Climate Finance and Global Development Post-2012: Clearing the Fog at Doha

For 15 years, climate policy wonks have been talking about “the post-2012 World,” describing the years after the end of the Kyoto Protocol’s “first commitment period,” which ran from 2005 to 2012.  Now just three weeks away, the post-2012 world is actually much fuzzier than ever before.  Just as we near the shore, a fog is descending.

In terms of reducing emissions, the Kyoto Protocol’s binding limits on greenhouse gas emissions was always applied to a small group of developed nations, excluding the United States, and several other major emitting nations.  Kyoto’s “second commitment period” captures even fewer emissions than the first, with a smaller number of nations taking on binding targets, and debate continuing here in Doha over whether the second commitment period might be five or eight years long.  The real solution of course is a global agreement, but negotiations to this effect are taking place under another track (the Ad Hoc Working Group on the Durban Platform for Enhanced Action, or ADP) with a potential agreement kicked down the road to 2015, for implementation by 2020.  So expect three more years of fog on mitigation targets.

However there is no reason why climate finance should be a contributor to the haze.  As developing nations become increasingly aware of the need to avoid dirty energy pathways and face the risks of a changing and uncertain climate, they need clarity on what support is available from abroad, and whether they can count on it.  To address these huge challenges, planning needs to be long term.  Otherwise, climate finance will fall into the trap of much of foreign aid, where agencies get approval very late and have to “push money out the door,” creating haphazard initiatives that lack coherence and long-term impact.

Along with the end of the first commitment period of the Kyoto Protocol, December 31, 2012 is also the end of the “Fast Start Finance” period, three years over which $30 billion was promised to build experience and institutions to deliver funding to vulnerable poorer countries to begin to develop green energy and adapt to climate risks.   This funding pledge was made at Copenhagen, as part of the effort to keep negotiations going in spite of deep distrust and acrimony.

Over these past three years, something approaching the $30 billion has been delivered by the wealthy OECD nations, but the details of what actually arrived are not clear.  Final reports are still coming in, but lacking is definitive evidence that promises for “new and additional” funding was provided (see my recent briefing with IIED, and another related briefing from Oxfam).

Copenhagen agreed to provide funding that would “scale up” to levels “approaching $100 billion a year” by 2020.  However no mid-term targets were ever specified for that scaling up.  Basic math shows that to get from about $10 billion a year to $100 billion a year over eight years would require roughly an additional $11 billion each year to be “mobilized”.  That would suggest we need $21 billion in 2013, $32 billion in 2014, and $43 billion in 2015, for a total of $86 billion.  Recognizing financial hard times, the G77+China (the largest negotiating bloc in the UNFCCC, comprised of developing and emerging economies) has proposed a lower amount of $60 billion total over the next three years, of which a majority should come from public resources and be allocated to adaptation actions.  

Climate finance discussions are headed to a shore blanketed with fog.  As the U.N. climate negotiations move into their final days in Doha, there is still no certain finance stream that would start when “Fast Start Finance” ends on January 1, 2013 -- just days away.  Developed nations are resisting a concrete pledge, with countries like the U.S. only saying that the funding won’t go over a “fiscal cliff” in January, but without further specifics. 

The Doha negotiations are dizzyingly complex, with seven separate negotiating tracks, and a lack of clarity on the resolution of two key tracks  that were created in Bali in 2007 to try to bring the United States and other key nations onboard (the AWG-KP and AWG-LCA).  But just three areas require attention to be resolved for finance to become “adequate, predictable, and reliable,” as is needed for developing countries to plan a greener and safer future.  These are the funding stream for the now 10-year-old Adaptation Fund, the functioning and filling of the Green Climate Fund, and a clearer picture on long-term finance and the role of the standing committee. The importance of these three areas at Doha and what is needed going forward is as follows:

  • The Green Climate Fund (GCF) was created with much fanfare in Durban last year, but has taken forever just to get its board appointed and its rules laid out.  As we move into the final days in Doha, the GCF is still only partially operationalized and has only $3 million in start-up funding committed. The GCF needs to be fully functioning by this time next year, and needs major pledges and a reliable finance stream to avoid it becoming another empty “placebo fund.”
  • The Adaptation Fund was meant to be supported by a levy on Clean Development Mechanism (CDM) projects, but demand for CDM credits has collapsed with the end of the first commitment period of the Kyoto Protocol with no certain second commitment period beyond 2012.  This is happening just as the fund is hitting its stride: direct access is now approved for 14 countries, and 25 adaptation projects have been approved, with $160 million allocated.  Meanwhile incomes are a slim fraction of what was projected when CDM credits had real value.

    So now for the Adaptation Fund it’s back to the “bad old days” when funds and recipients await pledges and voluntary contributions from generous developed countries (like Spain and Sweden), while others are holding back or only giving through bilateral channels.  My analysis with IIED of the “Fast Start Finance” reports of 10 nations/groups showed that only 2 percent of that funding was given through U.N. channels like the Adaptation Fund and the also-underfunded Least Developed Countries Fund. 

 

  • The new Standing Committee awaits its marching orders, which will include the substantial task of assessing the needs for funding among developing countries and should include recommending how those needs are actually going to be filled.  In order to generate stable and adequate funding for integrating climate and development, a potential funding source has to include “Innovative Sources” of Long-term Finance.  These should include finally taxing international shipping and airline flights (which somehow still have massive loopholes) and possibly an international transaction tax.  While politically difficult, these are perhaps the only places where adequate and predictable financing rests outside national treasuries, who are hoarding funds since the financial crisis. 

One final element is needed to truly lift the fog of finance going forward: transparency.   Whether it is in the Standing Committee or elsewhere such as in the Subsidiary Body for Scientific and Technological Advice (SBSTA) track, there has to be developed rigorous standards for defining what counts as climate finance, and where each climate project claimed by contributors is reported in a standardized format.  This “Measurement, Reporting and Verification” (MRV) was required of poor nations on their mitigation pledges, and should be required of developed countries on their finance pledges.  As it stands now, there may be no formal reports on climate funding until 2014. This is no way to build trust, and certainly no way to foster stable long-term development planning.    It’s time to lift the fog in Doha.