Tag: Fast Start Finance

Fast Start Finance: Mixed Results

Climate finance is not generosity or voluntary aid – it is a moral and legal obligation of developed countries, and an essential element of a solution to the climate crisis. But concrete commitments to financing are absent here so far. 

Now ECO has heard some grumpy noises from developed countries that their fast start financing and transparency efforts are not sufficiently appreciated. 
 
While not very sympathetic to the rich countries’ plight, ECO understands how hard it is pry any amount of money out of the hands of finance ministries, especially in difficult economic times. 
 
Treasuries could well be lacking commitment to resolving the climate crisis, and don’t understand why it is absolutely essential to quickly scale up climate finance and meet all commitments transparently and responsibly.
 
That’s why ECO is taking this opportunity to recognize the fact that developed countries did in fact deliver some climate finance in the Fast Start Finance period, and that climate negotiators and ministers participating in these negotiations had to work long and hard to steer that financing through government budgeting processes and get it delivered. 
 
Even Japan, faced with a devastating tsunami and a nuclear disaster, followed through on its plans, such as they were, which accounted for nearly half the FSF commitments.
 
And ECO also recognizes that developed countries have come under fully justified criticism for their failure to meet the commitment of $30 billion in new and additional public finance, as well as a series of other shortcomings. 
 
In fact, while developed countries now claim they over-delivered to the tune of $33 billion, independent analyses show that less than one third of these funds are new and additional. 
 
If those countries think they are being unfairly criticized now, they have no one to blame but themselves. 
By rejecting any kind of common standards for assessing what financing counts towards this goal, and an independent tracking system, they set themselves up for failure.
 
And now some of them are compounding this error by insisting they have no need to provide any assurance or specific commitments to funding from 2012 onwards. 
 
This is certainly the wrong lesson to take from fast-start. But that’s another story…
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CLIMATE FINANCE: UP AND NOT DOWN!

To our freshly arrived negotiators, get ready for a major wake up call (or at least a loud and not particularly polite noise) on finance, when the countries most vulnerable to climate change will be rightly asking: what happens when Fast Start Finance runs out at the end of this year?

 
And what happens now that we know Fast Start Finance (the money pledged between 2010 and 2012) was mostly a false start? Yes, ECO did the maths and estimates only 33% of FSF was “new” money (that is, additional to existing, pre-Copenhagen pledges), and around 24% additional to existing aid promises. Only one-fifth of finance was spent on adaptation, and less than half was available as grants. It seems developed countries need to re-learn some basics about climate finance. Which part of “new and additional, predictable, and adequate in relation to rapidly spiralling needs...with balanced allocation between mitigation and adaptation” are they failing to understand?
 
And to those who need illustration of “spiralling needs”, please count the unprecedented number of climate related disasters in 2012 which - along with sea-level rise, and the gradual but deadly effects on agricultural and
fresh water systems - mean that the bill from carbon pollution just keeps going up and up. If we are to tackle the consequences of current inaction, the hundred billion annual figure promised before Copenhagen is now looking implausibly small.
 
Here in Doha, we are facing a “finance cliff” with fast start finance ending just at the point when we need ramping up. ECO is concerned that many developed countries have arrived in Doha unwilling to pledge new resources. For vulnerable countries this is a daunting prospect, and will hugely reduce their trust that these countries intend to make good on their $100 billion a year by 2020 promise. By holding back on money they have promised, developed countries are shooting the 2015 global deal in the foot.
 
Luckily, ECO is giving countries two extra weeks to do their homework on how to:
 
SCALE UP – ECO will not accept Doha as a success without reassurance that climate finance will go UP, not down and especially not off a cliff in 2013. For 2013-2015, developed countries should at least double the amount delivered under Fast Start Finance levels and channel US$10 to 15 billion to the Green Climate Fund.
 
PROGRESS ON SOURCES – To sleep tight, ECO needs to see a scaling up of climate finance to meet the $100 billion per year commitment by 2020. Advancing promising new sources of finance will be crucial to provide
predictable and scalable finance and needs genuine commitment by developed countries. ECO supports the recommendation on the Long Term Finance Work Programme to establish a high-level experts group across the ICAO, IMO and UNFCCC secretariats to examine finance-raising options from a fair carbon pricing mechanism. ECO will give top grades to the EU member states who allocate at least a quarter of the upcoming Financial Transaction Tax to the Green Climate Fund.
 
