LCA Finance Comes Alive

3 June 2010

After a unexciting first couple of days, today out of the blue in the LCA contact group on finance, delegates picked up the pace. It was a pleasure to see negotiators giving thoughtful and creative responses to the Chair's questions and to each other's proposals. The Chair chose wisely in selecting finance, which underpins progress on many other areas, for the first deep engagement with the new negotiating text. Parties responded by presenting new ideas and arguments on the complex linkages between institutions as well as the need for effectiveness and accountability to the UNFCCC and its governing bodies. There is a clear consensus about the establishment of a new fund, and some new and creative thinking about how an overarching Finance Board could provide an oversight or coordinating function. But no institutional framework for financing can be effective without sufficient funding. To ensure rapid progress on scaling up finance, the LCA must also continue its discussion of sources, in parallel with the discussions under the Advisory Group on Climate Finance (AGF), which is holding a workshop on Saturday to report on progress and receive input. The AGF has an opportunity to make rapid progress on identifying sources of funding for climate actions in developing countries. However, the LCA cannot just wait until the AGF presents its final report in November to take up the issue of sources, if it hopes to move from analysis to action this year. Parties should start actively discussing sources of public funds in the LCA now, and incorporate and build on the analyses and recommendations of the AGF, starting with the interim report expected in July. Avenues to explore include new and innovative sources of public finance, including bunkers mechanisms, financial transaction taxes (FTTs), Special Drawing Rights (SDRs) and international auctioning of AAUs. Then in Cancun, the LCA can be in a position to adopt substantial decisions and provide clear guidance for the work of the UNFCCC and other bodies in the coming year. This can lead to adoption of a comprehensive set of decisions on financing sources and institutions as part of an ambitious comprehensive agreement in Cancun.  All this is possible if leaders have the political will; but short of that, Parties can agree a more modest but still ambitious package of decisions to demonstrate the viability of the UNFCCC process and support the scaling up of mitigation and adaptation actions on the ground.