International climate finance / Innovative sources of financing / Loss and Damage

The tasks for COP25: Significant increase finance and support for gender-just climate resilience measures

As climate impacts become more severe and frequent, increasing finance for climate resilience for the most vulnerable people is of utmost urgency. The 2016 Adaptation Finance Gap Report estimates the annual costs of adaptation in developing countries could range from USD 140 billion to USD 300 billion by 2030 and from USD 280 billion to US 500 billion by 2050. Effective adaptation is, however, also a historic opportunity. The Global Commission on Adaptation recently found that investing $1.8 trillion globally in just five areas from 2020 to 2030 could generate $7.1 trillion in total net benefits. The five areas considered by the Global Commission on Adaptation are early warning systems, climate-resilient infrastructure, improved dryland agriculture, mangrove protection, and investments in making water resources more resilient. This represents only a portion of the total investments needed and total benefits available. There is no doubt, and it is clearly underpinned by the findings of the IPCC Special Reports on 1.5°C, Land, and Oceans/Ice, that further harmful impacts of the climate crisis are unavoidable, even in scenarios of rapid, immediate emission reductions. Thus, further impacts on top of those that already harm people and ecosystems across this planet today are inevitable in the near-term future.

Strengthen the loss and damage mechanism and pave the way for new finance

Climate change is already having a devastating impact on vulnerable developing countries and communities around the world. In many instances, these impacts have gone beyond what is possible to adapt to (i.e., territories swallowed due to sea-rising levels, forced relocation), and into the realms of loss and damage. Climate change loss and damage is impacting the poorest countries most significantly, as they lack the economic and financial capacity to rebuild and recover as quickly as developed countries. It creates a daily climate emergency for millions of people.

The review of the Warsaw International Mechanism (WIM), which Parties will conduct at COP25, needs to fully operationalise the WIM to support the needs of developing countries along with additional support to avert or minimise loss and damage and address displacement. With financial support, vulnerable countries can properly assess the impacts and identify gaps, enhance their climate change risk management, and recover from loss and damage they experience due to climate impacts.

At COP25, Parties need to engage in a full-fledged discussion on whether (i) the mechanism is fit-for-purpose to meet the challenge of loss and damage currently faced by vulnerable developing countries; (ii) if it is capable of meeting future loss and damage needs based on scientific projections on impacts, including displacement, and (iii) how to generate and transfer finance to meet the needs of the most vulnerable. The review should address any gaps in the implementation of the WIM’s original mandate, and in the current and future needs of vulnerable developing countries.

The most obvious gap is the lack of finance. The Executive Committee of the WIM, mainly because of the resistance of developed countries, has largely avoided entering into a substantial discussion on various aspects of the loss and damage financial architecture.

Innovative sources of finance for adaptation and loss and damage

Governments should use COP25 to advance new and innovative sources of public finance that take the pressure off official development aid budgets, whilst addressing the climate crisis (i.e., airline passenger taxes or levies and climate damages tax on fossil fuel exploration) which can generate truly additional finance, in particular for adaptation and addressing loss and damage. CARE recently released a policy brief on innovative sources of public finance and the GCF which provides further background. David Boyd, The UN Special Rapporteur on Human Rights and the Environment, recently released a report on nations’ obligations to address climate change which also states that financing for loss and damage could be provided by the tools listed above:

  • A basic global air travel levy would raise $40–$100 billion annually (at $10–$25 per person per flight, given that current passenger levels exceed 4 billion per year).
  • The Climate Damages Tax is a proposal for a tax on the fossil fuel industry. If it were introduced globally in 2021 at a low initial rate of USD 5 per tonne of CO2 equivalent, it would raise around USD 210 billion in its first year, some of which could be allocated to loss and damage, and adaptation.
  • Increasing the carbon tax on maritime fuel by USD 75 per tonne of CO2 in 2030 would raise revenues of about USD 75 billion in the same year.
  • A Financial Transaction Tax (FTT) putting a levy on shares and bonds at 0.1% and derivative agreements at 0.01% has the potential to raise USD 63billion (if applied to the European Union), and a similar global FTT could raise significantly more.

A recent report prepared by ActionAid also analysed these and other instruments with regard to their performance in key human rights principles, and concluded that “better state budgeting that shifts state subsidies away from fossil fuels and towards addressing the impacts of climate change and funding a Just Transition; and progressive taxes such as the Climate Damages Tax and the Financial Transaction Tax” perform best.

Increase available adaptation finance with stronger integration of gender equality

CARE promotes an approach to adaptation and resilience-building that is gender-responsive and supports poor women and men to access the necessary resources, rights and opportunities to deal with the impacts of climate change. Adaptation activities promoted under the action tracks should strengthen resilience and empower the most vulnerable groups, particularly women and girls, who should be identified and involved through a comprehensive, participatory and gender-responsive situational analysis and integrated in programmes and projects. At the same time, it is important in this context not to regard women as “victims” because of their vulnerability, but as key change agents and rights holders who need to be further empowered and supported.

While the Green Climate Fund is facing a number of different challenges, it has high potential as the biggest multilateral climate fund under the UNFCCC to effectively support the necessary paradigm shift to low to zero emission and climate-resilient development pathways, in line with the 1.5°C limit. With its intended 50/50 allocation of resources between adaptation and mitigation, it is also a key financial tool to support climate adaptation. With 90% of the projects approved so far having gender assessments and gender action plans, it also makes significant progress in advancing gender equality in climate action. The first replenishment process has so far resulted in financial pledges close to USD 10 bn for the next 4 years, led by a few countries like Germany, France, UK, Sweden and others who have doubled their amounts compared to the previous phase. Unfortunately, the US and Australia have declined further contributions to this cooperative instrument.