STRENGTHEN MRV – False Start Finance has taught ECO the tricks for how to count existing aid as new and additional. ECO is now looking forward to learning how to do things the right way. Parties now need to agree on MRV reporting formats on climate finance that help assess whether the promises are “new and additional” finance, and ensure “balanced allocation between adaptation and mitigation”. It is high time that the reporting is transparent, verifiable and clarifies what is “real” and “legitimate” climate finance.
 
HIGH-LEVEL POLITICAL PROCESS – Finally, ECO intends to be an ongoing and relentless nuisance, by insisting on a high level political space for negotiations on finance, if and when the AWG-LCA comes to an end after COP18. In whatever context negotiations continue, finance MUST NOT be relegated to the status of a “technical” issue. There is nothing technical about being on the receiving end of climate disaster. Lives and livelihoods are at stake, and we expect this issue to be treated with the political seriousness it deserves.
 

 

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Finally, Finance?

ECO is heartened to have heard that a group of developed countries is considering putting concrete numbers on the table for long-term finance in Doha. In the last year of Fast Start Finance, and with few firm commitments for finance from 2013 onwards currently on the table, this is none too soon. Substantial new and additional climate finance commitments could really help to give a boost to the negotiations going into Qatar.

As ECO has long argued, such commitments would give developing countries some needed reassurance that climate finance is not about to fall off a cliff, but rather start the steady climb towards the US$100 billion per year promise made in Copenhagen and Cancun. Rhetorical reassurances during the negotiations are no match for concrete numbers committed on paper.

Let’s hope that more developed countries reach this enlightened conclusion before Doha. There will be nowhere for them to hide if a group of countries makes a pledge, while they turn up empty handed.

But ECO would also hope that developed countries have learned some lessons from the Fast Start Finance experience, and apply them as they consider their pledge. Don´t forget that ECO has a beady eye for creative accounting tricks that may artificially inflate finance pledges that are actually not new and additional. The potential for trust-building could be undermined if developed countries are seen to be counting spurious finance flows, especially from private finance.

One kind of pledge that is guaranteed to win plaudits from developing countries and ECO alike is a serious commitment to the capitalisation of the Green Climate Fund. No one wants to see a third COP in a row that leaves the GCF as an empty shell. Now is the time to give the political signal of financial support for the fund over the coming years.

After the delays in the Board’s first meeting, a round of pledges to the Fund would be like a shot in the arm to this nascent institution. It would spur efforts to get the Fund up and running and disbursing climate cash to those who need it most as soon as possible. At the end of Bonn, ECO insisted that a sum of $10-15 billion of public finance by 2015 is needed. What better way for developed countries to show they mean business in the negotiations over this period than to take our hint?

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Progress on the Path to $100 billion

This year’s long term finance work programme provides a critical opportunity for focused and constructive engagement on sources of climate finance and developing country financing needs. 2012 should be a pivotal year for climate finance, as Fast Start Finance comes to an end and developed countries start on the path to US$100 billion per year by 2020

Negotiations on long-term finance have faced significant headwinds in recent years, and analytical work has been limited to ad-hoc and one-off initiatives like the UN Advisory Group on Climate Change Financing, and fora with limited and exclusive memberships such as the G20. If rich countries want to show climate finance is not just another broken promise to poor countries, they must use this year’s work programme to help make significant progress on agreeing to a roadmap to scale up funding over the next eight years to $100 billion per year by 2020.

To help ensure this ambition is realised, ECO would like to highlight the following objectives for the work programme, for consideration by parties attending today’s UNFCCC consultation on its scope

It is vital the work programme contributes to decision(s) at COP18 that make concrete progress towards scaling up finance, including:

- Identifying and advancing promising sources of predictable and assured finance, especially public sources, such as providing guidance to the International Maritime Organisation and International Civil Aviation Organisation on generating financing from measures to address emissions from international shipping and aviation, as well as financial transaction taxes and public finance liberated in developed countries through the elimination of their fossil fuel subsidies

- Providing a roadmap for reaching agreement on a pathway to mobilising $100 billion by 2020, including maximisation of public sources channelled through the Green Climate Fund, an appropriate role for the private sector and a trajectory for developed countries to scale up

- Establishing a shared understanding of developing country financing needs, based on a review of recent literature on mitigation and adaptation financing requirements

- Clear commitments to provide scaled up finance from 2013 onwards, including for the capitalization of the Green Climate Fund

This work is all the more urgent given the link between raising and delivering climate finance and reaching the goal of staying below 1.5/2 degrees C of warming. Scaled up finance to support increased ambition in developing countries is critical to move them towards low carbon development pathways.

