Tag: Finance

Article 6 (Finance): Surgical Insertions Bring Back Commitment, Adequacy, Predictability 

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.

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The Cure

ECO is eager for the discussions on Workstream 2 to start. Without a strong outcome on pre-2020 ambition, we are likely to lose any chance of keeping global warming to below 2°C, let alone 1.5°C. ECO would like to suggest a few surgical insertions for our patient to grow into a strong and healthy workstream:

  • Recognise the ambition gap and the need to close it: The efforts under Workstream 2 have to be informed by a clear purpose: the urgency of closing the pre-2020 gap.
  • Acknowledge the need for finance and the role of the Financial Mechanism: Like the Technology Mechanism, the Financial Mechanism should be given a role. Those environmentally, economically and socially sound opportunities identified under Workstream 2, particularly in renewable energy and energy efficiency, should receive priority support.
  • Task high-level champions with matching potential and support: Appointing champions can move Workstream 2 from discussion to implementation. They need a clearer mandate to enable coalitions and to match mitigation opportunities with the necessary support.
  • Criteria for initiatives: The champions and high-level dialogues will catalyse efforts, initiatives and coalitions. Criteria are needed so we can recognise those efforts that respect human rights, social safeguards, and environmental integrity.
  • Review of implementation of initiatives: Once initiatives are launched, we need to ensure they deliver. Assessing the impact of initiatives should be added as a task for the high-level dialogue.
  • Adaptation: The status of the the paragraphs in italics regarding a technical examination process for adaptation is not clear, but ECO knows that adaptation efforts and support are insufficient and must be enhanced from now until 2020.

ECO doesn’t hold a medical degree, but we are sure that to restore the health of the text the brackets must be removed, namely those around the paragraphs on accelerated implementation and high-level co-champions.

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Vital Surgery Revives Loss and Damage Solidarity

 

ECO joins you in being glad that Monday is behind us, dear Delegates. And that the text ended up slightly less (or should that be more?) lost and damaged than it started. The reinsertion of institutional arrangements for loss and damage can be the basis for making the mechanism fit for purpose. In addition, a provision for finance for loss and damage is essential if the Paris Agreement is to enable the most vulnerable people to deal with the worst impacts of climate change.

As Typhoon Koppu (Lando) deluges the Philippines, causing flooding and mudslides, knocking out power to nine million people, displacing 16,000 and killing 11 people, it is surely more obvious than ever that a durable climate change agreement must deal with the real and pressing issue of loss and damage, alongside scaling-up action to adapt to climate change.

ECO was saddened to hear Switzerland put brackets around the whole loss and damage article–and saddened-yet-not-suprised to hear the Umbrellas pushing for no reference to loss and damage. The EU seems to have exited themselves from the debate. EU: your celebrated “partnership” with vulnerable countries means nothing if you don’t stand with them on this critical issue! [PS: This ECO article is not entirely bracketed. Gruezi!]

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United In Faith On Climate Action

The voices of many religions are amplifying the call to bring back real ambition to these climate negotiations.

Today, a statement signed by 154 religious and spiritual leaders from 50 countries will be handed over to Christiana Figueres. The Christian, Muslim, Jewish, Hindu, Buddhist, Brahma Kumari and Sikh leaders are asking governments to reach zero emissions by mid-century, phase-out fossil fuels, commit to building climate resilience, and provide finance and support to poor and vulnerable countries.

Leading by example, these faith leaders have also committed to climate action by pledging to continue raising awareness on climate change and significantly reduce the carbon footprints of their organisations.

Standing united across differences, while combining a scientifically sound mitigation target, finance, support to the most vulnerable, and taking action at home…is all ECO ever asks for.

ECO suggests that Parties take note from these spiritual leaders and continue the negotiations in good faith

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ECO’s Recipe For Success

While France is renowned for its mouth watering cuisine, the negotiating text for COP 21 will need major changes to avoid leaving a bad taste in everyone’s mouth.

The co-chairs have brought from the kitchen an incomplete meal with bland elements of uncertain origin. Crucially, the entire non-paper lacks that key ingredient necessary to stay in the running for a Michelin star: ambition.

To start with, the ambition and durability of the international climate regime must be secured through a review and revision mechanism based on the principles of equity and CBDR, which should work to increase Parties’ ambition over time in order to limit global warming to 1.5°C above pre-industrial levels.

