TWN Info Service on Climate Change (Apr22/07)
8 April 2022
Third World Network

IPCC: Efforts by developed countries to undermine climate finance obligations

Kathmandu, 7 April (Prerna Bomzan): The line-by-line approval of the Summary for Policymakers (SPM) of the Intergovernmental Panel on Climate Change’s (IPCC) assessment report on ‘Mitigation of Climate Change’ under its Working Group 3 (WG3) saw climate finance as one of the central controversial issues, until the final moments of the protracted negotiations from 21 March to 3 April.

The 63-page SPM provides a high-level summary of the key findings of the comprehensive full assessment report and was negotiated between developing and developed country governments as well as the authors, and was adopted on 3 April.

From the outset, the most prominent finance fight was over country classification based on the fundamental bifurcation of development levels viz. ‘developing countries’ and ‘developed countries’.

By questioning the definition of the two terms and attempting removal of their usage, developed countries led by the United States (US) (which was imposing income based classification instead), basically pushed to undermine their climate finance obligations to the developing countries which is firmly embedded in the UN Framework Convention on Climate Change (UNFCCC) and its Paris Agreement (PA). This was further evident by resistance to the reference of the unfulfilled USD 100 billion-a-year finance goal (by 2020 which was committed by developed countries under the UNFCCC).

(The UNFCCC categorizes countries into: (i) Annex I Parties comprising industrialized countries that were members of the Organisation for Economic Co-operation and Development [OECD] in 1992, plus countries with economies in transition; (ii) Annex II Parties comprising OECD members of Annex I who are required to provide financial resources; and (iii) non-Annex I Parties comprising mainly developing countries).

While there was immense rhetoric by developed countries to preserve the integrity of the underlying assessment report throughout the approval session, they however demonstrated double standards in the finance negotiations with a great deal of push back on the textual proposals by the authors, resulting in major revisions including what was seen by developing countries as distortion of findings from the underlying report.

The fight over country classification

The long-drawn-out contention over country classification culminated in the final plenary session when figure 9 (a key graph under section E.5) on “mitigation investment flows and investment needs” was eventually dropped from the SPM due to failure in reaching consensus on the inclusion of the terms ‘developing countries’ and ‘developed countries’ due the deadlock playing out between the US and China.  

The original draft of figure 9 contained reference to ‘developed countries’ and ‘developing countries’ representing ‘by type of economy’, which was later removed by authors due to the insistence of the US.

The US’s key argument was that the classification was based on the UN M49 statistical country groupings which was viewed as “outdated”, and it pushed instead “income based” classification, alluding to the emerging economies in developing countries.

Germany also had called for a clear definition of developed and developing countries.

Following negotiations, a reference was reinstated in a revised iteration of figure 9 of 30 March, in a panel on “by regions” namely Europe, North America, Australia, Japan and New Zealand which were denoted as developed countries and Eastern Asia, Latin America and Caribbean, Southern Asia, South-East Asia and Pacific, Africa, Eastern Europe and West-Central Asia, and the Middle East were denoted as developing countries.

It was this revised iteration of figure 9 that China repeatedly requested to be displayed for approval, but it’s requests were denied by the concerned coordinating lead author without any clarification. The figure that was displayed for approval was a mirror version, but with the reference to developed countries and developing countries removed. The US was happy to go along with this version saying “it does not prejudice the Chinese view about who is developed and who is developing…(and) there are countries whose per capita income is higher than us…”.

Preceding the final plenary session, at a last-ditch-effort through a huddle to forge consensus, China clearly expressed its concern that it wanted to ensure figure 9 was consistent with the underlying report (referring to figure 15.4 in Chapter 15 on finance under the section on ‘Financing Needs’), which contained the terms developing countries and developed countries by type of economy, adding that this information was absolutely necessary. India, Bolivia, and Ecuador supported China and were willing to drop the figure if the reference was not reinstated.

At the final plenary session, as a compromise offer China suggested to include only ‘developing countries’ in the figure, which the US refused, and eventually figure 9 was dropped from the SPM altogether. China requested the “reason for deletion to be clearly stated on record”, emphasizing that the authors had included both developed countries and developing countries in the original draft totally in keeping with the underlying report and that these two terms were not “added or invented by us”.

In fact, the figure 9 actually had a lot of issues to start with. During the first reading of the SPM for initial comments, India had raised issues regarding the figure, as it referred to implied investments across regions based on scenarios, and that it did not speak of financial flows as implied by the caption and title. Also, it said that the figure is not about financial needs as implied by the use of investment needs in the title. By using the terminology of “annual yearly flows” this figure gave the misleading impression that it is referring to financial flows from developed to developing countries, when it was about an aggregate of annual investment at the regional level. India was in favour of dropping the figure. Brazil too agreed with India on the assumptions of the scenario.