In addition to constructive engagement on these areas through the work programme, all parties must be afforded sufficient spin-off group time in Bonn, Bangkok and Doha to participate in defining vital decisions for agreement at COP 18. In this respect it is imperative the Work Programme is seen as a complement to, rather than a substitute for, negotiations involving all parties.

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Mahlet Eyassu: what is needed on climate finance this year.

Mahlet Eyassu: what is needed on climate finance this year.

Mahlet Eyassu from Forum for Environment-Ethiopia speaks on what is needed on climate financing before the conclusion of the Durban UN Climate Talks in December 2011.

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Drought in Ethiopia Requires Financing From Developed Countries...Do It by Durban!

Mahlet Eyassu: what is needed on climate finance this year.

Photo Credit: Manjeet Dhakal

Mahlet Eyassu
Climate Change Program Manager
Forum for Environment
Ethiopia

We are now in Panama, for the intersessional which is the last meeting before the Conference of the Parties (COP) in Durban. The 17th COP will be in Durban, South Africa, which make this a very important COP for Africa.  Africa along with Least Developed Countries and the Small Island States are the most vulnerable to the adverse impacts of climate change. Even though Ethiopia is one of the least developed countries that is showing a rapid economic growth, it is still being affected by drought.

At the moment the Horn of Africa, including Ethiopia, is confronted with recurring climate change related disasters, in particular prolonged droughts and floods. This drought is said to be the worst in 60 years. Drought is not something new for Ethiopia nor the Horn. However, it has become more recurrent and severe in the last decades.  Climate change is making the matters and problems worse for us who are under-developed.

In order to address the impacts of climate change, countries are negotiating under the United Nations Framework Convention on Climate Change (UNFCCC). In its 15th and 16th meetings an agreement was reached that developed countries will be supporting adaptation and mitigation actions of developing countries. We are now approaching the end of 2011, where the fast start finance of $30 billion for the years 2010-2012 is about to end. The other decision we have is the one on long-term finance to mobilize $100 billion by 2020. So far there are no pledges from the developed countries for the year 2013 and onwards.  That is a worry for us coming from the developing world. We have learned some lessons from the fast start finance, which is not new and not additional to the ODA, but is just relabeled as climate finance, given in the form of loans instead of grants. There is an imbalance between adaptation and mitigation with more money going to mitigation actions instead of adaptation.

Forty member countries of the transitional committee are designing the Green Climate Fund (GCF) of whose works will be presented in Durban to be approved by the Conference of Parties (COP).  However, most developed countries do not want to have any form of discussion on long-term finance which is supposed to fill this fund. With all of these climate related disasters happening in most parts of the world, especially developing countries being the most vulnerable and having no capacity to adapt, adaptation finance is very crucial for us. It is a matter of survival and should be taken seriously by others. Developed countries need to get more serious and commit themselves to discuss the sources of finance that will feed into the new fund. If we want an outcome in Durban, most discussions and texts need to happen here in Panama.

It is good to note that, developing countries at the local and national level are also working to raise funds for their adaptation and mitigation actions. In my organization back home, Forum for Environment-Ethiopia, we have started an initiative to raise funds, which can be used for some local adaptation actions. We have started implementing the green tax initiative in which 1% of our salaries are deducted every month. We have done this for the past year and have raised small amount, which has not been used yet. Now we want this to be taken up by other organizations at the country-level to show our commitments by raising more money and taking  local initiatives. We have started the process of engaging others to hopefully have a larger impact. Progress in Panama in all issues, especially finance, is very important for us to achieve something in the African COP in Durban.
 