Clearly, the proposed “Global Stocktake” does not make that cut. CAN proposes the adoption of a Paris Ambition Mechanism (PAM) that would link and synchronize Parties’ mitigation, finance and adaptation commitments in 5-year cycles. The PAM should combine a scientific review of the adequacy and equity of Parties’ commitments with implementation support for countries that wish to act beyond their domestic capabilities. It should hold the first round of reviews well before 2020.

A good chef thinks through a meal, from the amuse-bouche to the digestif. Likewise, this deal must be thought through all the way to the long-term goal.

That’s why countries must commit to reach full global decarbonisation and a transition to 100% renewable energy by 2050, and to develop national decarbonisation strategies based on accelerated deployment of efficiency and renewable technologies.

The adaptation section of the agreement should include a call for increased financial support for adaptation, and recognise that rising temperatures will require greater adaptation efforts and that adaptation needs will escalate with lower level of mitigation ambition.

On loss and damage, the Paris Agreement can’t merely note the problem; it must ensure that institutional arrangements under the Agreement will continuously strengthen support for loss and damage—in a separate section from adaptation.

The current draft does not ensure the predictability and adequacy of future financial support. At the last session, the G77 called for the Paris Agreement to establish collective targets for financial support set in periodic intervals. To ECO, this makes a lot of sense, especially if there are separate targets for adaptation and mitigation support from public sources, accompanied by real action to shift private and public investments.

Firm commitments by developed countries and others with comparable capacity and responsibility to contribute to meeting those targets should be inscribed into the agreement. ECO also suggests re-inserting language to support recipient countries in assessing their requirements for enhanced action, to facilitate such support.

The COP decisions on pre-2020 action must catalyse implementation on the ground by strengthening the TEPs, appointing high-level champions to further good mitigation opportunities, and matching them with the necessary finance, technology, and capacity building support. The text must also create processes to identify adaptation support and cooperation needs at different levels. Crucially, developed countries must demonstrate how they intend to scale up public finance in order to meet their commitment to mobilise US$100 billion per year by 2020.

Paris must put in place a means to avoid the double counting of credits used in international transfers, setting durable principles to ensure the quality of any credits used and their contribution to sustainable development.

Finally, a palatable Paris Package must ensure respect for human rights, responding to the needs of people and communities through strong public participation provisions.

Only when such a menu is prepared will ECO be able to truly say: bon appétit!

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Coal: A New Climate Solution?

Burning coal is many things: its dirty, carbon intensive, expensive and, a massive threat to public health. Its also not a solution to the climate crisis. This should be evident to anyone familiar with the warnings from the IPCC and IEA. The construction of coal plants will soon lock in emissions that will exceed 2°C warming. Approximately 80% of the worlds coal reserves cannot be burned if we are to stay below this threshold. 

Many of this understand this, although, apparently this is not evident to Japan. 

Japan has relentlessly argued that burning unlimited amounts of coal in slightly more efficient plant is a core solution to climate change. To advance its fairy-tale vision of a coal-fired, climate-safe world, Japan has systematically obstructed common sense proposals to limit global coal subsidies. Japan has opposed language in the finance text that would call on countries to limit international support for high carbon investments. It has funded coal plants and claimed it as part of its climate finance contributions, rejecting the consensus of other major contributors that this is inappropriate. And perhaps worst of all, it has blocked any compromise agreement at the OECD level that would limit public subsidies for the export of coal technologies. 

To see just how regressive Japans intransigent support of its coal industry really is, compare their position to that of China, which recently committed to take steps to strictly control its public support for coal plants, both at home and abroad. Better yet, compare it to that of Kiribati. Faced with the existential crisis of warming-induced sea level rise, Kiribati has called for a global moratorium on new coal mines to facilitate the transition away from burning coal.

Its hard to see how Japan subsidising coal plants will help Kiribati. Its not hard to see how it will help its own industry.

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Enabling Clarity on “Enabling Environments”

All week, the expression “enabling environments” kept coming back into use during the finance sessions. Several Parties raised questions about what it actually means. ECO has a few worries of its own. Since this week has been about gathering feedback and building convergence, a bit more clarity on this term needs to be enabled.

