Erik Haites 1
7 Climate finance post-2020
Under the Paris Agreement, adopted at COP21 in December 2015, all Parties pro-pose national actions to address climate change. The actions are expected to become more ambitious over time in response to five yearly assessments of collective progress in limiting the global average temperature increase. As national commitments be-come more ambitious more countries are likely to contribute climate finance and/or fewer countries are likely to receive financial support to help implement their com-mitments. However, the aggregate amount of climate finance could rise over time due to the scale and cost of the mitigation, adaptation, loss and damage, technology transfer, and capacity-building efforts.
The main provisions related to climate finance are found in Article 9 of the Par-is Agreement and a corresponding section of the COP decPar-ision.41 The Agreement reaffirms the obligations of developed countries under the Convention to provide climate finance to developing countries. In addition, other countries are invited to provide climate finance voluntarily. It also states that climate finance should aim to achieve a balance between adaptation and mitigation. Parties that provide climate finance will be expected to submit biennial reports on their projected levels of public financial resources for developing countries.
The COP decision commits the COP to set a new collective quantified climate finance goal in excess of USD 100 billion per year by 2025, taking into account the needs and priorities of developing countries. The other provisions of the COP decision focus mainly on ensuring that the existing institutions and arrangements to deal with climate finance continue under the Paris Agreement.
41 Ibid. paras 53-65.
Thus, climate finance under the Paris Agreement is likely to maintain the biennial cycle of reporting and assessment established for 2014–2020 but without a commit-ment to a High Level segcommit-ment of the COP to consider climate finance. In addition, climate finance will be an element of the five yearly stock of collective progress which may lead to revisions to the collective climate finance goal although any such goal is unlikely to be more operational than the Copenhagen pledge of USD 100 billion per year by 2020. Many international funding processes, including the UN budget and GEF Trust Fund replenishment, operate on a two to four replenishment cycle. It appears that climate finance is moving to a similar structure taking into account its diverse sources and multiplicity of channels through which it flows.
8 Conclusions
Finance is essential to efforts to address climate change. The 1992 United Nations Framework Convention on Climate Change included commitments by Annex II Parties to provide financial resources to developing countries and established a fi-nancial mechanism for this purpose. Operation of the fifi-nancial mechanism was delegated to the Global Environment Facility and two special funds – the LDCF and SCCF. But climate finance was not operationally defined and not systematically tracked. And the climate finance needed was not known.
That began to change about ten years ago with the UNFCCC report on Investment and Financial Flows to Address Climate Change.42 That paper reviewed existing and projected investment flows and financing relevant to the development of an effec-tive and appropriate international response to climate change. It found that the additional investment and financial flows needed to address climate change were large compared with the funding. That provided the context for the Copenhagen pledge to aim to mobilize USD 100 billion per year for climate action in developing countries.
The COP devoted the next few years, 2010 to 2013, to elaborating the Convention’s institutional structure for dealing with finance. It created the Green Climate Fund and the Standing Committee on Finance and established the biennial process to review climate finance during the 2014–-2020 period. The COP also established a ‘long-term finance’ process to discuss possible approaches to tracking progress toward the 2020 goal of USD 100 billion.
Several initiatives outside the Convention have enhanced our understanding of cli-mate finance over the past decade. The OECD DAC began to track aid projects with climate mitigation and adaptation objectives. The multilateral development
42 UNFCCC, ‘Investment and Financial Flows to Address Climate Change’ (2007), available at <unfccc.
int/resource/docs/publications/financial_flows.pdf> (visited 12 April 2016)
banks and the member institutions of the International Development Finance Club (IDFC)43 followed a few years later. The Climate Policy Initiative initiated its annual estimates of global climate finance. Several multilateral climate funds that channel funds from developed to developing countries outside the Convention have been established.
Although there are huge gaps and uncertainties in the data, we now have a much better picture of global climate finance. Most climate finance is private and is mo-bilized and invested domestically in developed and developing countries. Climate finance flows from developed to developing countries are only a small share of the global total. Furthermore, the flows under the Convention are only part of those flows to developing countries.
The biennial process for climate finance review for 2014–2020, which is expected to continue under the Paris Agreement, provides the COP with an overview of climate finance through the Biennial Assessment and Overview of Climate Finance Flows prepared by the Standing Committee on Finance. The COP can use this informa-tion to address climate finance flows under the Conveninforma-tion through guidance to the GEF and the GCF as well as general guidance to Parties for their bilateral climate finance. Some of the institutions are new and the process is in its infancy, so it is not yet clear how well it will work.
43 See <https://www.idfc.org/>.