Tag: Finance

CAN Submission: Cancun Building Blocks, October 2010


A fair, ambitious and binding deal is needed more urgently than ever. Climate science is more compelling by the day. Impacts are coming harder and faster. Disastrous flooding in Pakistan, heat waves and forest fires in Russia and hottest recorded temperatures around the globe, amongst other devastating climate-related events, all point to the need for urgent action. Levels of warming once thought to be safe, may well not be, 1.5˚C is the new 2˚C. 

Negotiations Post-Copenhagen
Copenhagen was a watershed moment for public interest and support for climate action – and people have not lost interest. More people in more countries than ever have put their governments on notice that they expect a fair,
ambitious and binding global deal to be agreed urgently. Trust-building is essential after the disappointment of Copenhagen. Developed country leadership must be at the core of trust building efforts. Countries must show
their commitment to the UNFCCC process by driving it forward with political will and flexible positions, rather than endless rounds of repetitive negotiations. Many countries are troublingly pessimistic for Cancun, and are working to lower expectations. While others, including countries most vulnerable to climate change, maintain high expectations.

Challenges ahead of Cancun
There are many challenges to getting a full fair, ambitious and binding deal at Cancun, including:

  • Lack of a shared vision for the ultimate objective of the agreement, and the equitable allocation of the remaining carbon budget and emissions reduction/limitation commitments;
  • Sharp divisions on the legal form of an eventual outcome;
  • Failure of the US Senate to pass comprehensive legislation this year; and
  • Current economic difficulties facing many countries, which make it difficult to mobilize the substantial commitments to long-term climate finance needed as part of any ambitious agreement. 

Positive moves afoot
However, more and more countries, both developing and developed, are stepping up their efforts to pursue low-carbon development and adaptation, despite the absence of an international agreement. This can be seen in a variety of ways:

  • Investments in renewable energies have continued their exponential growth, increasing to 19% of global energy consumed;
  • Progressive countries are working to move the negotiations forward;
  • There is a growing perception that low-carbon and climate-resilient development is the only option to sustainably ensure the right to development and progress in poverty reduction. 

So, what does a pathway forward look like?

Firstly we must learn the lessons of Copenhagen. The “nothing’s agreed until everything’s agreed” dynamic from Copenhagen could mean that nothing would be agreed in Cancun. An agreement in Cancun should instead be a balanced and significant step toward reaching a full fair, ambitious & binding deal at COP 17 in South Africa. This will require parties to work together in good faith to create sufficient gains at Cancun, and a clear roadmap to South Africa. This paper outlines how that could be achieved. 

Adaptation Fund: Do Not Put All Your Eggs in One Basket

In recent years, ECO has observed, with concern, the negotiations on the future of the Adaptation Fund (AF) in the post-2020 agreement.

Among all of the financial mechanisms under the Convention, the AF has made unique progress. The AF plays an important role in the climate finance landscape by providing funding for small-scale adaptation projects. It now has a portfolio of 50 such projects, enabled especially through its direct access modality. Furthermore, the AF has successfully accredited 20 national implementing entities (NIEs) and helped build local capacity. The AF’s wings should not be clipped.

Unfortunately, the Co-Chairs’ earlier draft text did not recognise these achievements, and failed to paint a clear picture of the AF in the future finance architecture. Thanks to the last surgical insertions, the new version contains a good proposal featuring the AF as a key instrument of the Financial Mechanism.

ECO feels warm and fuzzy about the proposal by the African Group. Currently, adaptation finance is in crisis. Any enhanced action on adaptation requires contributions of all funds, particularly the AF. The AF can help recipient countries to implement their NAPs and their INDCs. Despite the scarcity of the resources, the Fund’s board received an unprecedented 15 proposals (including the first regional programmes) at its last meeting. The demand for and relevancy of the AF is real.

This burgeoning interest should be understood as a call for more pledges to help the Fund reach the fundraising target of US$100 million by COP21. However, this remains only a short-term solution. The long-term solution would be granting the AF a specific mandate under the new agreement. As the AF is a fund where all developing countries are eligible for financing in principle, it is a powerful tool for advancing the adaptation debate across the globe. Within a few years, the AF has pioneered a robust direct access and operationalised a streamlined and rapid project cycle that enables developing countries to maintain full ownership throughout project implementation and ensure monitoring and transparency at each stage.

