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TWN
Info Service on Climate Change (Mar25/03) CONTENTIOUS PARIS AGREEMENT’S ARTICLE 2.1(c) TEXT DROPPED FROM IPCC FINANCE CHAPTERS Kathmandu, 12 Mar (Prerna Bomzan): At the recent 62nd session of the Intergovernmental Panel on Climate Change (IPCC 62) which approved the chapter outlines of the three working group (WG) reports of the upcoming seventh assessment report cycle (AR 7), the most contentious issue of Article 2.1(c) of the Paris Agreement (PA) in relation to “climate finance” did not make its way into the approved finance chapter outlines. (Article 2.1(c) reads, “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. There is no consensus yet on the scope of the article and its complementarity with Article 9 [on finance] of the PA. Work under the Sharm el-Sheikh dialogue launched in 2023 is on-going under the PA, and Parties are to decide on a way forward on the matter, when they meet at COP 30 in Belem, Brazil in Nov 2025.) The IPCC 62 was held in Hangzhou, China from 24-28 February. The meeting ended late on 1 March following intense negotiations that lasted nearly 40 hours at a stretch, involving several contentious issues. On 1 March, Panel members concluded the approval of the chapter outlines of WG 1 ‘The Physical Science Basis’; WG 2 ‘Impacts, Adaptation and Vulnerability’; and WG 3 ‘Mitigation of Climate Change’ reports. The approved chapter outlines of WG 2 and WG 3 contain ‘Chapter 7: Finance’. In essence, the difficulty and sensitivity of the finance discussions revolved around ensuring the IPCC’s principle of being “policy-relevant” and “policy-neutral” against “policy-prescriptive”, and aiming for that “balance” in the final texts. Developed countries underpinned “finance” and “investments” in the context and relevance of Article 2.1(c) of the PA with its clear reference in the finance chapters, underscoring investments, financial flows and all sources of finance and financial actors with the key role of private finance, further calling for inclusion of “investments” in the title of the chapters to read as “Finance and Investments” and “consistency” and close “alignment” between the WG 2 and WG 3 finance chapters. In particular, in WG 2 finance chapter, the language reflecting Article 2.1(c) appeared in the last indicative ‘bullet’ which was finally dropped due to irreconcilable differences. Overall, there were two important wins for developing countries going forward: (i) the ‘title’ is maintained as solely “finance” without inclusion of investments and (ii) the absence of language on Article 2.1(c) of the PA, in both the WGs 2 and 3 finance chapter outlines. This article will focus on WG 2 finance chapter negotiations. (See TWN update for WG 3 finance chapter.) WG 2 Chapter 6: Finance In sharp contrast with WG 3 finance chapter negotiations which was conducted in a dedicated ‘contact group’ setting on 27-28 Feb, no such mode of work was followed for WG 2 finance chapter which was hastily negotiated and approved at the plenary in the morning of 1 March, after approval of the WG 3 chapter outlines including on finance. Saudi Arabia expressed “disappointment” over the “imbalance of treatment” between the WG 2 and WG 3 finance chapters and cautioned against any precedent, calling for a process with equal allocation of time. Negotiations were based on the proposed chapter outlines agreed at the scoping meeting, which was presented by WG 2 Co-Chairs Winston Chow (Singapore) and Bart van den Hurk (the Netherlands), on behalf of the WG 2 Bureau, and which received general comments on 24-26 Feb. The ‘title’ and 7 indicative ‘bullets’ of the chapter outline read as follows: “Chapter 6: Finance • Background considerations, including broader macroeconomic context, international financial architecture, and reforms, geopolitics, other international commitments, barriers and enablers to finance • Climate finance for adaptation – overview of financing needs, current flows, instruments and gaps, effectiveness and access, and methodologies for tracking finance flows • Climate finance for responses to losses and damages – overview of financing needs, current finance flows, instruments and gaps, effectiveness and access, and methodologies for tracking finance flows • Public and private investments for climate action: finance flows at domestic and international levels • Equitable financial systems and schemes including those related to financial stability, sustainability and financial risk management • Approaches to accelerate finance flows, including the diversity of instruments, schemes and approaches, and their appropriateness • Consistency of finance flows with a pathway towards climate resilient development” During general comments at the WG 2 plenary on 24-26 Feb, developed countries made calls for “consistency” and