness of the Partnership has yet to be proven, but the signs are promising – if the Partnership shifts from its current de facto focus on climate risk insurance to a much comprehensive approach, because most climate risks, especially in the poorest countries, cannot be dealt with properly by insurance solutions but require other approaches. The partnership must also be driven by principles to target the needs of the poorest people – and it will have to also address a fundamental issue of justice, because the people most affected by climate change in poor countries usually had no role in causing it – asking them now to buy insurance (that they often won’t be able to afford) to deal with worsening climate change contradicts all principles of climate justice. Here, the partnership can advance innovative solutions – such as mobilising funding from those responsible for climate change in order to pay premiums of future climate risk insurance solutions.

Jan Kowalzig, Oxfam