Climate Action Network Submission: NCQG

The world is already facing lethal temperature increases, which threaten to become unspeakably worse, and those who have contributed least to the crisis are suffering the most. To limit global warming to 1.5oC and achieve the other goals of the Paris Agreement and the COP28 Global Stocktake, it is essential that developed countries pay up for climate action. 

A new climate finance goal is needed for climate action in developing countries, which must be based on at least $1 trillion a year in grants and grant-equivalent finance. Fortunately, it is possible to find the public finance for a fair transition — developed countries can raise trillions for climate finance and other imperatives, through shifting public money away from fossil fuels and other harmful activities, making rich polluters and profiteers pay, and helping to transform an unfair finance system.

Time is of the essence and the world is watching.

The following elements and issues, presented in this submission, represent the essential criteria for judging whether the New Collective Quantified Goal (NCQG) is fit for purpose, according to the Climate Action Network (CAN), the world’s largest network of NGOs working on climate issues. These are elements that must be secured and issues that must be managed in the next few months — either at the eleventh  technical expert dialogue (TED), the third meeting under the ad hoc work programme, Ministerial events, the pre-COP and other preparatory meetings, and/or COP29. 

• Quantitative elements: CAN is concentrating on the public finance provision element, within the wider mobilization goal, as the most important part of the quantum. Based on a recent review of the current needs determination literature, which is recognized to be underestimating needs in various important respects, CAN expects the NCQG to set a public finance provision quantum of a minimum of $1 trillion per year in grants and grant-equivalent terms from developed to developing countries, to cover mitigation, adaptation, and loss and damage (L&D) as part of inclusive just transition pathways, in the context of a larger accumulating climate debt.

• Sources for enhancing provision:  Developed countries can raise trillions in public finance for climate action (including via the NCQG) and other needs, at home and around the world — with measures toward tax justice and the redirection of public finance. The NCQG must recognise the principle of tax justice and the polluter pays principle within the frame of equity and common but differentiated responsibilities in light of respective capacities (CBDR-RC). Operationalizing this, the NCQG must call on developed countries to take the lead in introducing taxes on polluters and profiteers, to ensure that the costs of climate change are borne by those with the greatest capacities as well as the most responsibility for causing it. This includes wealth taxes, on the rich and ultra-rich, and other progressive taxation. This also includes taxing companies in high-emitting sectors, such as the fossil fuel industry and the military industry, and redirecting excess profits.  Developed countries must also redirect their existing public spending and subsidies for fossil fuels and other high-emissions and harmful activities.  

• Qualitative elements:  CAN calls for a high-quality NCQG based on strong qualitative features, stating clear principles and operationalizing these as appropriate, including on equity and common but differentiated responsibilities in light of respective capabilities;  predictability; adequacy; just transitions; human rights, Indigenous Peoples’ rights and informed consent and gender equality; access and accessibility; responsiveness to marginalized communities and groups; additionality; affordability and non-exacerbation of debt challenges; science- and evidence-based approaches; integrity, especially ruling out climate finance for false solutions (such as fossil gas) and dangerous distractions (such as carbon offsets); prioritizing UN-based funds; transparency and accountability; and more.

• Transparency and accountability:  Transparency and accountability, as a core principle for the NCQG, must see a basis for operationalisation under the NCQG decision. A clear definition of climate finance is essential for transparency and accountability, and a process must be initiated to develop one, addressing issues including integrity and greenwashing, as well as additionality relative to development assistance commitments such as the 0.7% GNI goal. Moreover, a fit-for-purpose Enhanced Transparency Framework (ETF) is key to ensure that the NCQG has clear mechanisms to track delivery of climate finance on a regular basis, adding a formal category for reporting loss and damage, and requiring the tracking of the grant equivalent of finance.  Other necessary elements include avoiding double-counting of finance; ensuring any “arrears” are covered; enhancing transparency on information needed for strong qualitative elements; establishing burden-sharing frameworks; and annual updates under the United Nations Framework Convention on Climate Change (UNFCCC) on NCQG delivery.

• Structure: CAN is calling for a structure with the following :
  • A public finance provision inner goal, measured in grant-equivalent terms, as the core of the wider (mandated) mobilization goal.  Amid a historic debt crisis, to rebuild trust through clarity and to address the current perverse incentive for developed countries to over-prioritize loans and non-concessional public finance, a public finance provision measured in grants equivalent is essential.
  • Thematic subgoals for mitigation, adaptation, and loss & damage must be established in the NCQG, with targets for provision of public finance for each — to address the current imbalance in finance provision for adaptation and loss & damage, to rebuild trust and to deliver all the climate action required.

• Timeframes and revision: CAN is calling for a cyclical NCQG under 5-year timeframes, with periodic review under the GST and regular upward ratcheting of NCQG ambition aligned with the NDC cycle, taking into account the evolving needs of developing countries, consistent with the wider 5-year ambition mechanism of the Paris Agreement.  Within these cycles, annual monitoring under the UNFCCC of NCQG delivery is required, along with shorter time-frame reports (such as the Biennial Transparency Report (BTR), the Biennial Assessment of Climate Finance Flows (BA), or Needs Development Report (NDR)) which provide spaces for increased accountability amid a clear pathway for the scale-up of finance with near-term targets.

• Managing the “contributor base” debate: Developed countries must fulfill their obligations under the UNFCCC and Paris Agreement in terms of providing the means of implementation for developing countries to address climate change, in line with the principles of equity and CBDR-RC. Those other countries who have the capacity to do so should make voluntary contributions in line with Article 9.2 of the Paris Agreement. Under such arrangements, the Quantified Goal of the NCQG must be for climate finance from developed countries since these are the only countries with an incontrovertible legal obligation to be contributors. Following adoption of the first NCQG at COP29, further processes can build consensus on the expectations for contributions from individual countries and on criteria for how such expectations may evolve dynamically according to key criteria based on the principle of CBDR-RC.

• Overlap with Article 2.1c: 
  • Wider finance systems transformation is essential to delivering the Paris Agreement. The current financial system is not fit for purpose and deepens inequality, creating a net-outflow to the Global North, and undermining the space for climate action in the Global South. CAN recalls its seven principles for finance system transformation: (1) Challenging economic imbalances; (2) Democratising and decolonising governance; (3) Debt justice; (4) Tax justice; (5) Phasing out finance for fossils and harmful activities; (6) Justice and access in finance; and (7) At-scale increases in international grant- based and concessional public finance from Global North to Global South. 
  • The NCQG may be understood as part of finance system transformation, in assuring a framework for predictable transfer of public climate finance to the Global South from the Global North. The Sharm el-Sheikh Dialogue and any future Work Programmes on Article 2.1c (“making finance flows consistent”) are the space to advance the other parts of finance system transformation, and must take into account the above to ensure an equitable approach. While the Quantified Goal is for provision of public grants-based and concessional finance from developed countries to developing countries, the wider NCQG decision can establish important linkages to the wider finance system transformation agenda and further processes to take it forward.