After protracted negotiations, a key decision on long-term finance

Once again, finance proved to be a thorny issue and a vital decision on long-term finance was taken only after some difficult negotiations.

T Ajit and Meena Raman

PARTIES to the UN Framework Convention on Climate Change (UNFCCC) adopted a key decision on long-term climate finance (LTF) on the final day of the Marrakech climate talks on 18 November, after much wrangling on some key issues.

Arriving at the decision was apparently difficult as there were major divergences between developed and developing countries on some of the key issues as regards climate finance. 

Sources revealed that the most contentious issues included the 'Roadmap to US$100 billion' report, scaling up climate finance, adaptation finance, the measuring, reporting and verification (MRV) of support, and the referencing of Article 9 of the Paris Agreement in the preamble of the LTF decision.

'Roadmap to US$100 billion' was an un-mandated report launched by the United Kingdom and Australia on behalf of the developed countries just ahead of the Marrakech talks. It claimed that $62 billion was mobilised in 2014 by developed countries and that, based on an analysis by the Organisation for Economic Cooperation and Development (OECD), 'pledges made in 2015 alone will boost public finance from an average of US$41 billion over 2013-14 to US$67 billion in 2020 - an increase of US$26 billion'.

This report was used by developed countries to assert their claim that they are on target to meeting the goal of $100 billion per year by 2020 that was agreed to at the climate talks in 2010 in Cancun, Mexico.

 As expected, developing countries, led by the Philippines representing the G77 and China, did not want to lend legitimacy to the 'Roadmap' as it was not mandated by the UNFCCC.  

 Instead, they preferred to rely on the work of the UNFCCC's Standing Committee on Finance (SCF), which submitted a report to COP 22 that included a 'Summary and recommendations ... on the 2016 biennial assessment and overview of climate finance flows', as mandated by the COP.

The biennial assessment (BA) highlighted that the flow of public finance from developed to developing countries as reported in the biennial reports of developed countries was $25.4 billion in 2013 and $26.6 billion in 2014.

When the Marrakech talks began on 7 November, the COP agreed that a contact group be established on LTF, which was co-chaired by Georg Borsting (Norway) and Andres Mogro (Ecuador). 

During the informal con-sultations held under the contact group, several iterations of the draft text were hammered out until the last day of the COP, which was mainly conducted behind closed doors, not open to observers. 

 A bracketed text (indicating lack of consensus) was finally forwarded by the co-facilitators of the contact group to the COP 22 presidency on the final day of the climate talks, following which the presidency offered a bridging proposal. 

 Parties worked on the bridging proposal in an informal setting and that is how a decision on LTF got adopted on 18 November. 

 Following are the highlights from the LTF decision around the contentious issues. 


$100 billion 'Roadmap'


In paragraph 2 of the decision adopted, the text reads: 'Welcomes with appreciation the submission made by developed country Parties in response to decision 1/CP.21, paragraph 114, and takes note of the information contained therein'.

 (Paragraph 114 of the COP 21 decision 1/CP.21 refers to the call to developed countries 'to scale up their level of financial support, with a concrete roadmap to achieve the goal of jointly providing US$100 billion annually by 2020 for mitigation and adaptation while significantly increasing adaptation finance from current levels and to further provide appropriate technology and capacity-building support'.)

According to sources, developing countries led by the G77 and China were against an explicit reference in paragraph 2 of the decision to the developed countries' 'Roadmap to US$100 billion' and wanted to only 'take note' of it and not welcome it. 

On the other hand, developed countries led by the European Union and the United States wanted to 'welcome' the report 'with appreciation' and insisted that this was a red line for them. For the G77 and China, the words proposed by the developed countries were viewed as being 'too strong', as it would lend credence to the 'Roadmap'. 

 It was learned that during the closed-door negotiations, the US said it found it 'mind-boggling' that some Parties had suggested deleting the reference to the 'Roadmap'. 

The final compromise was the use of the term 'the submission made by developed country Parties', which is an implicit reference to the 'Roadmap'.  

 (According to several developing-country negotiators and observers, there are serious issues in the 'Roadmap' as to what is regarded as 'climate finance' and there were significant questions about the accounting methodology involved in the analysis that is the basis for the report.)

 Sources also revealed that developed countries led by the US insisted that long-term climate finance was about pre-2020 climate finance (and not about the post-2020 time frame which is covered by the Paris Agreement). 

 According to a seasoned negotiator from a developing country, the US contention was that LTF would end in 2020. 'If it is long-term climate finance, how can it end in the pre-2020 period?' questioned the negotiator.


MRV of support


According to observers, developing countries achieved some success in deleting references in the adopted decision to any figures on what may be regarded as climate finance flows from developed to developing countries. 

Paragraph 1 of the decision noted 'with appreciation the 2016 biennial assessment and overview of climate finance flows of the Standing Committee on Finance, in particular its key findings and recommen-dations, highlighting the increase of climate finance flows from developed country Parties to developing country Parties'.

 In an earlier version of the draft decision, the section on MRV of support had read as follows: 'Notes with appreciation the 2016 biennial assessment and overview of climate finance flows of the Standing Committee of Finance, in particular its key findings and recommen-dations, underlining the need to improve reporting guidelines taking into account the challenges and limitations identified in the report and the importance of addressing methodological issues of tracking finance flows and for the reporting on finance provided to developing country Parties and the finding that global climate finance flows continued to increase, including flows mobilised from developed to developing countries reaching US$53 billion in 2013 and US$61 billion in 2014.' 

 According to sources, deleting the numbers was important for developing countries because of the limitations and challenges mentioned in the 2016 BA. 

