Between 30 November and 11 December 2015, Paris will host the 21st session of the Conference of the Parties (COP21). We provided an overview of the COP21 climate change negotiations in our article on 19 October 2015. The aim of the meeting is to seek to achieve a global agreement on tackling greenhouse gas (GHG) emissions with the aim of limiting global temperature rise to 2 or 1.5 degrees Celsius).
We are publishing a number of articles on the central aspects of the potential agreement. This article focuses on the proposals for financing and the provisions on public and private resources to achieve the aims of the agreement. As noted in our article dated 22 October 2015, the ability to secure financing is a key factor in ensuring that the measures on mitigation, adaptation and loss and damage are realised. This is vital in shaping and achieving the development of low carbon and climate resilient economies.
The draft text of the proposed agreement has recently been expanded following the eleventh part of the second session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action held between 19 and 23 October 2015 in Bonn. Although the latest draft re-introduces options for the parties to take a more ambitious stance or agree to less demanding obligations, the draft text encourages developed country parties (and potentially other parties in a position to assist) to provide support to developing country parties on the mitigation and adaptation measures. The text seeks finance flows to promote transformation to low-emission and climate resilient societies and economies.
$100 billion per year
A key question is the amount of financing that developed country parties may be willing to provide to developing country parties and the terms of such financing. The figure of USD 100 billion per annum from 2020 was proposed at COP15 in Copenhagen in 2009. While some commentators argue that this figure may be insufficient to cap the rise in global temperature to 2 degrees Celsius, it is promoted as essential to help bridge the gaps in countries’ abilities to tackle climate change. It is also the figure agreed for the pre-2020 period as part of earlier climate finance discussions. Agreement on post-2020 financing is seen as a key requirement to persuade developing country parties to sign up to a global agreement in Paris.
Need for a variety of sources
The draft agreement recognises the need for a variety of financial sources and instruments: public and private, bilateral and multilateral, including alternative or additional sources of financing that best suit the recipients’ economic circumstances. As part of this, countries will be seeking to include technology transfer and capacity-building, as well as improving the domestic environment to attract low-emission, climate-resilient investment. One option in Paris will be to codify that this financing would be distinct from official development assistance funding and that financing for adaptation should be public and grant-based.
Supporting LDC and SIDs
The ability of Least Developed Countries (LDCs) and Small Island Developing States (SIDs) to cope with adverse effects of climate change is a recognised global issue. Without comprehensive mitigation and adaption measures and collaborative efforts on a global scale, the ability of holding global temperature to an agreed level is compromised. LDCs and SIDs have been vocal in their requests for robust assistance from the developed country parties. While the current draft of the agreement notes the need for cooperative action and urges parties to prioritise the provision of grant-based and concessional finance to the poorest, most vulnerable and/or those with the least ability to mobilise other resources, it will be interesting to see how the final position in terms of the financial package (if agreement is reached) is set out.
Encouraging climate-resilient investments
If the fuller option in the current text is followed, the Parties are to take steps to reduce international support for high-emission and maladaptive investments and instead are to attract international support for low-emission, climate-resilient investment. This has been interpreted by some as encouraging energy efficiency programmes and ways to lower the cost of capital for renewables and infrastructure (such as transport) as well as the development of carbon pricing mechanisms.
Green Climate Fund and other funds
Transparency and ease of access are key areas for discussions on the agreement and developing countries want any financing agreed in Paris to be in addition to existing development assistance programmes. This looks as if it may be a thorny issue (it was debated in Bonn (19 - 23 October 2015), ahead of the COP 21 meeting).
It is expected that the Green Climate Fund (GCF) established within the framework of the United Nations Framework Convention on Climate Change (UNFCCC) in 2011, will be one of the vehicles for securing the finance and raising the necessary funds. Although it is not clear what funds could count towards the GCF target, some countries such as the EU advocate the use of private finance as well as relying on public resources to bridge the resources gap. The details of how the fund(s) shall operate will be detailed separately. Presently GCF allocates resources equally between mitigation and adaptation though with the changes in priorities advocated in the draft agreement this allocation may yet change.
If governments are to send strong signals in support of long-term strategies and priorities to support movement to low carbon and resilience, then financing is a key issue that must be unlocked for there to be agreement in Paris.
Of course the negotiations are not without challenges. For instance the EU advocates a financial system that incorporates climate risk into investment decisions to urge transformation to low carbon economies, whereas others, like Japan, China and Saudi Arabia oppose prohibiting the GCF being used to fund fossil fuel projects. Whether the two weeks in Paris will result in agreement remains to be seen, however the leaders of virtually all sectors will be watching the political leaders to determine how willing they are to tackle the risks of climate change.