by Bogdan Zymka
Finance is a crucial aspect of making the United Nations Framework Convention on Climate Change an effective regime. The finance system under the UNFCCC is extremely complex. The beginning of the financial mechanism was established under Article 11 of the convention: “A mechanism for the provision of financial resources on a grant or concessional basis, including for the transfer of technology, is hereby defined. It shall function under the guidance of and be accountable to the Conference of the Parties, which shall decide on its policies, programme priorities and eligibility criteria related to this Convention. Its operation shall be entrusted to one or more existing international entities.” The mechanism has since been expanded and defined to include several funds under the Global Environmental Facility (GEF) and a Green Climate Fund (GCF) directly under the convention.
Historical Context and Modalities: Standing Committee
The Standing Committee (SC) is an independent body under the convention that reports directly to the Conference of the Parties (COP). The SC was first established at COP16 in Cancun. Parties agreed to establish a committee tasked with “[assisting] the Conference of the Parties in exercising its functions with respect to the financial mechanism of the Convention in terms of improving coherence and coordination in the delivery of climate change financing, rationalization of the financial mechanism, mobilization of financial resources and measurement, reporting and verification of support provided to developing country Parties.” During COP17 in Durban, the work of the SC was further elaborated into six areas. These areas are as follows: (a) Organizing a forum for the communication and continued exchange of information among bodies and entities dealing with climate change finance in order to promote linkages and coherence; (b) Maintaining linkages with the Subsidiary Body for Implementation (SBI) and the thematic bodies of the Convention; (c) Providing to the Conference of the Parties draft guidance for the operating entities of the financial mechanism of the Convention, with a view to improving the consistency and practicality of such guidance, taking into account the annual reports of the operating entities as well as submissions from Parties; (d) Making recommendations on how to improve the coherence, effectiveness and efficiency of the operating entities of the financial mechanism; (e) Providing expert input, including through independent reviews and assessments, into the preparation and conduct of the periodic reviews of the financial mechanism by the Conference of the Parties; (f) Preparing a biennial assessment, overview of climate finance flows, to include information on the geographical and thematic balance of such flows, drawing on available sources of information, including national communications and biennial reports of both developed and developing country Parties, information provided in the registry, information provided by Parties on assessments of their needs, reports prepared by the operating entities of the financial mechanism, and information available from other entities providing climate change finance; The Standing Committee has a total of twenty members. Ten members are from Annex I countries and Ten members from Non-Annex II countries including African, Asia-Pacific, and the Latin America and Caribbean States, one member from a small island developing State and one member from a least developed country Party. These members serve for two years. A chair and co-chair are elected annually from Annex I and Non-Annex I countries respectively. All members are to be approved by the COP. The SC is mandated to meet at least twice a year.
Work Done in the Standing Committee Thus Far
The SC is a relatively new body in the UNFCCC and since its inception has only had two meetings. The first meeting was held in Bangkok in September of 2012. During their first meeting, they produced four background papers on matters relating to the committee. The first background paper was on the modalities of work of the Standing Committee. This paper briefly outlined the procedural practices of the committee including the roles of each member and technicalities of member attendance. It also outlined that observers may participate in meetings of the committee if asked by the committee. The committee comes to conclusions by consensus and has the ability to close session to outside observers. The second background paper was on the possible activities based on the functions of the Standing Committee. This paper briefly outlined possible activities of the SC based off of its initial mandate. In the area of rationalization of the financial mechanism, the committee suggested that it (a) provide draft guidance to the COP on the financial mechanism of the convention; (b) Analyze and assess the effectiveness and efficiency in the delivery of climate finance; (c) Provide input to the COP, including through independent reviews and assessments, into the preparation and conduct of the periodic reviews of the financial mechanism. In the area of mobilization of financial resources, the committee suggested that it (a) Prepare a technical paper on mobilization of financial resources; (b) Preparation of report for consideration by COP. In the area of Measurement, reporting and verification (MRV), the committee suggested that it (a) Prepare biennial assessment of climate financial flows; (b) Develop methodologies and processes for MRV of support; (c) Interact with the registry and financial institutions providing climate finance to exchange information on climate finance sought and provided. The third briefing paper was on the on the organization of the forum for the communication of information regarding to climate change finance. This paper outlined two options for a forum to streamline the exchange climate finance information, including the possibilities of public-private partnerships. This forum would both be a formal in-person meeting as well as a web-hosted seminar. The final background paper was on approaches for maintaining linkages with the Subsidiary Body for Implementation (SBI) and the thematic bodies of the Convention. This paper outlined the overlap in mandates given to the SBI and SC. The areas in which the SC and the SBI have the most overlap are in the area of guidance provided to the Operating Entities (OEs) of the Financial Mechanisms to the COP. An amendment to the way COP requests guidance was proposed such that either only one of the bodies provides guidance or both work in joint collaboration to provide such guidance. The second meeting was held in Cape Town. As of now, there are no additional documents released other than the provisional agenda which included the report of the SC to COP18, finalization of the work programme under the SC, and further expression of the forum.
Oppurtunity for Coherence
The downfall of the financial mechanism in the UNFCCC is that it is highly bureaucratic and scattered. Work having to do with finance is split among the many complex bodies under the convention therefore extending the time period between fund pledging, depositing and implementing. The SC has an interpretable mandate that could possibly allow it to finally bring clarity and cohesion to the UNFCCC finance system. The Green Climate Fund currently has no procedure for the consideration of its report to the COP. The Standing Committee could have the opportunities for streamlining the finance process when the GEF is not involved. As it currently stands, the SC seems like a redundant body in the work that it shares with the SBs and other financial mechanisms with their own methods of reporting and guidance. If finance communication is streamlined, the Standing Committee could be the connecting role between MRVs, the Registry, and the Green Climate Fund.