The country classification dispute and thus, attempts of developed countries to fudge their financial obligations to developing countries was also reflected in the very lengthy negotiations to agree to the first sentence of section E.5.3 which reads as follows: “Accelerated financial support for developing countries from developed countries and other sources is a critical enabler to enhance mitigation action and address inequities in access to finance, including its costs, terms and conditions and economic vulnerability to climate change for developing countries”.

This sentence taken from the executive summary of the finance chapter was proposed by the authors in response to government comments to reflect language of E.5 headline statement. It was supported by India, Saudi Arabia, Argentina, Brazil and Saint Kitts and Nevis but was opposed by the US and Canada.

Saudi Arabia had suggested to add “developed countries to developing countries” and given several comments by developing countries to better reflect the underlying chapter, the authors had come back with an improved formulation containing the language of “consistent with common but differentiated responsibilities and respective capabilities (CBDR) in light of different national circumstances, agreed under the UNFCCC” at the end of the sentence. However, there was immediate opposition to this from Germany, the United Kingdom (UK), the US, Norway, Japan, Canada and the European Union while in defense were additional developing countries Kenya and Mexico. Despite the support in the chapter, the additional language was dropped after all.

In addition, Germany, UK, and the US consistently called to remove “developed countries” with the US repetitive argument that the “largest official capital supplier is not a developed country, (and) capital is coming from a much broader base”. Germany and the UK argued that finance has to come from “multiple sources”.  As a compromise language, Chile proposed “more developed to less developing countries” which was supported by Germany. However, there was opposition from Argentina, Brazil, Mexico on further differentiation of developing countries.

India, Argentina, Brazil, and Saudi Arabia said that if the term “developed countries” is removed, then CBDR needs to be reinstated. The other issue for developed countries was also the inclusion of the term “critical enabler”. After time consuming negotiations the E.5.3 sentence (cited above in italics) was agreed with the compromise language “…..for developing countries from developed countries and other sources…..”.

The fight over reference to USD 100-billion-a-year goal

The only two references to the USD 100-billion-a-year goal (agreed to under the UNFCCC) proved contentious, which compounded the view from developing countries that developed countries were obscuring as well as escaping from their financial commitments.

In section B.5.4, the reference is in the third sentence: “In 2018, public and publicly mobilised private climate finance flows from developed to developing countries were below the collective goal under the UNFCCC and Paris Agreement to mobilize USD 100 billion per year by 2020 in the context of meaningful mitigation action and transparency on implementation”.

The original draft read: “Public and publicly mobilised climate finance flows from developed to developing countries remain below the level of USD 100 billion per year pledged under the UNFCCC”.

The US had tried to remove the USD 100 billion reference altogether further arguing that if kept, the goal should be articulated correctly in line with the “full” PA language which also includes the clause “in the context of meaningful mitigation action and transparency on implementation”, (without mentioning the need to include the second important clause “taking into account the needs and priorities of developing countries”). (The language referred to by the US is not in the PA but in the UNFCCC’s COP 21 decision, that adopted the PA).

Canada and Switzerland also toed the US line and said bringing the negotiations language presents such challenges since the “collective” goal was “through 2025” while Germany clarified that goal is “not” referenced in the PA but in a “COP” decision under the UNFCCC.

Trinidad and Tobago, Saint Kitts and Nevis, Brazil urged to also specify that the goal was not met in 2020 while Argentina further pressed to include the qualifier “well below” to signal the large gaps of the unfulfilled goal.

The final approved sentence (cited above in italics) was a convoluted formulation of paragraph 53 of decision 1/CP. 21 (adopted in Paris at COP 21) by the authors. India had opened the sentence at the plenary session and requested for the addition of “taking into account the needs and priorities of developing countries”, however, the US opposed it. Later, Bolivia had also followed suit and requested for the addition of “to address the needs of developing countries” (in line with the 2010 COP 16 decision which established the USD 100 billion-a-year goal by 2020 commitment by developed countries). The concerned author had responded positively that such an inclusion was acceptable. However Co-Chair James Skea (who is from the UK) hurriedly gaveled down the approval of the sentence.

The second reference to the USD 100 billion-a-year goal is in section E.5.3, which reads:  “Options for scaling up mitigation in developing regions include: increased levels of public finance and publicly mobilised private finance flows from developed to developing countries in the context of the USD100 billion-a-year goal; increase the use of public guarantees to reduce risks and leverage private flows at lower cost; local capital markets development; and building greater trust in international cooperation processes”.

The lengthy wrangling in a huddle until the final hours of the negotiations was over when the replacement of the phrase “in the context of” by the word “beyond” in relation to the USD 100 billion-a-year goal. The concerned author had brought back the language “beyond USD 100 billion-a-year goal” from the preceding final government draft of the SPM in response to requests by developing country governments. However, for the developed countries, the insertion of “beyond” signalled the new finance goal post 2025.

