TWN Info Service on Climate Change (Oct21/05)
20 October 2021
Third World Network

Finance needs of developing countries in trillions of US dollars, reveals new UNFCCC Report

Delhi, 20 Oct (Indrajit Bose)- The UNFCCC’s Standing Committee on Finance (SCF) adopted the executive summary of the first ever report on the determination of the needs of developing countries for implementation of the Convention and the Paris Agreement at its 26th meeting held in a hybrid format from 12-14 October.

The summary reveals that the needs of developing countries as identified by information sourced from various reports submitted by them, is in the trillions of US dollars.

The first ever Needs Determination Report (NDR) comprises of an executive summary and a technical report. The executive summary was prepared by the SCF while the technical report was prepared by experts under the guidance of the SCF but remains a product of the external experts.

The NDR was compiled from sources submitted by developing countries. These include adaptation communications (AC); biennial update reports (BUR); long-term low emissions development strategies; national adaptation plans (NAP); national adaptation programmes of action (NAPA); National communications (NC); nationally determined contributions (NDC); technology action plans (TAP); and technology needs assessments (TNA).

According to the executive summary of the NDR, “NDCs from 153 Parties (as of 31 May 2021) included 4,274 needs, with 1,782 costed needs identified across 78 NDCs cumulatively amounting to USD 5.8 trillion to USD 5.9 trillion up to 2030. Of this amount, USD 502 billion is identified as needs requiring international sources of finance and USD 112 billion as sources from domestic finance”.

The summary also states that “NCs from 149 Parties represent the highest number of identified needs (6,990 needs) of which 1,137 costed needs cumulatively amount to USD 8.8 trillion –USD 8.9 trillion”. “BURs from 62 Parties identified 2,044 needs, of which 535 needs are costed, cumulatively amounting to USD 11.5 trillion,” the summary states.

(The mandate for the preparation of such a report came from the 24th session of the Conference of Parties (COP) in 2018. Further highlights of the executive summary are provided below.)

One issue of controversy that arose during the SCF meeting, was over the inclusion of a recommendation related to assessing methodologies to determine loss and damage needs.

(The term ‘loss and damage’ refers broadly to the entire range of damage and permanent loss associated with climate change impacts in developing countries that can no longer be avoided through mitigation nor can be avoided through adaptation.)

SCF member Randy Caruso (United States) referred to loss and damage as being outside the mandate of the report since the mandate was to focus on mitigation and adaptation. The US member said that he would not agree to including a recommendation on loss and damage in the executive summary.

Zaheer Fakir (South Africa) clarified that the mandate from COP 24 was in relation to the implementation of the Convention and PA and it did not say anywhere that the mandate was restricted to mitigation and adaptation.

SCF members Ali Waqas Malik (Pakistan), Mohamed Nasr (Egypt), Ivan Zambrana Flores (Bolivia), Zerihun Getu Mekuria (Ethiopia), Diann Black-Layne (Antigua and Barbuda) stressed that loss and damage must be in the executive summary and recommendations, given the importance of the issue and the challenges faced by developing countries. They insisted that there should be a recommendation to assess methodologies in relation to loss and damage needs.

Caruso then suggested that instead of listing loss and damage separately, it be clubbed with adaptation. He proposed the following language: “…adaptation needs, including loss and damage”. Developing country SCF members could not agree to this and clarified that that since loss and damage is a standalone article in the Paris Agreement (as Article 8), it merits separate treatment and not be superimposed onto adaptation.

After much wrangling, the recommendation was as follows: “The SCF invites…Parties, multilateral and financial institutions, academia, methodology developers, research institutions and other relevant actors to continue to develop methodologies for the determination of adaptation and resilience enhancement needs and, in this context, needs related to averting, minimizing and addressing loss and damage.”

Another contentious issue that arose during the meeting was in relation to whether the recommendations adopted by the SCF should be forwarded to the COP and Conference of the Parties to the Paris Agreement (CMA).

Caruso (US) objected to the recommendations being forwarded to the COP, without clarifying the reason behind the request. The US member further expressed that he wanted it to be noted that the SCF approved the NDR “but there is no consensus on forwarding the NDR to the COP”.

Following this statement, the UNFCCC’s legal counsel was consulted and the legal opinion was that anything that is gaveled by the SCF would be forwarded to the COP. With that, the NDR will be forwarded to COP 26 to be held in Glasgow end of this month.

On another note, the SCF could not agree on the recommendations of its other flagship report titled ‘2020 Biennial Assessment and Overview of Climate Finance Flows’ (BA 2020). The SCF decided to forward just the summary of BA 2020 to COP 26, without the recommendations. During the BA 2020 discussion, the US had said that if the BA recommendations would not go to the COP, it would have implications beyond the BA and the same would apply to the NDR’s recommendations as well. However, by then, the NDR’s executive summary, including the recommendations, had already been adopted by the SCF. (A separate article on the issue will follow.)

Other highlights of the NDR Executive Summary

The NDR executive summary also states that, “Although some developing countries provided information on costed needs for mitigation and adaptation by sectors and subsectors, this information is not provided across all reports. Therefore, it is not possible to provide a comprehensive and accurate overall amount on needs by sector and subsector in the first NDR”.

“Although developing countries identified more adaptation than mitigation needs, the latter had more costs identified. This may not imply that mitigation needs are greater, but rather be due to the lack of available data, tools and capacity to assess adaptation needs,” the summary states further.

