Tag: Finance

Getting to the Core of Article 6

ECO is worried that the lengthy conversations about future contributors to climate finance may be helping developed countries avoid provisions today for more adequate and predictable support. Because, with time running out, ECO is fearful that Article 6 may be reduced to little more than a compromise on differentiation, a bit on ex-ante information (the draft para on this, let’s face it, is just re-hashing stuff from previous COP decisions), language on ex-post transparency, and perhaps a reference to the global stocktake.

This would be unfortunate. ECO has always seen Article 6 as one that an ambitious agreement needs in order to ensure future financial support for those countries that need it. Para 10 (option 2) does exactly that. The text suggests the periodic setting, review and adjustment of collective goals for the provision of support. ECO would love to see these few words, originally inserted by the G77 in October 2015, become the “operational core” of Article 6. Setting such collective goals, for instance, in 5-year cycles, perhaps backed by individual countries’ plans outlining how they will contribute, would greatly increase predictability. It would enhance adequacy, too, if such goals were linked to support requirements hinted at by developing countries in their current and future INDCs.

And yes, differentiation needs to be fixed. If ECO had its way, of course, Annex 2 countries would be required to enhance  the implementation of their obligations. And other countries with comparable levels of historic responsibility and economic capability would indeed be in a position to complement such efforts.

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Cycling Together

ECO has no doubt that parties came to Paris with the best of intentions, and are keen to make sure we stay below 2°C. The party spoiler is that we’ve been warned that we are on a more-than-3°C track. And ECO knows that even 2°C is too much. How can we increase the stakes to avoid settling for a 3°C world? ECO believes that many Parties, especially developing countries, can and are willing to go further than their current INDCs. But many will need extra support to do that.

The facilitative dialogue described in Paragraph 20 of the COP Decision Text is a great place to start influencing current INDCs before 2020.

After developed countries increase their pre-2020 ambition, wouldn’t it be so much more interesting and effective if all countries come up with improved INDCs? Developed countries would lead the way with mitigation, and support developing countries by identifying additional conditional contributions they could make with such support. This would be the embryonic beginning of a 5-yearly process that links the gears of finance cycles closely to those of mitigation reviews. The finance cycles would set targets for support in 5-year intervals, while the mitigation review cycles would start with the revision of INDCs and need to happen as soon as possible before 2020. Mere ‘preparation’ of subsequent INDCs is not enough–the current initial commitments must be revised and resubmitted to put us onto a 2°C path and keep 1.5°C in reach.

If ECO had a magic wand, it would make the same cycle apply to the identification of adaptation finance needs and set 5-yearly targets to meet them. This ‘axle of ambition’ would connect cycles of mitigation and adaptation, accelerated by finance and linked to the adequacy of mitigation ambition. This process should continue through the Article 10 post-2020 global stocktake, starting in 2023 and repeating and scaling-up every 5 years until a robust long-term goal is met. This sturdy connection allows these wheels to move fast–we’re talking Tesla on the Autobahn.

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Where Is the Bridge Builder? 

 

Yesterday, the Climate Vulnerable Forum declaration sent a resounding call to make the 1.5°C target real. Today, we continue to focus on the reality of climate impacts. 

Developing countries are at risk of acute climate damage and enormous adaptation costs. The European Union has a major role to play in ensuring the Paris agreement is fair and strong on this crucial issue. The EU has traditionally been a bridge builder in the negotiations. The EU needs to put its engineering skills to work. The EU should work closely with CVF countries to build unity and improve climate ambition. 

That means ensuring the Paris outcome truly supports countries to be resilient to climate impacts. A long-term goal on adaptation and a commitment to setting 5-year quantified financial targets are core elements. Our global resilience depends on the long-term target we set, so decarbonisation by 2050, and rapidly increasing ambition until we get there, are essential. 

No one is immune to the impacts of climate change. EU citizens are already experiencing severe floods and heat waves. In the last 30 years, Europe has seen a 60% increase in extreme weather events. Even in the EU, the poorest suffer most. Global solidarity must start in Le Bourget–ECO is looking to the EU to bring us together.

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Worrying Gives Us Wrinkles. Give Us Money Instead. 

The anticipation of what leaders would or would not announce on climate finance had our hearts pounding. Yesterday calmed some of those nerves. Hot on the heels of Canada’s pledge, other countries joined the party, making commitments to the Least Developed Country Fund. Norway, Sweden and Spain also increased their climate finance commitments.