A division of labor between the AF and GCF is needed in order to enhance complementarity and reduce the recipient countries’ burden in accessing the funds. ECO reckons that the new agreement should build on well-functioning institutions with proven track records, instead of dedicating all adaptation resources to a newly established Fund to meet the needs of the vulnerable countries. Given the GCF is well-resourced for some time and still has to learn how to spend money on effective adaptation, COP21 could also send an important signal through new financial pledges for the AF—and the Least Developed Countries Fund.

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Spirit of the $100 Billion Haunts Donors

Earlier this month contributors showed us what a US$100 billion commitment looks like. The OECD/CPI report revealed that the commitment consists mostly of loans and private finance. In 2013, the contributions consisted of more than $20b in loans, almost $20b in private finance, equity and guarantees, and a mere $13b in grants. These numbers don’t quite add up and ECO feels that the “$100 billion” is desperately lacking the spirit of the 2009 promise—to provide new and additional money to help meet the needs of developing countries.

ECO has heard donor Parties complaining about being haunted by the spirit of the $100b, but the effort to evade the original intentions with new accounting methodologies isn’t fooling anyone. So, here is an alternative approach, one that is more in keeping with the spirit of the commitment:

  • Address the adaptation finance gap: According to the report, only 16% of climate finance was for adaptation. Parties should commit to allocating at least 50% of public finance for adaptation. ECO would also encourage Parties to take action to address the gap before 2020. A public adaptation finance target for 2020 would kill two birds with one stone.
  • Use innovative sources for climate finance: Alternative sources, like financial transactions taxes on bunkers or redirecting fossil fuel subsidies, could allow donor countries to contribute to climate finance without raiding their aid budgets. Rather than diverting aid to meet their obligation on scaled-up climate finance, developed country Parties should commit to raising additional money from different sources.
  • Include a long-term mechanism for setting financing goals: Periodically setting separate quantitative targets for public adaptation and mitigation finance in line with adaptation and mitigation commitment periods is a good option. This will provide developing countries with greater predictability on the levels of support they can expect and therefore help all Parties increase ambition by matching finance to needs and climate action.

No one likes to be haunted by menacing spirits. ECO thinks Parties would be better served developing innovative sources of climate finance rather than innovative accounting methodologies.

Maybe then they will sleep better at night.

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Article 6 (Finance): Surgical Insertions Bring Back Commitment, Adequacy, Predictability 

ECO believes it is high time to deal with the problem that, when it comes to finance, Parties speak about two separate issues: one is the shifting, attracting and mobilising of financial flows, public or private; the other is the provision of financial support by rich countries to poor countries. They are lumped together in Article 6 because the word finance appears in both of them, and because one can nicely be used to marginalise the other. The issues are linked, and both have their role in the Paris Agreement, but ECO needs to remind everyone that they are not the same. One cannot replace the other.

The Umbrella Group’s finance proposals are about mobilising financial flows but not about committing financial support, leaving a wide finance gap. Article 6 now contains both the Umbrella Group’s proposals, and the G77’s proposals—a dramatic improvement.

ECO suspects that the Umbrella Group would have preferred the earlier version of the Article, as their “surgical insertions” re-hashed the old version instead of making the key changes  needed to improve predictability and adequacy of financial support under the Paris Agreement. Smartly, when making their insertions, the G77 stood up for their needs.

The new Article 6 now includes much of what is needed for an article whose role will be to organise financial support for adaptation, loss and damage, enhance mitigation, and to achieve the long-term goal of full decarbonisation by 2050. The new proposals clarify and strengthen the commitments to provide support, noting that grants and public finance are needed for adaptation, and that support needs to be additional to development assistance. That makes a lot of sense since climate change is an additional challenge to poor countries.

Another key component that found its way back in is the idea of setting collective goals for the provision of financial support at periodic intervals, e.g. every five years, linked with the INDC cycles. Still missing are separate targets for adaptation and for mitigation, to ensure that the looming adaptation gap is narrowed. Some say that numerical targets alone won’t do the trick. Ideally the CMA would continuously take action on all sorts of elements relating to the support of developing countries, reflecting evolving needs regarding the types, channels and instruments of support. Quantified targets would clearly be part of the package, to give everyone a direction to move toward.

