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. 

Enabling Clarity on “Enabling Environments”

All week, the expression “enabling environments” kept coming back into use during the finance sessions. Several Parties raised questions about what it actually means. ECO has a few worries of its own. Since this week has been about gathering feedback and building convergence, a bit more clarity on this term needs to be enabled.

Will developing countries need to establish some sort of “appropriate conditions” in order to attract greater flows of private finance? And what would those conditions be? Surely countries would not be required to relax their environmental or labour regulations just to allow the private sector to extract extra profit. Right?

And would the expansion of “enabling environments” reduce developed countries’ obligations to provide adequate levels of public climate finance to support extra action in vulnerable developing countries. Surely not.

These are just some of the questions that strike ECO upon hearing the echoes of “enabling environments”. It would be both a shame and slightly ironic if these concerns rang true, making the overall environments even less enabled to address the needs of affected people, ecosystems(?) and communities.

ECO totally supports the shift of overall financial flows and investments away from high-carbon to low-carbon and climate resilient activity. But that should happen alongside continued provisions of public finance, part of which is crucial to support ambitious policies and targets, strong and effective country institutions, and informed and empowered policymakers and civil society.

Maybe “enabling environments” will turn out to be more than a buzzword, but this can only happen if negotiators enable an environment for discussions and clarity on the type of policies, targets and institutions it should include.

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Innovative Public Finance: Fruit Ripe For Picking

Many delegates have spent years, inside and outside of this process, on the seemingly enticing topic of innovative finance. ECO understands if some of you are getting tired of this work–so now is the time to harvest the fruits of your labour and lock in new, predictable and significant sources of finance that aren’t at the whim of treasuries!

The ground has been prepared by studies, such as those of the High-Level Advisory Group on Finance, the Leading Group on Innovative Finance, and others who have scoped the landscape.

Trial plantings have been made with a share of proceeds of the CDM that initially provided funds for the Adaptation Fund. Unfortunately, this fruit has withered on the vine.

Early seedlings in ICAO and IMO have so far come to nought–it seems they need UNFCCC fertiliser to grow. And if there’s one thing the UNFCCC can produce, it’s fertiliser.

Now that the ground has been prepared, and the Paris agreement is well placed to ensure that, within a year, we are harvesting the fruits of innovative public finance.

We need only one more ingredient: a process to agree on new innovative sources of public finance. Paragraph 82 in Part II is a good start, but should be spliced with the detailed options found in paragraph 54 and paragraph 64, Part III.

We need to be sure that predictable finance flows into adaptation, loss and damage, and no-net-incidence are considered, as well as targeting the drivers of climate change where possible. And then, with some gardening work in 2016, we will be in a position to enjoy the fruits of our labour.

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It’s the Scale, Stupid

In the endless repetition of long-standing positions that passes for climate finance negotiation these days, one message comes through loud and clear: the Paris agreement–yes, the core legal agreement, currently largely in Part 1 of the co-chairs’ tool–must address the scale of finance to be provided post-2020.

Failure to do this will undermine trust, contribute to a lowest-common denominator deal (or even no deal), and bring us closer to the 3 or 4°C-warmer future we all dread.

ECO is well aware of the difficulties: post-2020 is beyond national budgeting cycles, finance ministries and political leaders must be engaged, etc., etc.

But let’s move into solutions mode. ECO concedes that firm numbers will not be in the core agreement. But let’s think about what can go there. Here is a start:

  • The US$100 billion-by-2020 commitment will be a floor for post-2020 finance.
  • Financial support will be scaled up over the post-2020 period until climate goals are met, and (to pick up on what the EU said yesterday) the most capable countries will contribute such financial support.
  • Ex-ante financial targets (aggregate and/or individual countries) will be agreed on a rolling basis, on a 2- to 5-year cycle.
  • Mechanisms, provisions or processes to enable developing countries to identify their needs to enhance action.
  • Recognition of the catalytic and central role of public finance, with at least 50% going to adaptation.

Scaled-up finance from multiple sources can be targeted to enable climate action in a variety of ways, through:

  • Traditional channels of financial flows
  • New financing arrangements for activities with high mitigation potential identified through Workstream 2 and an ongoing technical examination and prioritisation process, and
  • Matching of finance with conditional activities that have been identified in developing countries’ INDCs.

ECO is convinced that if all the big brains around the finance table really tried, they could find ways to incorporate these ideas. This includes finding even better ideas that can provide certainty that financial resources will be available.

Such certainty is the requisite to unlock the maximum mitigation and resilience potential in developing countries, by complementing their own domestic efforts to shift public and private financial flows.

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How Long-Term is a Game Changer

ECO has joyfully watched the birth of a new vision for the world’s economy – one where fossil fuel emissions are rapidly phased out, and clean, renewable sources of power are phased in. Millions of citizens from the global north and south, thousands of leading businesses, faith leaders and health professionals are now demanding this transition.

We all passionately believe in this vision — not least because science tells us that without it, and early deep cuts in GHG emissions, we will not be able to achieve the ultimate aim of the Convention: the stabilisation of GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.

If our global energy systems are not fully decarbonised by 2050 there would be neither equity nor fairness. It would mean a world where hard-won development is lost to dangerous climate change. The transition must happen in a fair, just and sustainable manner. Those with greater responsibility and capability must act first and support others to get to a new energy future. That means insuring that we do not neglect the challenges of adapting to the climate change impacts happening already today.

