Lessons from Year 1 of Fast Start Finance
3 December 2010
It’s the end of the first year of the Fast Start Finance (FSF) learning period.
Already it’s clear that vital lessons must be discerned and addressed in decisions here in Cancun on long-term finance. There are three key lessons, so please take note.
First, the balance between adaptation and mitigation must be defined. Despite the commitment in the Copenhagen Accord to ‘balanced allocation’ between adaptation and mitigation, more than 80% of FSF has been allocated to mitigation. Worse still, it is estimated that less than 10% of major dedicated public climate funds to date (including FSF) have been allocated to adaptation (climatefundsupdate.org).
This is only the latest episode in the history of adaptation being the poor cousin of mitigation. We cannot afford to wait any longer to close the ‘adaptation gap’. We need to establish a fair climate fund that guarantees at least 50% of resources are allocated to adaptation.
Second, the ‘new and additional’ problem isn’t going to go away. There isn’t a shared definition of ‘new and additional’ and some seem to hope there never will be. That’s not good enough. The problem will come back to haunt us every year until a common definition is agreed. As discussions over long-term scaled up finance intensify, so too will concerns about the amount of money being diverted from development aid to climate finance.
To address this, the mandate of the Standing Committee on Climate Finance (the body charged with oversight of financing flows) should be mandated to propose a common framework for the additionality of long-term finance to be adopted by the COP.
Third, the role of loans needs far greater clarity. We know a large proportion of financing is being channelled as loans – 52% in the case of the EU, for example. That’s bad enough – countries should not have to get into debt to adapt to climate change that they didn’t cause.
But what’s worse is that Parties haven’t even agreed how to account for the loans provided. Germany, for example, initially counted only the grant equivalent of its loans, whilst France accounted for the full gross value. To be fair, Germany has now reversed their approach. Clarity is needed to confront these diverging approaches. To start with, the Standing Committee should have a mandate to propose a common framework for use of loans in long-term financing.
It is crucial to apply these lessons to the development and deployment of long-term climate financing.