Long-term finance is the other side of Fast Start Finance, an initiative semi-adopted in Copenhagen in 2009 to mobilize funds for climate change projects by 2012. Long-term finance is the other side of the climate finance coin, in that it encompasses all funding passed 2012. During COP17 in Durban, Parties initiated a work programme on long-term finance. The initial stages of the work programme manifested themselves in two workshop sessions, one held in Bonn, Germany and the other held in Cape Town, South Africa. These workshops had the purpose of bringing together members involved in climate finance from both the private and public sector in order to better understand the nuances of mobilizing finance post-2012. The first workshop was a series of presentations given by various members on the subjects of past, present, and future needs of climate finance, the specific needs of developing country parties in climate finance, an evaluation of sources of long-term finance, options for mobilizing climate finance, and lessons learned from fast-start finance. Taking all of these into account, members of the work programme closed the session by setting the agenda for their second workshop. The second workshop was more pointed in that it focused on mobilization of climate finance taking into account the information gathered at the first workshop. There were two focus areas in the workshops, policies and instruments, and delivery and access of climate finance. After the two workshop sessions, members of the work programme submitted a report to the upcoming COP in Doha. The report consisted of policy recommendations for various areas of finance. Specifically, the work programme called for clarity and predictability of sources of climate finance, including clarity on how developed countries will fulfill their promise of mobilizing USD 100 Billion annually by 2020. Secondly they called for the acknowledgement that there needs to be more coherent information on climate-finance needs in developing countries, including a need for increased capacity in developing countries to conduct comprehensive assessments on their mitigation and adaptation needs. Thirdly, members called for a strengthening of the tracking climate finance, both private and public. Members also called for more ambition and transparency needed in setting targets for finance in order to support domestic efforts. Lastly, members called for the establishment of a regular climate finance forum in order to bring together innovative forms of finance to the financial mechanism of the UNFCCC. The members concluded the report by emphasizing the need for coherence in the GCF and the proposal for a carbon tax of USD 20-25 per tonne of carbon dioxide in order to better facilitate the achievement of the mobilization of USD 100 billion by 2020. There was also a mention of removing harmful fossil fuel subsidies and redirect funding to climate finance. The report concluded with the plan to continue the work programme these specific areas: (a) The analysis of options for the mobilization of financial resources from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources, and their linkages; (b) The analysis of the relevant analytical work on the climate-related financing needs of developing country Parties; (c) The integration of lessons learned from fast-start finance (FSF) and best practices from developing and developed country experiences in the analysis of sources and needs; (d) The exploration of the interface between public and private finance, including approaches to leveraging private climate finance; (e) The identification of enabling environments that can unlock and foster increased climate finance flows for mitigation and adaption; (f) The exploration of delivery mechanisms that could play a role in channeling climate finance. The plan also comprehensively outlines data compiled from the workshops in the areas specified during the workshops and how to move forward. One of the Co-Chairs of the work programme on long-term finance, Zaheer Fakir (South Africa) also sits on the board of the Green Climate Fund. While this may be seen as a mere personnel coincidence, given the content of the report to the COP from the work programme, this could be the beginning of coherence and proper utilization of the GCF for its intended purpose.
Big Picture & Perspective
While the mandates for the Standing Committee and the work programme on long-term finance seem to have concrete goals for streamlining of the process, they fall short in perceived effectiveness. Current long-term finance figures are grossly underestimated. According to a presentation given by Manuel Montes of the South Centre, the need for climate finance in developing countries is grossly underestimated by the current USD 100 billion annual proposal. According to the South Centre, best-case scenario, developing countries would need 5-10 times the current prospective amount of finance. Estimates put developing country needs for mitigation and adaption between USD 600 billion and USD 1.55 trillion, USD 100 billion to 450 billion going to adaptation alone. These figures alone should be a clear indicator of the urgency of the issue at hand. Cohesion and effectiveness of financing has always been an issue within the UNFCCC. The time for creating more committees and work programmes to keep recommending better comprehension and cohesion is over. 2012 is coming to a close; the period for fast-start finance is over. The work programme on long-term finance has finished its background work; it is now time for them to infuse their report with the same ambition they themselves called for. They are charged with setting standards for long-term finance post-2012. There is now a dedicated body under the UNFCCC to streamline matters of finance in the Standing Committee. Under that committee, there is an open forum that meets often to find new, additional, and innovative sources of funding. The groundwork is set for that same committee to create comprehensive guidelines for reporting. The work-programme is chaired by a board member of the GCF and acknowledges that ambition and equity is needed to effectively implement funding, especially to the needs of developing countries. Fast-start finance proved to be a modest, yet crucial example of the ability to quickly mobilize funding. Developed country Parties have no excuse from committing to ambitious and much needed finance goals. The UNFCCC has the political infrastructure to make its financial mechanism effective. Parties should take finance out of the hands of the GEF and streamline predictable funding under the GCF, to be effectively administered, accessed and monitored through a combination of the Subsidiary Bodies, Standing Committee, and GCF board. These bodies should adopt equity and ambition as their core principles, especially when considering the finance needs of developing countries, as they are disproportionately affected. The stage is set. Developed countries have the historic responsibility to step up and implement the needed commitments to tackle every aspect of climate change, especially through the avenue of finance.