 The BA mentioned that challenges were encountered in 'collecting, aggregating and analysing information from diverse sources'. Other challenges highlighted included 'the limited clarity with regard to the use of different definitions of climate finance [which] limits comparability of data; there were uncertainties associated with each source of data', including 'uncertainties' related to data on 'domestic public investments' and 'lack of procedures and data to determine private climate finance'. 

Given these uncertainties and challenges, it was hard for many developing countries to accept the figures on the finance flows from developed to developing countries.


Scaling up climate finance


As regards the scaling up of climate finance, paragraph 3 of the decision adopted reads: 'Welcomes the progress by developed country Parties towards reaching the goal of jointly mobilising US$100 billion annually by 2020, . and urges developed country Parties to continue to scale up mobilised climate finance towards this goal'.

 According to sources, negotiations on this issue were quite intense as developed countries, with the US and Switzerland in the lead, wanted everything on 'scaling up' deleted, especially as regards long-term finance beyond 2020. 

 In a previous version of the draft decision, the text on 'scaling up' was much longer and read as follows: 'Acknowledging that developed country Parties should continue to take the lead in providing and mobilising climate finance from a wide variety of sources, recognising the important role thereof, taking into account the needs and priorities of developing countries, and further confirming that those efforts should represent a progression beyond previous efforts, . urges developed country Parties to scale up their provision of financial support to developing country Parties in line with the latter's increasing needs and priorities identified in a country-driven manner, including enhancing their national efforts within the global action to tackle climate change as identified in the nationally determined contributions (NDCs), where they exist.'

 (NDCs refer to climate actions in the post-2020 time frame under the Paris Agreement.)

 Clearly, the final compromise reached does not refer to the scaling up of climate finance beyond 2020 but is limited to the $100 billion annually by 2020.


Adaptation finance 


On adaptation finance, paragraph 5 of the decision adopted reads as follows:

'Urges developed country Parties to continue their efforts to channel a substantial share of public climate funds to adaptation activities and to strive to achieve a greater balance between finance for mitigation and for adaptation, recognising the importance of adaptation finance'.

Paragraph 6 of the decision notes 'with appreciation the summary report on the 2016 in-session workshop on long-term climate finance, which focused on the issues of adaptation finance, needs for support to developing country Parties, and cooperation on enhanced enabling environments and support for readiness activities'. 

 (During COP 22, a workshop on LTF focused on adaptation finance.)

 Paragraph 7 of the decision also notes 'the increase in adaptation finance to date as identified in the 2016 biennial assessment and overview of climate finance flows, and the need to continue efforts to significantly scale up adaptation finance, while stressing the need to strive for a greater balance between adaptation and mitigation finance, and invites Parties and relevant institutions to consider the key messages from the in-session workshop referred to in paragraph 6 above, including that:

(a) Country-driven processes for the assessment of adaptation needs in developing countries are fundamental for scaling up adaptation finance;

(b) The nationally determined contributions and adaptation communications could constitute a good opportunity for supporting the scaling up of adaptation finance;

(c) The role of the private sector in adaptation finance needs to be further enhanced;

(d) Access to adaptation finance remains a challenge, particularly for small-island developing States and the least developed countries;

(e) Better information needs to be generated for more efficient planning, including through enhanced tracking of adaptation flows;

(f) Strengthening national public financing management systems is vital to support countries to effectively manage, track and monitor climate finance;

(g) Maximising the effectiveness of adaptation finance is important in ensuring that limited financial resources achieve the greatest possible impact'.

 According to sources, in relation to adaptation finance, the paragraphs above were agreed to 'after a lot of struggle'. 

 It was learned that the G77 and China had a proposal to quadruple financing based on the SCF's BA, but the proposal did not fly in the negotiations. 

 (According to the BA, mitigation-focused finance represented more than 70% of the public finance, and adaptation finance provided to developing countries only accounted for about 25% of the total finance.)


Reference to Article 9 of the Paris Agreement


According to sources, the G77 and China wanted to include in the preamble to the decision a reference to Article 9 of the Paris Agreement, which, among other matters, reaffirms the legal obligation of developed countries to provide financial resources to developing countries. 

 Developed countries, it seems, refused to entertain any proposal on recalling Article 9, and a compromise was reached. 

 Instead of Article 9 being referenced explicitly, there is reference to decision 1/CP.21, which is the COP decision adopted in Paris to which the Agreement is annexed.

 The preamble of the decision adopted reads: 'The Conference of the Parties, . Recalling Articles 4 and 11 of the Convention, Also recalling decision 1/CP.16, . 1/CP.21 .'.


In-session workshops for 2017 and 2018


The decision adopted also spells out themes for in-session workshops in 2017 and 2018 as follows. 

 Paragraph 12 reads: 'Decides that the in-session workshops on long-term climate finance in 2017 and 2018 will, with a view to scaling up climate finance for mitigation and adaptation, focus on experiences and lessons learned from:

(a) Articulating and translating needs identified in country-driven processes into projects and programmes;

(b) Roles of policies and enabling environments for mitigation and adaptation finance;

(c) Facilitating enhanced access'.

 Paragraph 13 states: 'Requests the secretariat to organise the in-session workshops referred to in paragraph 12 above and to prepare summary reports on these workshops for consideration by the Conference of the Parties'.

 A developing-country negotiator explained that the phrase 'for consideration by the Conference of the Parties' in paragraph 13 is important in that the COP will need to consider the reports of the workshops and take a decision, which is different from just noting that an in-session workshop took place. 

Besides the decision on LTF, COP 22 also adopted other key decisions on finance relating to: the report of the SCF; terms of reference for review of the functions of the SCF; report of the Green Climate Fund (GCF) to the COP and guidance to the GCF; and report of the Global Environment Facility (GEF) to the COP and guidance to the GEF.     

*Third World Resurgence No. 316, Dec 2016, pp 23-25