UNFCCC / 100 billion / Adaptation / Loss and Damage

Climate finance at the SB58: What is at stake at the 2023 UN climate talks in Bonn?


UNFCCC climate talks in Bonn. Photo by IISD/ENB | Kiara Worth

Over the next two weeks, the SB58 climate talks will be held in Bonn, advancing the international climate regime and preparing the next UN climate summit COP28 in Dubai at the end of the year. Again, climate finance will be a central issue across much of the negotiating agenda. Also politically, 2023 is a key year for climate finance and the $100-billion-a-year promise. Here is an overview of what’s at stake on climate finance at the SB58.

The broken 100-billion-a-year promise

Back in 2009, developed countries promised to ramp up climate finance to reach $100 billion per year by 2020, aimed at supporting developing countries’ efforts to cut emissions and adapt to a changing climate. In its 2022 update report, the OECD confirmed that developed countries did not keep their promise but reported only $83.3 billion for the year 2020 (although the real support value underpinning reported figures may be much lower). Based on new pledges and commitments by developed countries on their climate finance contributions for the period after 2025, developed countries had projected in 2021 that they would reach the $100-billion-a-year level in 2023.

Ever since then, developed countries have asserted their confidence that they will indeed reach, in 2023, the level originally promised for 2020, most recently at the Petersberg Climate Dialogue. Yet there is little additional evidence available in the public domain, that backs up this confidence or would allow scrutiny, beyond the original delivery plan and its update.

While the $100-billion-a-year goal is not on the formal agenda for Bonn, developing countries will continue to question developed countries’ efforts in achieving the goal, especially given the legacy of breaking the original promise (i.e., to reach the $100-billion-a-year level by 2020). Developed countries could and should use the Bonn session, and the time between Bonn and COP28 later this year, to provide additional clarity on progress towards reaching the goal this year, in particular clarity on individual countries’ levels planned and budgeted for 2023.

Doubling adaptation finance by 2025

It has been a long-standing issue that adaptation, in comparison to mitigation, receives too little attention in the allocation of climate finance. In 2020, only around a third of reported climate finance was aimed at supporting adaptation. Responding to the continued criticism by developing countries, developed countries agreed, at the UN climate summit COP26 in Glasgow, to double adaptation finance by 2025, compared to 2019 levels. This would translate into roughly $40 billion a year for adaptation by 2025 (within the $100-billion-a-year goal for overall climate finance) and thus constitute progress, though not quite reaching a true balance between mitigation and adaptation.

It remains unclear if and how the goal will be met and what progress developed countries are able to demonstrate at this point. The Standing Committee on Finance (SCF) is now tasked to produce a progress report on the goal to double adaptation finance. Yet, without sufficient information by developed countries about their plans and budgets contributing to the goal, individually and collectively, it remains to be seen if the upcoming report will create the desired clarity and confidence that this goal (other than the $100-billion-a-year goal) will indeed be met.

Again, this issue is not on the formal agenda for the SB58 in Bonn – but, again, developing countries will question progress and ask for further clarity. Developed countries in turn, would be well advised to produce that clarity on how the goal will be met between Bonn and the COP28 later this year.

Global Stocktake: Where are the gaps?

As per Article 14 of the Paris Agreement, countries will “periodically take stock of the implementation of this Agreement”, assessing progress towards achieving the agreement’s purpose. This explicitly also includes the issue of the means of implementation, UNFCCC lingo for climate finance, technology transfer and capacity building.

This means that the Global Stocktake (GST) offers a key opportunity regularly review the adequacy of provided and mobilised climate finance and identify gaps (e.g., related to scale, scope, accessibility delivery and implementation) and areas or trends that require attention (and action) by the UNFCCC process.

The GST is now in its technical assessment phase, before entering the consideration of outputs (i.e., it’s political phase) at COP28. The Bonn climate talks hence can greatly help ensuring that the GST outcome at COP28 delivers clear and actionable messages around the inadequacy of current climate finance (including $100-billion-a-year goal, whether met or not this year) if compared to the needs of developing countries. This is not only related to support provided by developed countries as per their obligations under the Paris Agreement, but also related to the critical role the international financial architecture will have to play to shift trillions in investments needed for the global transformation, including ending fossil fuel investments and subsidies and instead accelerate a just transition towards 1.5°C compatible development.

The New Collective, Quantified Goal (NCQG)

At COP29 in 2024, a new global climate finance goal for the time after 2025 will be adopted, building on the current $100-billion-a-year goal. Deliberations are based on technical expert dialogues on various issues related to the goal such as its scope, structure, or timeframes, complemented by ministerial engagement at the COPs, including at the COP28 in Dubai later this year.

The UN climate talks in Bonn will see the 6th Technical Expert Dialogue on the NCQG (TED6) that will focus on the quantum (i.e., the ‘how much’) of the new goal as well as the provision and mobilisation of financial resources, including a discussion on ‘sources’ (i.e., where will the money come from) and the links between the new goal and Article 2 of the Paris Agreement.

For an effective NCQG it is critical that it makes a clear distinction between the provision of public finance by developed countries as per Article 9.1 of the Paris Agreement (with additional, voluntary support coming from other countries as per Article 9.2) to meet support needs in developing countries, and the mobilisation of (private) finance to meet their investment needs. For a balanced thematic allocation of future climate finance, it seems to make sense to introduce subgoals for the provision of public finance on adaptation, mitigation and addressing loss and damage, as for instance further described here.

The ’quantum’ will remain a hot topic throughout the remaining time for the NCQG deliberations until its adoption. Needs in developing countries will amount to hundreds of billions of dollars every year in public finance support alone – plus trillions in necessary private investments to enable a just transition of economies. Yet, developed countries, as of now, seem unlikely to accept much higher contributions from their side as part of their fair share in the global effort to confront the climate crisis. We will see what they plan to bring to the discussion at the TED6.

Funding arrangements for loss and damage

COP27 had reached a historic milestone, by agreeing to establish a new multilateral fund through which to channel support to vulnerable countries, a well as additional funding arrangements, inside and outside the UNFCCC, to close existing gaps related to supporting action on addressing loss and damage that are becoming increasingly unavoidable due to the worsening climate crisis.

A Transitional Committee has been set up to work out the details of both the new fund and other funding arrangements, and to present recommendations to COP28 in Dubai (such as potential institutional arrangements for the new fund, its funding sources etc.). Its second meeting took place just before the SB58. While loss and damage is not included in the formal negotiating agenda of the SB58, the second meeting of the Glasgow Dialogue on Loss and Damage (GD2) will take place during the SB58, with the specific task to inform the work of the Transitional Committee, by focusing on the operationalisation of the new fund and additional funding arrangements.

For a successful outcome on finance for loss and damage, it is vital that the GD2 results in concrete recommendations for the TC to take up in its ongoing work that would eventually lead to the operationalisation of the new fund by COP28 so it can start taking contributions from developed countries – that should be pledged already at COP28, as a signal of commitment by developed countries.

For further reading: Here is an excellent compilation on the issue of (finance for) loss and damage at the SB58.

Jan Kowalzig, Oxfam