Tag: Finance

Over the past week, we’ve heard discussions in a variety of forums here in Bonn on how to address the urgency of climate change by increasing emissions reductions and mo-bilizing enough climate finance to help fund the transition to a climate resilient future for all. Well, ECO has found just the source to help both of these efforts – end fossil fuel subsidies by 2015!

Let’s start by raising mitigation ambition. The UNFCCC re-ceived many submissions on raising ambition. 111 countries were represented in the sub-missions citing phasing out fossil fuel subsidies as a po-tential source of additional emission reductions repre-sent. And how often does that happen?

Perhaps all 111 countries saw the recent statements by the Chief Economist of the International Energy Agency, who said that phasing out fossil fuel subsidies could provide half of the emission reductions needed to stave off dangerous climate change between now and 2020. Now, because the devil is often in the details, phasing out these  government handouts could go a substantial way in helping close the gigatonne gap. The ambition work programme under the ADP would be well-served to include this in its deliberations.

Now, on to finance. Recent estimates show that fossil fuel subsidies in rich countries could be in the tens of billions of US dollars, to perhaps as much as $100 billion. How about, instead, governments spend that money to support climate change fighting efforts? ECO encourages delegates to include this in discussions of both short-term and long-term finance.

While we’re at it, let’s all make sure we’re talking about the same stuff.  The numbers quoted above are estimates, mainly because the data out there isn’t transparent enough to allow for more precise figures. But, wouldn't you know, the UNFCCC could provide just the tools to increase transparency in this area through its national communications and biennial reports.  And since so many UNFCCC parties want to remove these subsidies, why not report on their existence and efforts to remove them? Who doesn’t like taking credit for doing good things, after all?

ECO hopes parties here at the UNFCCC will take note of the multiple benefits of removing fossil fuel subsidies. ECO encourages delegates to speak to their colleagues in the G20 and Rio+20 negotiations as well, so that progress can be made wherever possible, in order to end fossil fuel subsidies by 2015.

Developing countries have long insisted on the need for transparent and coordinated provision of financial support, to enable independent review of the extent to which commitments are fulfilled, as well as maximise the effectiveness of the funding. Moreover, transparency is vital to ensuring that the funds are equitably distributed over all developing countries in need of support, with priority for the most vulnerable developing countries.

At present, though there have been some positive steps taken in this direction, unless ECO was not invited that magical day, there is no common framework for measuring, reporting and verification (MRV) of international climate finance that fully captures existing financial flows.

ECO was happy to hear that at the end of 2011 the European Commission proposed a new EU regulation (referred to as the “MMR” Regulation) on monitoring and reporting for EU climate finance. The MMR (yet another acronym that delegates and observers should learn by heart) will standardize climate finance reporting requirements for EU Member States. We are glad to hear that the proposal is going through the EU legislative process this year, just in time to monitor the EU’s post-2012 financial commitments for climate action.

But the MMR still needs guidance from EU Member States on key concepts and methodologies to be included in the legislation: what is meant by climate finance and in particular “private climate finance”? What is “new and additional” climate finance and how are the baselines set for measuring this? How should the MMR count the climate-relevant activities and outcomes when reporting on projects with broader objectives?

In the grand tradition of EU stakeholder consultation processes, ECO knows that its ideas will be read and considered, and so takes the opportunity to recommend that the MMR include the following:

- detailed information on where the money is going

- comparable information that can be aggregated

- sources and recipient institutions as well as the channels used need to be visible in order to keep track of the financial flow

- Also, for this process to be really transparent, it is crucial that this information be made accessible to third parties, including recipient countries and NGOs and that the reported information be quadruple-checked by independent finance experts

But all this being said, ECO would like to remind all parties that any MMR or MRV proposal does not make any sense as long as there is no finance to MMR or MRV (or whatever you want to call it). At the end of the day, we need developed countries to start pledging substantial, scaled-up climate funding for 2013 onwards. Or the MMR will be yet another empty shell.

And because ECO knows that parties want to hear more about the major MRV reform behind the obscure acronym, the ACT Alliance and CAN-Europe went to great lengths to organize a side event on the role of private finance in climate action next Monday.

ECO will definitely be there.

The Adaptation Fund (AF) has entered into its fifth year of operation. A couple of weeks before this Bonn session, the Board of the Fund (AFB) at its 17th meeting made substantial decisions for further advancing the Fund´s provisions. In particular, these covered critical aspects such as the guidance for the consultative process, the consideration of most vulnerable communities, the establishment of complaints procedures and increased transparency regarding the technical review of project proposals. In the course of this week, the AFB had a chance to share information on its progress with interested Parties. The AFB can be congratulated for increasing its attention towards these issues and for learning from its own lessons.

This is important for the AF at its critical juncture of raising funds for meeting the adaptation needs of vulnerable countries and financing innovative projects that benefit the targeted areas. The prices for Certified Emission Reductions (CERs), which is the innovative and main funding source of the AF, have drastically decreased over the last months. Part of this is due to the lack of global ambition in mitigation. The EU, with its Emissions Trading Scheme, is one of the key demanders of the CERs. However, the current EU target of  20% reduction is not only well below the ambition indicated by the IPCC with regard to the 2°C limit, but also affects the prospect of the ETS as a functioning setter of price signals for emissions. (Of course, other developed countries lag behind in their mitigation ambition as well).

The direct access  approach of the AF is speeding up, with more and more developing countries managing the associated accreditation process, while sadly the funding gap is increasing, making it almost impossible for the AF to respond to all funding requests.

Few resources have been dedicated to the AF, despite its innovativeness and its progress. Sweden has contributed this year for a second time; Spain is the top contributor, with 45 million Euro. There are still too many developed countries who have not paid into it, some of them sitting on the Board. (And one could also imagine that some developing countries would support the AF in their own interest, e.g. as a learning tool.)

To address this issue, the Adaptation Fund Board has now set the target to raise US$100 million additional funds by the end of 2013. ECO encourages all developed countries to put additional money into the Fund. These contributions should enable the AF to keep pace with need until the Green Climate Fund becomes fully operational, due to increasing funding demands from developing countries.