That’s not a bad start. But ECO doesn’t want to come to every COP to worry about donor countries committing to much needed climate finance. Developed countries could ease ECO’s nerves by guaranteeing predictability, adequacy and clarity of their financial pledges, as they scale up climate finance to US$100 billion annually by 2020. This is particularly urgent for developing countries that need to prioritise adaptation while facing a shortfall in financial support.  

ECO urges developed countries to build on the climate finance momentum generated on Monday, not just through COP21, but also to 2020 and beyond. Strong language around credible, adequate, and predictable finance in the Paris agreement would smooth our wrinkles and unfurrow our brows.

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Le Tour du COP

Bonjour and welcome to the 21st edition of Le Tour du COP!
Participants in Paris have two weeks to show the world what they’re made of. ECO welcomes the ADP’s early start and expects governments to treat COP21 as a turning point, where they agree to a transformation that is much faster;  just; and has the needs of the most vulnerable at its core.
~ECO’s ultimate guide for winning the race~
Well-built Cycles: As any bike rider can tell you, increasingly ambitious cycles are essential for reaching the finish line.
ECO urges countries to adopt a Paris Ambition Mechanism that ensures that the overall ambition across all elements is assessed and scaled up in 5-year time frames. Contributions should be regularly updated to be in line with the 1.5-degree C limit, on the basis of regular science and equity reviews.
Current INDCs should be reviewed and ratcheted up as soon as possible, and well before countries begin implementation in 2020.
Long-term Goal: To maintain the right speed and direction, you need to know your final destination. ECO expects governments to agree to a 1.5°C temperature goal and operationalise it with a long-term goal of full global decarbonisation and 100% renewable energy access for all by 2050.
Finance: Securing the yellow (or should that be green?) jersey requires teamwork. This kind of collaboration can be fuelled by establishing collective targets for financial support to be set by the CMA every 5 years, with distinct targets for adaptation and mitigation.
Developed countries and other countries that are in a position to do so (because their levels of capability and responsibility are comparable to developed countries) would commit to contributing to meeting these targets.
Adaptation: To stay in the race for a climate-safe planet, we must be resilient by scaling up adaptation action urgently.
The Paris agreement must adopt a global goal that advances adaptation and builds resilience for all communities and ecosystems. It should recognise that higher temperatures will require greater adaptation efforts.  Achieving the adaptation goal is a common responsibility, and will require support to developing countries.
Loss and Damage Action: A durable climate regime must be able to respond to the impacts of climate change that can’t be prevented through mitigation or adaptation. The Paris agreement must be equipped with a separate provision on loss and damage, with  robust institutional arrangements and financial support to vulnerable developing countries to address these kinds of impacts.
Pre-2020 Action and Support: If you stay too far back in the pack, at some point you can’t make up the distance needed to win the race. The future of our planet is too important to risk waiting too long to make our move. Immediate action is needed to address the ambition gap. ECO urges developed countries to implement, accelerate and strengthen their pre-2020 commitments, while all countries cooperate to do more.
Through a strong Workstream 2 decision, governments must also agree to create a menu of workable policy options to scale up action. To maintain momentum, two high-level champion positions should be created and filled with leaders with a profile capable of incentivising high-level cooperation built around the good ideas coming out of the TEP. The champions should also coordinate the development and scaling up of mitigation and adaptation initiatives by matching good ideas with necessary means of implementation. These initiatives should be presented at annual high-level meetings, which can also review future progress.
Crucially, developed countries must present a plan on how they are going to meet their $100 billion promise, how to improve the imbalance between mitigation and adaptation, and specifically how support from public sources will increase until 2020.
Transparency and Integrity: The Tour has seen its fair share of unsportsmanlike conduct. To keep all Parties on their best behaviour, the Paris agreement should contain a strongtransparency framework, including MRV, to maintain trust and ensure transparency of action and support.
The new agreement must also ensure emissions reductions are real, additional, verifiable, and permanent; avoid double counting of effort; are supplemental to ambitious national mitigation; contribute to sustainable development and ensure net atmospheric benefits.
Respect for Human Rights: Good team leaders look after their people. For the Paris outcome to promote effective climate policies that benefit those affected by impacts of climate change, it must include an operative, overarching reference to human rights.
On this road through many negotiations, we have made it through some difficult stages and the finish line for an agreement is in sight. The pieces needed for a strong outcome in Paris are within reach. It is now up to our leaders to finish strong and deliver the result our world so desperately needs.
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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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