Take-aways on finance
ECO would not want negotiators to leave Bonn with the feeling that no progress was made on finance–which is what will enable the implementation of any fair and ambitious agreement reached in Paris.
The good news first: ECO senses convergence on the view that future finance arrangements should build on the existing architecture. This includes the Green Climate Fund, the Adaptation Fund, the Least Developed Countries Fund, the Standing Committee, the Strategies and Approaches process (a work in progress, hopefully useful), the biennial ministerial engagement, and the MRV provisions (modest and with room for improvement). This fact should keep the developed countries happy, and allow negotiators to focus on the substance: how to get more money flowing to climate action.
But before money can get out, it will first have to get in–that is, into the Green Climate Fund. The Fund is waiting for pledges.This week the G77 and China called for an initial capitalisation of at least US$15 billion. Thanks to the remarkable pledge by Sweden, we are inching closer. Will the US, the UK, Japan, Norway, Canada, Australia, New Zealand, Belgium, Finland, Austria, Iceland, Ireland, Poland and others rise to the challenge?
ECO is pleased that climate-proofing of investments has gained a lot of attention and support here in Bonn, perhaps even enough to be expressed through specific decisions to be made in Paris. ECO is all for climate-proofing, with public entities taking the lead. Governments, development banks, export credit agencies, etc. should shift their financial or political backing away from dirty fossil fuels.
Much to ECO’s dismay, however, no real progress was made on delineating the “vehicle” for finance between Lima and Paris. There is fierce resistance to including information on the provision of finance in developed Parties’ INDCs, meaning that developing countries will head home from Peru without any confidence that the Paris agreement will lead to binding commitments on finance. These commitments are an integral part of the “fair shares” that developed countries must make towards an equitable and ambitious outcome. ECO challenges them to offer credible ideas to create such confidence.
In this regard, ECO very much liked the Brazilian proposal to include South-South co-operation in their INDCs. Developed countries would be enlightened (or maybe embarrassed) to see other INDCs with information on support and co-operation without having anything to showcase themselves. Or, as AILAC noted, developing countries could prepare two-tier INDCs, starting with their fair-share level of ambition without support, and then an indication of how much further a country could go with sufficient support. Developing countries could then decide in Paris whether to lock-in their more ambitious INDCs, subject to finance becoming available.
Some developed countries (New Zealand is one) seem open to the idea of a global target on finance (and other means of implementation), as part of the Paris package, though most remain silent. Such a target on the provision of public finance is essential to ensure that adequate support is available for adaptation and to catalyse an investment shift from fossil fuels to renewables and energy efficiency technologies.
The AILAC proposal of periodic finance pledges or commitments by developed countries (and other countries with comparable levels of responsibility and capability) has gained attention this week. The EU, for one, does not seems entirely hostile to the idea, as a way of creating predictability and transparency in the fulfilment of longer-term promises and commitments.
Parties on the lookout for something more short-term may remember that there is still no forward-looking transparency with regard to the Copenhagen promise of $100 billion. ECO echoes the calls from Malaysia, Jordan and Iran for a finance roadmap towards 2020 and has no idea why the developed countries continue to resist this. Such a roadmap will be an essential ingredient to the success of the overall Paris package.