Yet, ECO is siding with the Umbrella Group on some issues. For instance, the idea to reduce international finance for high-emission projects deserves attention. The Bonn talks take place in a country that remains among the top five providers of export credit and guarantees for coal power stations and coal infrastructure projects. It appears that Germany (and a few more top-emitters) could use some direction from the Paris Agreement to end that dirty practice and shift these instruments away from coal and toward renewable energies.

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The Cure

ECO is eager for the discussions on Workstream 2 to start. Without a strong outcome on pre-2020 ambition, we are likely to lose any chance of keeping global warming to below 2°C, let alone 1.5°C. ECO would like to suggest a few surgical insertions for our patient to grow into a strong and healthy workstream:

  • Recognise the ambition gap and the need to close it: The efforts under Workstream 2 have to be informed by a clear purpose: the urgency of closing the pre-2020 gap.
  • Acknowledge the need for finance and the role of the Financial Mechanism: Like the Technology Mechanism, the Financial Mechanism should be given a role. Those environmentally, economically and socially sound opportunities identified under Workstream 2, particularly in renewable energy and energy efficiency, should receive priority support.
  • Task high-level champions with matching potential and support: Appointing champions can move Workstream 2 from discussion to implementation. They need a clearer mandate to enable coalitions and to match mitigation opportunities with the necessary support.
  • Criteria for initiatives: The champions and high-level dialogues will catalyse efforts, initiatives and coalitions. Criteria are needed so we can recognise those efforts that respect human rights, social safeguards, and environmental integrity.
  • Review of implementation of initiatives: Once initiatives are launched, we need to ensure they deliver. Assessing the impact of initiatives should be added as a task for the high-level dialogue.
  • Adaptation: The status of the the paragraphs in italics regarding a technical examination process for adaptation is not clear, but ECO knows that adaptation efforts and support are insufficient and must be enhanced from now until 2020.

ECO doesn’t hold a medical degree, but we are sure that to restore the health of the text the brackets must be removed, namely those around the paragraphs on accelerated implementation and high-level co-champions.

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Vital Surgery Revives Loss and Damage Solidarity


ECO joins you in being glad that Monday is behind us, dear Delegates. And that the text ended up slightly less (or should that be more?) lost and damaged than it started. The reinsertion of institutional arrangements for loss and damage can be the basis for making the mechanism fit for purpose. In addition, a provision for finance for loss and damage is essential if the Paris Agreement is to enable the most vulnerable people to deal with the worst impacts of climate change.

As Typhoon Koppu (Lando) deluges the Philippines, causing flooding and mudslides, knocking out power to nine million people, displacing 16,000 and killing 11 people, it is surely more obvious than ever that a durable climate change agreement must deal with the real and pressing issue of loss and damage, alongside scaling-up action to adapt to climate change.

ECO was saddened to hear Switzerland put brackets around the whole loss and damage article–and saddened-yet-not-suprised to hear the Umbrellas pushing for no reference to loss and damage. The EU seems to have exited themselves from the debate. EU: your celebrated “partnership” with vulnerable countries means nothing if you don’t stand with them on this critical issue! [PS: This ECO article is not entirely bracketed. Gruezi!]

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United In Faith On Climate Action

The voices of many religions are amplifying the call to bring back real ambition to these climate negotiations.

Today, a statement signed by 154 religious and spiritual leaders from 50 countries will be handed over to Christiana Figueres. The Christian, Muslim, Jewish, Hindu, Buddhist, Brahma Kumari and Sikh leaders are asking governments to reach zero emissions by mid-century, phase-out fossil fuels, commit to building climate resilience, and provide finance and support to poor and vulnerable countries.

Leading by example, these faith leaders have also committed to climate action by pledging to continue raising awareness on climate change and significantly reduce the carbon footprints of their organisations.

Standing united across differences, while combining a scientifically sound mitigation target, finance, support to the most vulnerable, and taking action at home…is all ECO ever asks for.

ECO suggests that Parties take note from these spiritual leaders and continue the negotiations in good faith

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ECO’s Recipe For Success

While France is renowned for its mouth watering cuisine, the negotiating text for COP 21 will need major changes to avoid leaving a bad taste in everyone’s mouth.