“On the basis of the number of mitigation needs expressed …, energy is the lead sector in climate change mitigation actions, followed by land use and forestry, transport, agriculture and waste and sanitation,” the summary states. With respect to adaptation, “agriculture and water are the two lead sectors in climate change adaptation actions, followed by disaster prevention and preparedness, coastal zone management and health”.

“Developing countries also communicate other areas of needs that involve issues such as gender, indigenous peoples and vulnerable groups,” states the summary further.

“Some Parties reported information on potential needs related to averting, minimizing and addressing loss and damage either through specific adaptation activities that include objectives related to averting, minimizing and addressing loss and damage; referenced damage incurred due to recent climate-related events such as droughts and severe weather; and modelled potential future impacts of climate on GDP or economic losses in a given year (e.g. 2030 or 2050),” it added.

“Qualitative data show significant prevalence of capacity-building and technology development and transfer needs,” it states further.

The summary also states that information and data on the needs of developing countries were also sources from available regional or global reports.

“For the mitigation needs of developing countries, these reports use a mix of climate-economic modelling for scenarios of below 2 °C, ranging from USD 2.4 to USD 4.7 trillion in annual energy-related investment needs globally; investment opportunities based on stated national plans and targets including and beyond NDCs, ranging from USD 23.8 to USD 29.4 trillion for emerging markets from 2016 to 2030; and investment estimates for achieving conditional NDC targets using carbon prices, for example USD 715 billion in Africa,” states the summary.

In relation to estimates related to adaptation and resilience, “Costs are based on bottom-up national and sector-based studies (ranging from USD 140 to USD 300 billion annually by 2030), measuring impacts to GDP (for example ranging from USD 289.2 to USD 440.5 billion up to 2030 in Africa) and the incremental investment needed to upgrade or retrofit infrastructure stock (ranging from USD 11 to USD 670 billion in annual incremental costs) are most prevalent” according to the summary.

The summary also states that the types of methodologies applied to determine needs vary. “Most methodologies used to identify mitigation needs are quantitative, while a lower number of qualitative methodologies are used to identify adaptation needs,” it added.

In the section on challenges faced by developing countries to determine needs, the summary cites examples such as institutional coordination; costing needs; capacity gaps; limited availability of granular data at the sector and subsector levels; and the lack of ability of some developing countries to continuously track needs and identify additional and emerging needs.

In the section on challenges experienced in the preparation of the first NDR, the summary cites the following: Data inconsistencies; Data gaps and Data interpretation, wherein different countries apply their respective definitions and interpretations of needs.

The summary also comprises the recommendations to the COP and CMA. In the recommendations adopted, the SCF invited the COP and CMA to encourage developing countries and climate finance providers, multilateral and financial institutions, private finance data providers and other relevant institutions, “to enhance the availability of granular, country-level data on needs related to the implementation of the Convention and the Paris Agreement with a view to addressing existing data gaps”.

The SCF also invited the COP and CMA to encourage developing countries to “share best practises on determining needs, including the institutional capacity conducive to determining needs”; and to provide, where possible, information on needs related to:
(i) Gender-responsive climate action and the needs of indigenous peoples and vulnerable groups;

(ii) Preparation of national reports to the UNFCCC, including reporting on the activities contained therein;

(iii) Addressing and mitigating risks, including physical and transitional risks;

(iv) Energy poverty as it relates to sustainable development;

(v) Methodologies employed in the determination of the needs in their national reports to the UNFCCC, including, in accordance with reporting guidelines, where available, quantified data on needs”

The operating entities of the Financial Mechanism, UN agencies, multilateral and bilateral financial institutions and other relevant institutions were invited “to make use of the information contained in the first NDR when supporting developing countries in identifying and costing needs”; “to make available further information on methodologies related to determining and costing needs, especially for adaptation needs and incremental costs”; and “to provide financial and technical support to developing countries in updating the reporting of their qualitative and quantitative information and data on needs to be considered in subsequent NDRs, as appropriate”.

(Green Climate Fund, GCF and Global Environment Facility, GEF are operating entities of the Financial Mechanism of the Convention.)

The operating entities of the Financial Mechanism were also invited to “revise templates and guidance for developing countries when supporting their processes in identifying their needs with a view to enhance availability of granular information on qualitative and quantitative needs”.

The SCF invited the COP and CMA to encourage developing countries to “consider the insights on methodologies identified in the first NDR when costing and determining needs” and “to take advantage of available resources through the operating entities of the Financial Mechanism as well as other multilateral and bilateral actors to strengthen institutional capacity for identifying and costing their needs in relation to implementing the Convention and the Paris Agreement”.

One recommendation was to invite the constituted bodies of the UNFCCC, in particular the Paris Committee on Capacity Building and the Adaptation Committee, to “consider the insights identified in the first NDR when implementing their respective work plans”.

Another recommendation which became contentious and as explained above was to encourage “Parties, multilateral and financial institutions, academia, methodology developers, research institutions and other relevant actors to continue to develop methodologies for the determination of adaptation and resilience enhancement needs and, in this context, needs related to averting, minimizing and addressing loss and damage”.

The final recommendation encouraged “all actors, when determining needs for implementing the Convention and the Paris Agreement, to highlight linkages to the implementation of the 2030 Agenda and application of the Addis Ababa Action Agenda”.