Responsible Approaches to Finance at Scale

7 December 2010

We are starting the crucial final week. Ministers are being briefed, crucial new texts are being minutely analyzed and insect bites are spreading. With so many difficult, complex and itchy matters competing for attention, it might be easy to overlook one fact. We have only two years to get climate finance flowing at scale before fast start finance expires in 2013.  But there’s good news: a variety of innovative sources of climate finance are right at our fingertips.
This week, Parties should create a robust process to discuss sources of long-term finance, with a clear work plan and outcomes that can deliver concrete decisions by COP 17. These steps will address where the financing will come from, and acknowledge that meeting mitigation and adaptation objectives  means scaling up finance substantially over the long term
The new LCA text usefully calls for a look at needs and options for mobilizing long term finance. But in the absence of a work plan and outputs, negotiators will face another year of wrangling over how to move forward.
Sources of financing is a political issue, not a technical one, and it must be discussed in the LCA, not pushed off into the SBI or a body focused on designing a new fund.
The issue was held in abeyance this past year while the UN Secretary General’s Advisory Group on Climate Finance (AGF) did its work. The AGF has now released the findings of 9 months of study. While ECO was disappointed that private finance and carbon markets are spotlighted, and multilateral development banks are inappropriately considered sources instead of channels of finance, this constitutes an impressive body of work including workstream papers that can serve as a useful starting point for the coming focus on ways to mobilize public finance.
One source is government budgets from developed countries.  This will continue to be an important source of international climate finance, and a scale for assessed contributions will be an important output of the process.
But to scale up public finance to the necessary scale, rising rapidly from fast-start levels, other innovative sources will be required. Mechanisms to address emissions from international shipping and aviation fit that bill.
The AGF has endorsed a mechanism to solve the equity question under the principle of common but differentiated responsibilities raised about this mechanism. The AGF proposal involves using a rebate to ensure that developing countries are not subject to any net incidence or burden from global measures to address emissions in these sectors.
In the shipping sector this rebate would be based on the share of global imports attributed to each country. Other options are discussed for the aviation sector. Developing countries will be entitled to the rebate, while the share of revenue attributed to developed countries would be administered under the UNFCCC and be used for adaptation and mitigation actions in developing countries.
Text introduced by Chile should supplement the Chair’s LCA text on aviation and maritime transport.  However, a process for committing to public finance options must go beyond the AGF report to include new submissions, workshops and a clear workplan to get to decisions by South Africa on specific sources.
If we can break the longstanding deadlock in addressing emissions in this crucial and grow, negotiators and Ministers can claim an important success here in Cancun. And all those mosquito bites can be a badge of honor.