ECO believes it is high time to deal with the problem that, when it comes to finance, Parties speak about two separate issues: one is the shifting, attracting and mobilising of financial flows, public or private; the other is the provision of financial support by rich countries to poor countries. They are lumped together in Article 6 because the word finance appears in both of them, and because one can nicely be used to marginalise the other. The issues are linked, and both have their role in the Paris Agreement, but ECO needs to remind everyone that they are not the same. One cannot replace the other.
The Umbrella Group’s finance proposals are about mobilising financial flows but not about committing financial support, leaving a wide finance gap. Article 6 now contains both the Umbrella Group’s proposals, and the G77’s proposals—a dramatic improvement.
ECO suspects that the Umbrella Group would have preferred the earlier version of the Article, as their “surgical insertions” re-hashed the old version instead of making the key changes needed to improve predictability and adequacy of financial support under the Paris Agreement. Smartly, when making their insertions, the G77 stood up for their needs.
The new Article 6 now includes much of what is needed for an article whose role will be to organise financial support for adaptation, loss and damage, enhance mitigation, and to achieve the long-term goal of full decarbonisation by 2050. The new proposals clarify and strengthen the commitments to provide support, noting that grants and public finance are needed for adaptation, and that support needs to be additional to development assistance. That makes a lot of sense since climate change is an additional challenge to poor countries.
Another key component that found its way back in is the idea of setting collective goals for the provision of financial support at periodic intervals, e.g. every five years, linked with the INDC cycles. Still missing are separate targets for adaptation and for mitigation, to ensure that the looming adaptation gap is narrowed. Some say that numerical targets alone won’t do the trick. Ideally the CMA would continuously take action on all sorts of elements relating to the support of developing countries, reflecting evolving needs regarding the types, channels and instruments of support. Quantified targets would clearly be part of the package, to give everyone a direction to move toward.
Yet, ECO is siding with the Umbrella Group on some issues. For instance, the idea to reduce international finance for high-emission projects deserves attention. The Bonn talks take place in a country that remains among the top five providers of export credit and guarantees for coal power stations and coal infrastructure projects. It appears that Germany (and a few more top-emitters) could use some direction from the Paris Agreement to end that dirty practice and shift these instruments away from coal and toward renewable energies.