The co-chairs have brought from the kitchen an incomplete meal with bland elements of uncertain origin. Crucially, the entire non-paper lacks that key ingredient necessary to stay in the running for a Michelin star: ambition.

To start with, the ambition and durability of the international climate regime must be secured through a review and revision mechanism based on the principles of equity and CBDR, which should work to increase Parties’ ambition over time in order to limit global warming to 1.5°C above pre-industrial levels.

Clearly, the proposed “Global Stocktake” does not make that cut. CAN proposes the adoption of a Paris Ambition Mechanism (PAM) that would link and synchronize Parties’ mitigation, finance and adaptation commitments in 5-year cycles. The PAM should combine a scientific review of the adequacy and equity of Parties’ commitments with implementation support for countries that wish to act beyond their domestic capabilities. It should hold the first round of reviews well before 2020.

A good chef thinks through a meal, from the amuse-bouche to the digestif. Likewise, this deal must be thought through all the way to the long-term goal.

That’s why countries must commit to reach full global decarbonisation and a transition to 100% renewable energy by 2050, and to develop national decarbonisation strategies based on accelerated deployment of efficiency and renewable technologies.

The adaptation section of the agreement should include a call for increased financial support for adaptation, and recognise that rising temperatures will require greater adaptation efforts and that adaptation needs will escalate with lower level of mitigation ambition.

On loss and damage, the Paris Agreement can’t merely note the problem; it must ensure that institutional arrangements under the Agreement will continuously strengthen support for loss and damage—in a separate section from adaptation.

The current draft does not ensure the predictability and adequacy of future financial support. At the last session, the G77 called for the Paris Agreement to establish collective targets for financial support set in periodic intervals. To ECO, this makes a lot of sense, especially if there are separate targets for adaptation and mitigation support from public sources, accompanied by real action to shift private and public investments.

Firm commitments by developed countries and others with comparable capacity and responsibility to contribute to meeting those targets should be inscribed into the agreement. ECO also suggests re-inserting language to support recipient countries in assessing their requirements for enhanced action, to facilitate such support.

The COP decisions on pre-2020 action must catalyse implementation on the ground by strengthening the TEPs, appointing high-level champions to further good mitigation opportunities, and matching them with the necessary finance, technology, and capacity building support. The text must also create processes to identify adaptation support and cooperation needs at different levels. Crucially, developed countries must demonstrate how they intend to scale up public finance in order to meet their commitment to mobilise US$100 billion per year by 2020.

Paris must put in place a means to avoid the double counting of credits used in international transfers, setting durable principles to ensure the quality of any credits used and their contribution to sustainable development.

Finally, a palatable Paris Package must ensure respect for human rights, responding to the needs of people and communities through strong public participation provisions.

Only when such a menu is prepared will ECO be able to truly say: bon appétit!

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Coal: A New Climate Solution?

Burning coal is many things: its dirty, carbon intensive, expensive and, a massive threat to public health. Its also not a solution to the climate crisis. This should be evident to anyone familiar with the warnings from the IPCC and IEA. The construction of coal plants will soon lock in emissions that will exceed 2°C warming. Approximately 80% of the worlds coal reserves cannot be burned if we are to stay below this threshold. 

Many of this understand this, although, apparently this is not evident to Japan. 

Japan has relentlessly argued that burning unlimited amounts of coal in slightly more efficient plant is a core solution to climate change. To advance its fairy-tale vision of a coal-fired, climate-safe world, Japan has systematically obstructed common sense proposals to limit global coal subsidies. Japan has opposed language in the finance text that would call on countries to limit international support for high carbon investments. It has funded coal plants and claimed it as part of its climate finance contributions, rejecting the consensus of other major contributors that this is inappropriate. And perhaps worst of all, it has blocked any compromise agreement at the OECD level that would limit public subsidies for the export of coal technologies. 

To see just how regressive Japans intransigent support of its coal industry really is, compare their position to that of China, which recently committed to take steps to strictly control its public support for coal plants, both at home and abroad. Better yet, compare it to that of Kiribati. Faced with the existential crisis of warming-induced sea level rise, Kiribati has called for a global moratorium on new coal mines to facilitate the transition away from burning coal.

Its hard to see how Japan subsidising coal plants will help Kiribati. Its not hard to see how it will help its own industry.

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