In this spirit, ECO has some proposals:

  • A long-term goal on mitigation that reflects the need for differentiation. This means that specifying the time-scales for decarbonising at the national level should reflect Parties’ differing responsibilities and capabilities, and what support is available to them. Bearing this in mind, all Parties should show clear but differentiated trajectories to phasing in 100% renewable energy and phasing out fossil fuel emissions.
  • Those with the greatest responsibility and means to must act now by increasing their existing pre-2020 ambition obligations.
  • Achieving this transformation will require strong outcomes on pre- and post-2020 finance.  Countries requiring support may want to consider national emission reduction commitments with unconditional and conditional components, with the latter put up for matching support.
  • A long-term goal for 2050 must be combined with a robust mechanism to increase ambition over time. Progress towards a long-term goal should be the defining factor over each 5-year cycle.
  • There also needs to be a long-term goal to enable and support adaptation alongside the mitigation one. The Parties that are committed to a fair and equitable outcome in Paris — and ECO hopes that this is everyone! — should never allow the two goals to become separated and lonely.

As part of a Paris outcome that respects these five suggestions, a long-term mitigation goal will embody the Convention’s fundamental principles and help achieve its ultimate objective.

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Finance: A Three Part Act

As negotiators prepare their last-minute assessments of the finance section, ECO doesn’t think that it’ll be too hard to guess which Parties will be rather happy with how the finance section of the Geneva text was distributed across the co-chairs’ tool.

Part One (to become the core agreement) contains useful language on some aspects. Yet, it fails to include any constructive proposals to organise the mechanics of future financial support. For some reason, these were thrown into Part Three. ECO is puzzled, because what would go into a treaty if not the mechanics? This needn’t frustrate delegates, since ECO has been assured many times, Part Three is not a dumping ground of any kind.

ECO will be looking out for suggestions to move some of the key ideas from Part Three into Part One. For example, the countless references to needs assessments to ensure climate finance is matching The needs would logically be placed in Part One. Also, counting the number of paragraphs that suggest setting (and regularly updating) some form of targets for the provision of financial support should also belong to the core mechanics of future support. For instance, by setting collective targets every five years, based on above-mentioned assessments of support requirements, with separate targets for adaptation. Obviously, developed countries, but also countries with comparable levels of responsibility for the problem and capability to act, would contribute to meeting those targets.

Part One is not completely empty, of course: a general commitment for certain countries to provide support can be found in quite a few variations. Similarly, ECO spotted useful language that at least 50% of financial support should be allocated to adaptation. And there is a reference to the role of innovative sources of finance which, if tweaked, could get us exploiting the potentials to generate new and additional public finance. We have something to start with, but only if mixed with some of the {strong} ingredients from Part Three will we get a decent Article $: Provision of Financial Support.

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Loss and damage provisions: Don’t leave Paris without them

Dear Developed Countries: Newsflash — Loss and damage must be in the Paris Agreement. We keep hearing some really lame arguments as to why you’re keeping it out.

Lame argument 1: We don’t need L&D in the Paris Agreement as we have the Warsaw International Mechanism for L&D and its review in 2016.

ECO responds: Despite being agreed nearly 2 years ago, the WIM has yet to make progress. Its mandate is heavily contested and some developed countries have sought to undermine the only clear mandate in the agreement, the one that deals with finance. Some vulnerable countries are concerned that the 2016 review is a thinly disguised attempt to review the WIM out of existence.  By embedding the important functions of the WIM into the Paris agreement, we can alleviate these concerns. There should be no argument against this by those who genuinely want to see the WIM succeed.

Lame argument 2: L&D is just adaptation, and that’s already in there.

ECO responds:  Adaptation to having your home, community, places of worship and livelihood destroyed in super storm Cyclone Pam or Typhoon Haiyan is not possible. These are not impacts that can be adapted to — and given inadequate mitigation, they will likely increase further in the coming years. The IPCC acknowledges the limits to adaptation and makes it clear that even with high levels of adaptation there will be residual L&D.

Lame argument 3: L&D will cost too much.

ECO responds: The worst impacts of climate change on the poorest countries will have substantial costs. Compensation is one element of L&D, but there is a spectrum of needs for addressing L&D, some of which are outlined in Part III of the Co-Chairs tool. Clearly, rich countries that developed using fossil fuels and polluted the atmosphere have a major responsibility. So does the fossil fuel industry, which is responsible for two-thirds of climate pollution. Moreover, there are alternative sources of finance that can be drawn upon – including a fossil fuel extraction levy which could easily raise $50 billion a year initially, increasing with time, until fossil fuels are phased out. This could pay for a significant portion of the L&D needs, alleviating the objections of rich countries to paying for loss and damage.

Delegates — we’re clearly on a pathway to temperature increases well exceeding 1.5°C, any agreement that doesn’t include provisions to address the worst impacts of climate change on the most vulnerable will not be judged acceptable by your constituents at home.

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CAN Position: A Finance Package for Paris, June 2015

~~To secure a strong outcome in Paris that facilitates ambitious climate action on the ground, a key pillar will be a “finance package” that covers both the pre- and the post-2020 period. Developed countries will have to demonstrate how they are meeting past promises (in particular the $100bn target). For the period after 2020, strong provisions on finance in the Paris Agreement are needed to enable developing countries to enhance their ambition beyond what they can do on their own, laying out the mitigation potential that could be unlocked with scaled-up financial resources. Also, developing countries, particularly the poorest and most vulnerable countries, will require increasing amounts of financial support to adapt to a changing climate and cope with the impacts. This submission outlines the Climate Action Network’s view on the main elements of this finance package for Paris.



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