Will developing countries need to establish some sort of “appropriate conditions” in order to attract greater flows of private finance? And what would those conditions be? Surely countries would not be required to relax their environmental or labour regulations just to allow the private sector to extract extra profit. Right?

And would the expansion of “enabling environments” reduce developed countries’ obligations to provide adequate levels of public climate finance to support extra action in vulnerable developing countries. Surely not.

These are just some of the questions that strike ECO upon hearing the echoes of “enabling environments”. It would be both a shame and slightly ironic if these concerns rang true, making the overall environments even less enabled to address the needs of affected people, ecosystems(?) and communities.

ECO totally supports the shift of overall financial flows and investments away from high-carbon to low-carbon and climate resilient activity. But that should happen alongside continued provisions of public finance, part of which is crucial to support ambitious policies and targets, strong and effective country institutions, and informed and empowered policymakers and civil society.

Maybe “enabling environments” will turn out to be more than a buzzword, but this can only happen if negotiators enable an environment for discussions and clarity on the type of policies, targets and institutions it should include.

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Innovative Public Finance: Fruit Ripe For Picking

Many delegates have spent years, inside and outside of this process, on the seemingly enticing topic of innovative finance. ECO understands if some of you are getting tired of this work–so now is the time to harvest the fruits of your labour and lock in new, predictable and significant sources of finance that aren’t at the whim of treasuries!

The ground has been prepared by studies, such as those of the High-Level Advisory Group on Finance, the Leading Group on Innovative Finance, and others who have scoped the landscape.

Trial plantings have been made with a share of proceeds of the CDM that initially provided funds for the Adaptation Fund. Unfortunately, this fruit has withered on the vine.

Early seedlings in ICAO and IMO have so far come to nought–it seems they need UNFCCC fertiliser to grow. And if there’s one thing the UNFCCC can produce, it’s fertiliser.

Now that the ground has been prepared, and the Paris agreement is well placed to ensure that, within a year, we are harvesting the fruits of innovative public finance.

We need only one more ingredient: a process to agree on new innovative sources of public finance. Paragraph 82 in Part II is a good start, but should be spliced with the detailed options found in paragraph 54 and paragraph 64, Part III.

We need to be sure that predictable finance flows into adaptation, loss and damage, and no-net-incidence are considered, as well as targeting the drivers of climate change where possible. And then, with some gardening work in 2016, we will be in a position to enjoy the fruits of our labour.

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It’s the Scale, Stupid

In the endless repetition of long-standing positions that passes for climate finance negotiation these days, one message comes through loud and clear: the Paris agreement–yes, the core legal agreement, currently largely in Part 1 of the co-chairs’ tool–must address the scale of finance to be provided post-2020.

Failure to do this will undermine trust, contribute to a lowest-common denominator deal (or even no deal), and bring us closer to the 3 or 4°C-warmer future we all dread.

ECO is well aware of the difficulties: post-2020 is beyond national budgeting cycles, finance ministries and political leaders must be engaged, etc., etc.

But let’s move into solutions mode. ECO concedes that firm numbers will not be in the core agreement. But let’s think about what can go there. Here is a start:

  • The US$100 billion-by-2020 commitment will be a floor for post-2020 finance.
  • Financial support will be scaled up over the post-2020 period until climate goals are met, and (to pick up on what the EU said yesterday) the most capable countries will contribute such financial support.
  • Ex-ante financial targets (aggregate and/or individual countries) will be agreed on a rolling basis, on a 2- to 5-year cycle.
  • Mechanisms, provisions or processes to enable developing countries to identify their needs to enhance action.
  • Recognition of the catalytic and central role of public finance, with at least 50% going to adaptation.

Scaled-up finance from multiple sources can be targeted to enable climate action in a variety of ways, through:

  • Traditional channels of financial flows
  • New financing arrangements for activities with high mitigation potential identified through Workstream 2 and an ongoing technical examination and prioritisation process, and
  • Matching of finance with conditional activities that have been identified in developing countries’ INDCs.

ECO is convinced that if all the big brains around the finance table really tried, they could find ways to incorporate these ideas. This includes finding even better ideas that can provide certainty that financial resources will be available.

Such certainty is the requisite to unlock the maximum mitigation and resilience potential in developing countries, by complementing their own domestic efforts to shift public and private financial flows.

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