By Vositha Wijenayake
With the world facing daily adverse impacts of climate change, financing for addressing climate change has become a dire need. However from where the total money needed for climate actions, and building resilience of vulnerable communities will be channelled to those countries and communities in need remains a key problem. While there remains a great number of options that are deemed available for developing countries to access funding that is available and deemed to be potentially available, the process is not as easy as expected.
This article aims to deliver a breakdown of what options are available for climate finance, and the role that the multi-stakeholders could play in helping develop countries access funding, as well as monitoring the utility of money that has been accessed.
What Is Climate Finance?
Climate finance is broadly refers to local, national or transnational financing which could be drawn from public, private and alternative sources of funding[1]. However there is not a universally accepted definition of what climate finance is, and this applies especially to the adaptation sector where determining and tracking what constitutes “climate” finance remains difficult.
Climate Financing: The Institutions
Since the birth of the United Nations Framework Convention on Climate Change (UNFCCC) 1992, how to finance climate actions, and where the money comes from have been a key issues of focus. The Convention provides that developed countries “shall provide new and additional financial resources” to developing countries. This financial assistance was channelled through the Global Environment Facility, either directly or through two GEF-managed funds set up under the Convention, the Least Developed Country Fund (LDCF) and the Special Climate Change Fund.
However the issue of climate finance has become complex over the decades. This is mainly due to flows of finance moving through multilateral development banks and climate-related overseas development assistance. While what constitutes climate finance remains vague, and blurry, estimates put it at around ±USD340 – USD650 billion dollars each year, ±USD40 – USD175 billion of that coming from public institutions[2].
In 2010, a new institution was introduced to the climate finance family: The Green Climate Fund. Today it has gained more attention than any of the former institutions which were available for developing countries to access finance for climate actions for mitigation and adaptation.
Green Climate Fund: For whom? For what?
In 2010, at the 16th Conference of the Parties of the UNFCCCC, the Green Climate Fund (GCF) was established controlled by a board which was decided to have equal representation of developed and developing countries. The GCF was established with the aim that it “will strive to maximise the impact of its funding for adaptation and mitigation, and seek a balance between the two, while promoting environmental, social, economic and development co-benefits and taking a gender-sensitive approach.” It joins the Adaptation Fund (set up under the Kyoto Protocol and financed through a levy on carbon market transactions) as the only other international climate fund independent of development finance institutions.
Further, the GCF falls within the operating entities of the Financial Mechanism of the UNFCCC referred to in Article 11 of the Convention. At COP17 in Durban,GCF was included as an operating entity to the Financial Mechanism which is accountable to the COP which decides on its climate change policies, programme priorities and eligibility criteria for funding.
The financial input of the GCF is to be provided from the developed country Parties to the Convention, as well as a variety of other sources that are public and private, including alternative sources. All developing country Parties to the Convention are eligible to receive funding from the GCF, and the GCF will finance agreed full and incremental costs for activities to enable and support enhanced actions on themes such as adaptation, mitigation, technology development and transfer, capacity building and the preparation of national reports by developing countries. It will also have thematic funding windows, with initial ones being mitigation and adaptation.
In addition to this, the GCF will also provide resources for readiness and preparatory activities and technical assistance, in order to facilitate developing countries to be able to access funding, and to satisfy the requirements listed out in the project cycle of the GCF.
Climate Finance in the Paris Agreement
The Paris Agreement provides that developed country Parties to the Agreement are to provide financial resources to help developing country Parties carry out mitigation and adaptation actions. This is not new; developed countries have always had to support and financial obligations under the UNFCCC and its Kyoto Protocol. However the Paris Agreement encourages other Parties that are in a position to do so, and willing to do so, to provide or continue to provide such support.
The Agreement also provides that financial resources to be allocated to assist developing country Parties need to be for both mitigation and adaptation activities. Article 9 of the Agreement mentions the need for the provision of scaled-up financial resources aiming to achieve a balance between adaptation and mitigation, taking into account country-driven strategies, and the priorities and needs of developing country Parties. This also highlights focusing especially on those countries that are particularly vulnerable to the adverse effects of climate change and have significant capacity constraints.
Ensuring transparency and accountability
Transparency and accountability are two key elements to building mutual trust and confidence and to ensure effective implementation of climate actions. The Paris Agreement establishes an enhanced transparency framework for both action and support, which is to have built-in flexibility by taking into account Parties’ different capacities and builds on collective experience. It further requires developed country Parties to include projected levels of public financial resources intended for developing countries in their bi-annual communications. Though the details of the transparency framework are still being developed, it is to be based on existing reporting and transparency procedures under the UNFCCC. Countries are also required to submit information necessary to track the progress made in implementing and achieving their respective nationally determined contribution.
At COP22 in Morocco in 2016, a facilitative dialogue is to be conducted to “identify relevant opportunities to enhance the provision of financial resources, including for technology development and transfer and capacity-building support, with a view to identifying ways to enhance the ambition of mitigation efforts by all Parties.” This will provide countries the opportunity to gain more clarity on the finance availability, allocation, as well as how resources could be enhanced for much needed climate initiatives and support for resilience building of vulnerable countries.
In addition to the Agreement, transparency and accountability plays a key role in the financial institutions as well. For example in the process of the GCF, it Governing Instrument, under paragraph 57, provides that monitoring of finances provided for implementation at country level needs to be monitored regularly for impact, efficiency, and effectiveness. It further adds the need for monitoring to be conducted in a participatory manner, with the involvement of stakeholders. This is mentioned as an aspect that needs to be encouraged within the GCF and its funding mechanism.
The Way Forward
While all are in agreement that finance needs to be allocated for immediate and urgent climate actions, there remain many hurdles that need to be overcome to achieve the USD 100 billion target per year for climate finance by 2020. This in turn requires a way to ensure that the most vulnerable to climate change impacts are not double burdened by the extensive requirements that are imposed for accessing climate finance.
Developing countries lack resources and technical knowledge in developing readiness proposals, concept notes, and funding applications needed to access climate finance. Most of these countries are not equipped with accredited implementing entities, while political thinking prevent them from accessing funding through international institutions that are accredited to play this role.
In order to make climate finance a reality we need to focus on those who need finance the most, and ensure that financing for implementing climate actions are invested in a manner has long term impacts and is sustainable. In order to achieve this, it is much needed to promote and facilitate a multi-stakeholder driven, and participatory set-up for monitoring the accessibility, and implementing of climate financing. In doing this, the civil society will be a key player, in ensuring accountability, as well as bridging the gap of lacking resources and technical expertise to access climate finance.
[1] FOCUS on Finance, UNFCCC. http://unfccc.int/focus/climate_finance/items/7001.php#intro.
[2] UNFCCC Standing Committee on Finance (2014). 2014 Biennial Assessment and Overview of Climate Finance Flows Report.
About the Author:
Vositha Wijenayake is the Policy and Advocacy Co-ordinator of CANSA and, Regional Facilitator for Asia for the Southern Voices Programme. She is a lawyer by profession and has an LLM from University College London. She specialises in International Environmental Law and Human Rights Law. She has been tracking the UNFCCC negotiations since 2009 with a legal and gender focus.