close “alignment” between the WG 2 and WG 3 finance chapters framing it in the context and relevance of Article 2.1(c) of the PA (reflected in the last bullet 7), underscoring investments, financial flows and all sources of finance and financial actors with the role of private finance, and further calling for inclusion of “investments” in the title of the chapter to read as “Finance and Investments”. They also called to include “costs of inaction”, similar to calls in the WG 3 finance chapter. Palau welcomed the chapter outline which included climate finance for both “adaptation” and “losses and damages”, highlighting the Loss and Damage Fund under the UNFCCC as well as the adopted decision in Baku on the new collective quantified goal (NCQG) which speaks of grants and public finance. It stressed on “consistency” between the two finance chapters given elements of quality, quantity, access, features, and transparency, which was supported by Grenada, Nepal, Timor-Leste, Saint Kitts and Nevis, Antigua and Barbuda, Vanuatu and Belize. Timor-Leste underlined that climate finance is a climate justice issue which was echoed by Nigeria. Saudi Arabia while appreciating the chapter outline, expressed major disagreement with the last bullet (7th) reflecting the language of Article 2.1(c), reiterating that there is no common interpretation agreed by members and this is to be decided at COP 30 and hence, called for it deletion since it is out of scope and mandate of the IPCC. It also called for the deletion of “geopolitics” as seen as out of place in bullet 1 as well as mention of “reforms” as prescriptive. In bullet 2, it pointed out the need to include “from developed to developing countries” after climate finance for adaptation and pointed out that it mostly comes from public sources, while also highlighting the imbalance between mitigation and adaptation finance. In bullet 5, it called to replace “financial stability, sustainability and financial risk management” with “policies”. India and China supported for the deletion of the last bullet 7 carrying the language of Article 2.1(c). Maldives speaking to needs based financing in bullets 2 and 3, stated that “adequate and sustained finance, technology transfer and capacity building (means of implementation)” is very critical and requested its statement to be put on record. It also emphasised on public finance which was supported by Kenya who further suggested to highlight and add “imbalance” in adaptation finance in bullet 2. The Netherlands specifically stated that the language of means of implementation is used in the UNFCCC context. Based on general comments received, a revised text was released which was then opened for negotiations only in the early morning of 1 March to an exhausted and dwindling plenary, after approval of the WG 3 chapter outlines including on finance. In the revised text, two insertions of “costs of inaction” were seen in bullet 2 and 3, as follows: Bullet 2: “Climate finance for adaptation – overview of financing needs, current flows, instruments and gaps, effectiveness and access, methodologies for tracking finance flows, and costs of inaction” Bullet 3: “Climate finance for responses to losses and damages – overview of financing needs, current finance flows, instruments and gaps, effectiveness and access, methodologies for tracking finance flows, and costs of inaction” Further, additional language “related to adaptation action and responses to losses and damages” in bullet 4 and “investments” in bullet 6, as follows: Bullet 4: “Public and private investments for climate adaptation action and responses to losses and damages: finance flows at domestic and international levels” Bullet 6: “Approaches to accelerate finance flows and investments, including the diversity of instruments, schemes and approaches” Specifically in response to bullet 4, developing countries took the floor pointing out the importance of “public finance” for both adaptation and losses and damages, and further opposed to the elevation of “investments” in bullet 6. India cautioned against alignment with the WG 3 finance chapter and also reiterated against “cost of inaction,” which it only saw as “costs of inaction in the provision of means of implementation”. It maintained its position on the ‘title’ to be retained solely as “finance” and stated that references to “investments” already was a flexibility, calling for deletion of the last bullet containing language on Article 2.1(c), which was supported by China. Saudi Arabia, drew attention at the outset on the “imbalanced” treatment of the WG 2 finance chapter, further expressing disappointment that requested changes had not been included in the revised text, reiterating to delete “geopolitics” and “reforms” in bullet 1 and deletion of the last bullet on Article 2.1(c). It also objected to new