However, much more resources would be needed. All developed countries should ensure at least a doubling in USD terms, and must orient the size of their contributions towards those contributors with highest per capita payments, so that the replenishment results in available resources of USD 15 bn. For example, Sweden contributed USD 581 million which was almost USD 60 per capita, whereas Germany’s contribution of USD 1bn was only USD 12.4 per capita. CARE also encourages other G20 countries to complement those pledges, and also supports the exploration of innovative finance sources to support the fund.

The most recent data published by the OECD reveals that climate finance provided is far from meeting the promised 50/50 balance between mitigation and adaptation. Across different parameters (2017 share of total climate finance; within bilateral finance from 2013 to 2017), adaptation makes up only roughly 20% of climate finance.14 A highly concerning trend is also that bilateral climate finance has even gone down in 2017 compared to 2016, while an increase at all fronts is needed. The overall reported increase in climate finance seems to be mainly due to Multilateral Development Banks taking a more proactive approach on climate action by increasing the share of adaptation finance from 20% in 2013 to 27% in 2017. Therefore, climate finance from developed countries should achieve a 50/50 balance between adaptation and mitigation finance. This balance must apply to overall climate finance, not only public finance, as mitigation can more easily mobilise private finance.

Gender equality must be integrated across adaptation (and mitigation) finance, and should be measured, such as through the OECD gender markers. CARE demands that by 2023 at the latest, at least 85% of the projects accounted for in the OECD system include gender at least as a significant objective (marker 1), and out of that at least 20% are a principal objective (marker 2). CARE’s calculations for support provided in 2017 (latest available figures), updated from a report published in 2018 indicate that Canada (95%), UK (73%) and EU institutions (72%) are the top-runners among the G7 when it comes to the share of adaptation funding that addresses gender equality among other objectives (out of the entire adaptation finance), but no country reaches the 20% threshold for adaptation funding with gender equality as a principal objective (as opposed to just a significant, secondary objective). Advancing the integration of gender equality and women’s empowerment in climate resilience measures is essential for both the recipient as well as the contributing countries.

Making climate finance accessible to those who need it most must be facilitated by a commitment by governments to remove administrative barriers to accessing climate funds, offering smaller-sized, local funding options, and increasing fiduciary risk-tolerance. We emphasize the need to provide additional public and grant-based financial resources for adaptation in developing and vulnerable countries.

The process to formulate and implement National Adaptation Plans was established by the COP in 2010 to enable the least developed country (LDC) Parties to address medium- to long-term adaptation needs by enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change. Most recently, the Green Climate Fund has become an important instrument to financially support vulnerable countries in undertaking such planning, along with the Least Developed Countries Fund. While the development of NAPs is ongoing, only 13 developing countries have so far submitted their NAPs to the UNFCCC.16 Given the overall slow progress, decision 8/CP.24 acknowledged that there is not enough information to assess the extent to which the process to formulate and implement national adaptation plans is reducing vulnerability to climate change, strengthening resilience and building adaptive capacity. In CARE’s view, NAPs should be gender-responsive, participatory and inclusive, and should also strengthen the coherence of various global framework, such as Sendai, SDGs, Urban Agenda, Ecosystem Based Solutions, and Rio Conventions. When countries start updating and enhancing their NDCs, NAPs under development can be an important tool as an implementation strategy towards reaching the NDCs, and may also be updated to be consistent with the NDCs. COP25 provides an opportunity to strengthen all of the above aspects, and to build up further support in particular for LDCs to effectively benefit from the NAPs process.

Expectations for COP25

Overall, on the loss and damage mechanism COP 25 should now pave the way to deliver clarity and pursue:

  • New and innovative sources of finance (complementing finance from developed countries) that can generate truly additional resources at a scale of USD 50bn by 2022.
  • The role of existing institutions and whether there is a need for new ones to address the multiple needs of loss and damage finance: which of the funding purposes might be delegated to the Green Climate Fund (with additional resources), because they are more of a longer-term nature, may have synergies with adaptation, and fit to the GCF’s approach for a paradigm shift? By which institutional approach could the humanitarian system be supported and gaps be filled which exist in most funding appeals in case of climate-related disasters? Are existing institutions specialised on displacement, migration and relocation aspects fit for purpose to channel funding into useful responses to those challenges? These and other aspects have not yet been addressed.
  • How funding can reach the most vulnerable, with specific attention to mainstreaming gender aspects and the role of women and girls into the WIM’s work. The pro-poor principles adopted by the InsuResilience Global Partnership can serve as a useful inspiration here how on to approach this objective.
  • A decision at COP25 to establish a loss and damage financing facility which would serve as an umbrella for channelling the new resources into an effective financial architecture serving the different needs to address loss and damage could trigger an in-depth, but quick examination process with the aim of delivering clear policy recommendations and concrete actions by COP26.

On adaptation finance, COP25 should:

  • Result in additional pledges to the Green Climate Fund so it progresses towards a goal of USD 15 bn received in the current replenishment.
  • Call on developed countries to provide clarity on how they will further raise adaptation finance towards 50/50 balance with mitigation and reaching the USD 100bn goal.
  • Call on countries to significantly increase the share of climate finance that also addresses gender equality objectives, to 85% by 2023 at the latest.
  • Call on both developed and developing countries, and climate finance institutions, to explore all possibilities to increase the involvement and access of local organisations, in particular women’s organisations and supporters of gender equality.
  • Further accelerate the development of participatory, inclusive and genderresponsive NAPs in the context of a coherent approach to various global frameworks and the need to prepare enhanced NDCs by 2020.

Sven Harmeling, Care

This text was first published as part of Care’s expectations for COP25.