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CAN SIDE EVENT -

Scaling-up Climate Finance from 2013

16:30-18:00 - Miraflores (Sheraton)

How to ensure sufficient and scalable longterm public climate finance starting in 2013, after the end of FSF. CAN will discuss the need for new and additional budget contributions and assess options for mobilizing supplementary sources of innovative public finance, consistent with CBDR.

 

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Charting a new course on shipping emissions

Panama could not be a more fitting place to reboot the negotiations on controlling the high and rising emissions from international shipping. Last month’s G20 finance ministers’ discussions on raising climate finance from international transport suggest there is a huge opportunity to do so.

The magnificent sight of the Panama canal is a reminder of the scale of emissions from the international maritime fleet. Shipping is already responsible for 3% of global emissions – more than those of Germany, and twice those of Australia. Without urgent action, emissions could triple by 2050, likely ruining any chance of keeping global warming below the 2°C target agreed in Cancun, let alone the 1.5C target needed. Tackling the emissions from this sector is a vital part of the efforts needed to close the emissions gap.

A step in the right direction was taken this June when governments in the International Maritime Organisation (IMO) established energy efficiency design standards for new ships. But welcome though this was, it will only reduce shipping emissions by around 1% below business-as-usual levels by 2020.

It is clear that weak efficiency standards alone are not enough. A carbon price for shipping is needed to drive emission cuts at the scale needed – applied either through a bunker fuel levy or the auctioning of emissions allowances in a new sectoral emissions trading scheme.

As the preliminary report of the World Bank and IMF shows, a carbon price of $25 per tonne would raise the cost of global trade by approximately 0.2% - or $2 for every $1000 traded – and would raise $26 billion per year by 2020. The report suggests that to make a global agreement stick, this revenue should be used to compensate developing countries for the economic impact of higher shipping costs – ensuring they face no net incidence as a result – and as climate finance.

Even after some revenues are used as compensation, this should still leave at least $10 billion per year to be directed to the Green Climate Fund. That would be a significant step towards the $100 billion per year that developed countries have promised to mobilise by 2020, which – unlike Fast Start Finance pledged to date – should be genuinely new and additional to existing promises of development assistance.

The World Bank and IMF report shows the way to a new approach to tackling shipping emissions which Parties meeting in Panama must seize. Building on the work in the G20, a decision in Durban on the key principles of this approach would give the IMO all the guidance needed to get to work on designing and implementing a scheme that delivers a double dividend for the climate. By helping to close the emissions gap, and fill the Green Climate Fund, such a deal on could be a flagship of success in Durban.

Money – Now, New, and on the Table

In Copenhagen and reaffirmed in Cancún, developed countries collectively pledged USD 30 billion in ‘fast-start’ finance from 2010-2012 to support developing countries’ mitigation and adaptation efforts, and helping to maintain Parties confidence in the process.

Based on the fast-start finance reports submitted by developed countries, about USD 16.8 billion has been committed or allocated in 2010. However, opaqueness remains. Several countries are clearly not meeting the agreed criterion that the finance should be “new and additional,” and constitute a “balanced allocation between adaptation and mitigation.” On balanced allocation, e.g. France has stated that 80% of its fast-start finance will go to mitigation and REDD+, with the rest to adaptation. This imbalance is not unique and implies that adaptation will remain heavily underfunded. Denmark has a better track record, with 48% of its fast-start finance in 2010 supporting adaptation and capacity building.

Furthermore, countries are not being entirely comprehensive, comparable or complete in reporting information on their finance. While countries do report on whether e.g., grants or loans have been used, they do not provide information on the terms (concessionality) of loans when used, nor on which projects are supported by loans versus by grants. While there is no political agreement on how to define ‘additionality,’ countries should at least be transparent about the baseline they are using to define this. Enhanced reporting guidelines are clearly needed, building towards a common reporting format in the longer term.

Despite this opaqueness, we can and should give developed countries credit for making a perceivable effort to get fast-start finance flowing   and reported on, despite a lack of formal guidance on how to do so. The EU yesterday hosted an open forum on their fast-start finance, which reflected on lessons learned – from the donor side and from the recipient sides – for improving the future provision of, access to, and reporting of financial support. Such stocktaking will help ensure the transparency, effectiveness and efficiency in the delivery of finance in the future, and build much-needed trust between developed and developing countries in the international climate negotiations.

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