Q&A: Richard Klein on what’s at stake for climate finance in Doha

At COP15 in Copenhagen, developed countries agreed to establish a Green Climate Fund to channel financial support for mitigation and adaptation; to mobilize US$100 billion per year for those purposes, from various sources, by 2020, and to provide US$30 billion in “fast-start” finance from 2010 to 2012.

Three years later, there are questions about just how much of that money materialized – and how much more (or less) will flow between 2013 and 2019. Richard J.T. Klein, a senior research fellow at SEI and close observer of climate finance negotiations, answered questions about what’s at stake at COP18.

Q: Developing countries are seeking to significantly ramp up climate finance post-2012, to US$60 billion per year by 2015. How likely is that, and how big an issue is it on the COP18 agenda?
A: There is very little that developing countries can do to make developed countries pay more than they are willing to commit. You would need a formal agreement on climate finance for 2013-2019, and developing countries are keen on reaching one. Developed countries, on the other hand, say that no such agreement is needed and that the fast-start finance they provided shows they are acting in good faith.

But given the current economic situation, it seems inevitable that the amount of climate finance will actually fall over the next few years. For example, Sweden has already announced that it will cut by half its annual share of climate finance.

Keep in mind also that while money is important, so are plans to spend the money wisely and effectively. Negotiations about providing money go hand in hand with negotiations on what could or should be done with the money. For example, Least Developed Countries have already assessed their urgent and immediate adaptation needs in National Adaptation Programmes of Action; they will prepare national plans to address their mid-term adaptation needs over the next few years.

Q: Questions have been raised about how much truly “new and additional” finance was provided through the “fast-start” programme. Is there a way to answer that question reliably?
A: The amount of climate finance disbursed to developing countries has increased over the past three years, but it is clear that there has been a fair degree of double-counting – that is, money that was already committed as development assistance now also got labelled as climate finance. Unfortunately, there is no agreed definition of “new and additional”, so it is difficult to make firm statements. Developed countries argue that they have met the US$30 billion target; developing countries disagree.

Q: Why is it so difficult to track those financial flows, and will it continue to be so?
A: Mechanisms to promote the accountability of both developed and developing countries are needed, but don’t exist yet. In principle it was agreed at COP13 in Bali that the provision of climate finance by developed countries should be measurable, reportable and verifiable, but no agreement has yet been reached on what exactly is to be measured and reported, let alone how it is to be verified. Developed countries have submitted to the UNFCCC Secretariat annual reports on fast-start finance provided, but there are no standard templates or agreed definitions, so these reports are difficult to compare and verify.

Q: Could the Green Climate Fund, once operational, fill that gap?
A: The Board of the Green Climate Fund, which has the task of preparing operational guidelines for the fund, will not address questions related to the measurement, reporting and verification of the provision of finance. Not all the money will flow through the Green Climate Fund, either: developed countries will also continue to use bilateral channels as well as the World Bank and other multilateral banks to disburse money to developing countries.

It is the Standing Committee on finance that, among other things, will prepare periodic overviews with the specific aim of enabling the measurement, reporting and verification of support provided to developing countries. The first of these overviews is scheduled for COP20, and will also cover climate finance that will not flow through the Green Climate Fund.

Q: What are the implications for the GCF’s medium- and long-term success (2020 and beyond) of what funding levels are pledged for 2013-2019? Does it matter whether finance is scaled up or not?
A: Yes, it matters, but just as important is whether countries can agree on the use of innovative sources of finance, which is a key issue for the Work Programme on Long-Term Finance. Despite developing countries’ insistence, it is unrealistic to assume that more than just a modest share of the US$100 billion per year from 2020 onwards will come directly from public budgets. That means that new ways of “generating” money need to be found, which also includes a role for the private sector.

For a while it looked as if carbon markets could be a source of climate finance (e.g. from selling emission permits), but the price of carbon is very low at the moment and looks unlikely to recover in the absence of strict emission reduction targets. Other possible sources include a tax on aviation and shipping fuels, or a tax on international financial transactions. However, some countries strongly oppose such tax measures.