ECO Newsletter

So here we are at the first ever finance ministerial.  With the ‘climate crunch’ rapidly exposing our economies to the risks of climate change and economic downturn, the stakes have been raised.  Parties have agreed on the need for action, put in place the institutions and frameworks, but there is one essential ingredient missing: finance.

Climate impacts are accelerating and multiplying as they rush through our global economic system.  We all know that the lack of finance is blocking progress – both in action on the ground and in  negotiating a stronger global climate  deal.

The UNFCCC is the central multilateral framework for tackling climate change, and finance is key to powering the process. The refusal of developed countries to make clear commitments on finance is sapping the life out of the negotiations, just as much as the failure of the same countries to reduce their emissions.

For all countries to work together, regardless of their status as developing and developed, promises  must be upheld.  The finance gap is blocking progress on REDD+, draining down the Adaptation Fund, threatening  to make the GCF another empty shell, and  providing the perfect justification for ensuring the threadbare ADP text remains devoid of content.
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You may have noticed the developed countries’ increasing  enthusiasm for having private finance substitute for their direct support as part of meeting the the promise of mobilizing US $100 billion per year by 2020.

This year, two US-hosted ministerial meetings and the pre-COP finance discussions focused almost exclusively on the role of private finance, whilst the glaring uncertainties around the provision of public finance were barely discussed. And the invitation letter from the COP presidency to today’s finance ministerial encourages civil society organisations to ‘present their own ideas on possible ways of mobilizing sources of finance in the private sector’ as if to silence calls on the urgent need to scale up public finance.

So you be the judge: are developed countries sliding back on their side of the bargain and using private finance to sidestep the need to increase public finance?  Today’s Finance Ministerial is an opportunity to highlight that whilst private finance has a role to play in the global climate transition, it is not a substitute for scaling up  crucially needed public support.

Public finance has a critical role to play in mitigation by helping to catalyse larger private investments,. The real need is estimated to exceed $1 trillion globally,  if we are to limit the temperature increase below 2 degrees Celsius.
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ECO wonders if developed countries are scheming to create suspense on the Adaptation Fund over the next couple of days, by orchestrating the announcements of their pledges to start with the lowest first: Norway’s  US $2.5 million was announced yesterday. While that doesn’t quite compare to Sweden’s  $30 million, we believe that every dollar counts. Perhaps we will now see a race to the top, with a string of pledges — each one higher than the one before — to reach and exceed the goal of $100 million before COP 19 is over. ECO is excited to see who will turn out to be the highest bidder.

Once again, falling short of the $100 million goal is simply not an option. Surely developed country ministers will want to make that possible, to demonstrate good faith and pave the way for the much larger goal of mobilizing $100 billion per annum in climate finance by 2020.

The argument has been made here and there that the Adaptation Fund is not quite empty yet.  Perhaps so for now, but not for long.  The Adaptation Fund Board predicts that it will run out of money over the course of the next year. And already there are stranded projects (see table nearby).

Fill the Adaptation Gap

Only a minor share of climate finance is currently being allocated to adaptation, meaning that vital support to the world’s vulnerable people and communities is lacking. Agreement must be reached to increase finance for adaptation, and a first step must be to improve the balance between mitigation and adaptation. COP 19 should agree that at least 50% of all public climate finance is allocated to adaptation.

Ensure Predictability

Predictability of finance through to 2020 is vital. This requires a global climate finance roadmap that sets out intermediate targets and planned collective action to mobilize additional finance. To complement that, developed countries should prepare national pathways showing how their contribution to the $100 billion promise will evolve over time, disaggregated by relevant types, instruments and channels.

Where is the Finance (WTF) to fill the gap? Here’s one of many answers to that question, the Financial Transaction Tax (FTT).

In early 2013, 11 EU Member States agreed to introduce an FTT that could generate revenues of €37bn a year or more, depending on its scope. While the FTT is still in in the design phase, ECO wonders whether France,  Germany and the other nine European supporters could not only finalise discussions on the scope of the FTT (on which scale of revenue will depend) but make a bold move: by allocating a big portion of the revenues to climate finance. This is a marvellous plan, as it would allow the EU – perhaps in time for the Ban Ki-moon summit in late 2014 – to assign a substantial amount to the very empty Green Climate Fund.

It’s not a totally mad idea, It’s said France already is earmarking 10% of its FTT revenues to climate action. And we hear that Belgium supports the idea of  using part of the FTT revenues for development and climate action.

But what about the others, for instance Germany – where a new government is being formed even as the ministerial proceeds? One coalition partner had joined a grand campaign to allocate 33% of FTT revenues to climate action.
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Cancun – Wednesday 6th December 2010

Time to Make It Happen: a Fair Climate Fund

Over 200 civil society organisations today launch a call for a fair climate fund to be established this week in Cancun. As ministers arrive to face the vital politi¬cal challenges around the continuation of the Kyoto Protocol, sufficient political time and energy must be spared to ensure substantive outcomes on issues that really matter to those suffering from climate change’s savage impacts.

As the Civil Society Call makes clear, poor people are losing out twice. They are being hardest hit by a crisis they did least to cause, but the are not being served by climate-related funds that should be helping them.

Most existing funds have benefited just a handful of developing countries, privileging mitigation over adaptation, and offering little scope for the meaningful participation of affected communities, especially women.

There is an urgent need to establish a new fair global climate fund to help developing countries build resilience to the impacts of climate change, protect their forests, and adopt low-carbon development pathways. Public finance is vital to meet these needs, while carbon markets are proving inadequate or inappropriate. To be truly equitable and effective, the new fund must mark a clear shift in the management of global flows of climate finance that delivers for poor people.
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With negotiations for a draft ADP text entering their third day, the debate on equity is surely heating up. This is the moment to ensure that an important aspect of effort sharing is on the agenda: the equitable provision of finance and other means of implementation – especially to the most vulnerable.

As a number of Parties noted this week, equity must apply to all pillars of international global climate response. In contributing their fair share of the global effort, developed countries need to both control their own emissions and support further mitigation through the provision of climate finance, by helping poorer countries implement their low-carbon development strategies.

Does this mean that wealthier countries can buy their way out of making substantial emissions reductions at home? Sorry Japan, it most definitely does not. To close the emissions gap we must make every possible effort to reduce emissions within our borders. Period.

But, what about the global adaptation effort, you ask? Who pays for that? Given the neglect of adaptation finance in favor of mitigation, it is more important than ever to ensure that countries also make a fair contribution to the adaptation challenge. There is a core equity element here: the polluter pays principle.
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At the ADP session last night on the chairs’ (now Parties’) text there was at least one thing in common: nobody likes it very much.

ECO is with you on that, but at least there is a text. That’s an important milestone in a long journey. We’ll heed the Chairs’ advice and not provide per paragraph comments but provide some initial impressions.

On Workstream 2, an ‘action agenda’ is sorely needed, but cannot be in name only. We’ve seen the laundry list of options before, but what is needed in 2014 is tangible action, and that starts with a strong, clear workplan for 2014 with precise deliverables.

And the place to start is that all developed countries must increase their targets by June 2014 at the latest – and signal their intention to do so here in Warsaw, rather than indulge in the usual delays. And we need to see further responses from developing countries, particularly those that have not yet announced pledges.

More specificity is also needed on how the ‘technical development of opportunities’ is going to be organized, with a clear focus on renewable energy, energy efficiency and links to a political process to ensure delivery.

For Workstream 1, a deadline is needed for tabling targets in 2014 with sufficient information for analysis in an equity/adequacy review.
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