The author then proposed to break the entire sentence into separate parts aiming for a more convenient solution to the first part containing the reference to the goal. The revised iteration read, “Options for scaling up mitigation in developing regions include increased levels of public finance and publicly mobilised private finance flows from developed to developing countries beyond the USD 100 billion-a-year goal, as envisaged and under consideration”.

The US reacted that the entire inclusion of the USD 100-billion-a-year goal was “hugely problematic” and “wildly prejudicial” since it was unclear whether “one goal or several goals (were involved) and who will contribute to the goal”. Canada, Belgium, France, and Switzerland also had issues with the right language in the sentence, similar to the negotiations over the issue in section B.5.4 (referred to above).

The next iteration proposed read: “Options for scaling up mitigation in developing countries include increasing levels of public finance and publicly mobilised private finance flows to developing countries from developed countries and other sources beyond the USD 100 billion-a-year goal”. The author also proposed to insert the footnote containing the full text of paragraph 53 of decision 1/CP.21 reflecting both clauses “in the context of meaningful mitigation action and transparency on implementation” and “taking into account the needs and priorities of developing countries”.

To this proposal, the US expressed its frustration and retorted that governments should not be negotiating with authors in these type of matters. It said that it was “unprecedented in IPCC” that reference to the UNFCCC or PA was being made which was not “policy neutral”. As an ultimatum, it said that the entire reference to the USD 100 billion-a-year goal should be removed. Germany, UK, Switzerland, France, Estonia, Canada echoed the US sentiment in succession about this being “policy prescriptive”, while Argentina pointed out that the reference to the goal was “policy relevant” and was supported by Mexico.

In response, the concerned author said that the findings of the underlying chapter point to the fact that current levels are “inadequate” and that “scaling up becomes important”, proposed a another iteration which read, “Options for scaling up mitigation in developing countries include increasing levels of public finance and publicly mobilised private finance flows to developing countries from developed countries and other sources significantly above the existing USD 100 billion-a-year goal”.

Germany reacted that the IPCC is being “politicized” while the US additionally attempted to remove “developed countries” from the sentence on similar grounds as in its previous arguments. The author next proposed to delete the reference to the goal altogether which was strongly opposed by Argentina, Mexico, Trinidad and Tobago and China, who collectively demanded that the original formulation be taken to the plenary for transparency where it was then approved containing the reference to the USD 100 billion-a-year goal (cited above in italics).

The fight over needs, gaps and conditionalities

One of the significant fights over retaining the scale of mitigation investment requirements in the SPM was in relation to the first sentence of section E.5.1 which reads: “Average annual modelled investment requirements for 2020 to 2030 in scenarios that limit warming to 2°C or 1.5°C are a factor of three to six greater than current levels, and total mitigation investments (public, private, domestic and international) would need to increase across all sectors and regions”.

Developed countries, particularly, the US wanted to remove the phrase “factor of three to six” and this lingering issue of contention was eventually resolved in a huddle by a show of hands exercised by the facilitating IPCC Board Member Thelma Krug (from Brazil). The authors removed the earlier phrase and replaced it by “several times” but Argentina, India and Brazil insisted in reinstating it, in keeping with the underlying report.

Given the time constraint and absence of consensus, Krug asked for a show of hands as to who was not in favour of bringing the phrase back which then saw the US, Canada and Norway not wanting the phrase, out of the 53 participants present.

In relation to reference on gaps, under section E.6.2, the US did not agree to the reference of “gaps” in the original formulation of the second sentence. After a lot of back and forth negotiations especially between the US, India, and Korea, the term “gaps” was replaced by “challenges” in the approved sentence which reads as follows: “Challenges in and opportunities to enhance innovation cooperation exist, including in the implementation of elements of the UNFCCC and the Paris Agreement as per the literature assessed, such as in relation to technology development and transfer, and finance”.

On the issue of overall means of implementation (finance, technology transfer, and capacity building to developing countries to enable climate action and implement their nationally determined contributions [NDCs] under the PA), the US, in particular, (backed by Germany), imposed its narrative of “bi-directionality”, explaining that only ambitious NDCs can attract international support, despite the authors disagreeing with it, since such information was not present in the underlying chapter.

This was in relation to the second sentence under section E.6.1 that originally read: “International financial, technology and capacity support, will enable more ambitious national contributions and greater implementation”.

The US said that the statement was “speculative and hypothetical” and it should capture the “PA spirit of bidirectional mechanism”. Germany supported the mutual supportiveness concept as well, while India pointed out that the issue of means of implementation is well recognised in relation to enhancement of NDCs and that there was extensive support in the literature. It further called for inclusion of “from developed countries to developing countries” after “capacity support” to enhance the value of the sentence. The authors also reiterated that their findings suggest if there is support then there will be more ambitious NDCs that is captured in Article 3 and Article 9 of the PA.

The final approved sentence reads: “International financial, technology and capacity building support to developing countries will enable greater implementation and encourage ambitious nationally determined contributions over time.”