references of “costs of inaction”, as well as underscored that the added reference of investments in bullet 6 is an “overemphasis” on the private sector which is clearly not interested in adaptation projects. In bullet 3, Australia suggested to add “climate-related” finance for losses and damages, which was supported by France and Palau. However, Italy suggested only “finance” since it encompasses a broad range such as disaster risk reduction and humanitarian aid, which was supported by Belgium and Austria but opposed by Vanuatu who stated that the distinction between “finance and climate finance” need not be “politicised” as climate finance is well established over decades for climate action. Palau also reminded about the Loss and Damage Fund as an operating entity [of the financial mechanism]. In bullet 4, Kenya asked to replace “investments” with finance, which was supported by Chad. In the next revised text presented for consideration: in bullet 1, “geopolitics” and “reforms” were dropped; in bullets 2 and 3, “climate finance” was replaced with “funding”; in bullets 2 and 3, “costs of inaction” was reworded to “costs and benefits of adaptation action and inaction”; in bullet 4, “public and private” before investments was removed; in bullet 5, “those related to financial stability, sustainability and financial risk management” was replaced by “related approaches, policies and guidance”; bullet 6 was reworded to “approaches to accelerate finance flows and investments, including the diversity of instruments and schemes; and the last key bullet 7 was reworded to “coherence of climate finance with sustainable development goals”. India suggested to further remove “international financial architecture” and “international commitments” from bullet 1, given lack of clarity; urged restoration of “climate finance” and to drop “inaction” in bullets 2 and 3. It contested against “investments” in bullet 4, stating that large literature clearly acknowledges the importance of “public finance” and suggested to replace “sustainable development goals” with “climate resilience” in the last bullet 7. Kenya reiterated to add “imbalance” in adaptation finance in bullet 2 and also called for replacing “investments” with finance in bullet 4, which was supported by Vanuatu. Saudi Arabia supported India’s comments on bullet 1 and for the last bullet 7, proposed alternative language reading “synergies between climate finance and sustainable development”. In the next revised text for consideration, “climate finance” was restored in place of “funding” in bullets 2 and 3; “inaction” was dropped from bullets 2 and 3; and the last bullet 7 was reworded to “synergies between climate finance and climate resilience”. Further, India proposed to add new bullet 2 taken from agreed language of WG 3 finance chapter outline which reads, ”Financial adequacy, access (equity and justice), inclusion, effectiveness, and outcomes considering finance at different scales (including national, regional, and global”. Referring to bullet 3 on “climate finance” for losses and damages, France stated that there is “no category of finance for losses and damages” while there is “Article 9 [of PA] for adaptation”, to which Vanuatu responded that climate finance is a well established concept with specific channels around it for losses and damages and that it “did not want to see that level of compromise”. The final revised text presented for approval showed “climate finance” replaced by “funding” in new bullets 3 and 4 which was defended by Italy despite opposition from India and Kenya. The approved outline with its final 8 indicative bullets reads as follows: “Chapter 6: Finance · Background considerations, including broader macroeconomic context, other international commitments, barriers and enablers to finance · Financial adequacy, access (equity and justice), inclusion, effectiveness, and outcomes considering finance at different scales (including national, regional, and global) · Funding for adaptation – overview of financing needs, current climate finance flows, instruments and gaps, effectiveness and access, methodologies for tracking finance flows, and costs and benefits · Funding for responses to losses and damages – overview of financing needs, current climate finance flows, instruments and gaps, effectiveness and access, methodologies for tracking finance flows · Public and private finance for climate adaptation action and responses to losses and damages: finance flows at domestic and international levels · Equitable financial systems and schemes including related approaches and policies · Approaches to accelerate finance flows and investments, including the diversity of instruments and schemes for adaptation action · Synergies between climate finance and climate resilience”
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