This past week, Tuesday and Wednesday (July 16-17, 2013), an important meeting on climate change was held at the Dusit Hotel in Makati City. This was the first meeting of the expert group of the Work Programme on Long-term Finance (LTF) under the United Nations Framework Convention on Climate Change. The LTF was created to implement a commitment made in 2009, during the Copenhagen Conference on Climate Change by rich and developed countries, to make available $100 billion by 2020 to support developing countries in reducing greenhouse gas emissions and adapting to climate change. During that same meeting, which was a heads of state summit attended by President Barack Obama and other world leaders, the same rich countries also committed to deliver $30 billion for 2010-2012. There is disagreement on whether this pledge was in fact kept.
The Work Programme on Long-term Finance, co-chaired by the Philippine Climate Change Commissioner Naderev Sano and Swedish Finance Ministry Special Adviser Mark Storey, is intended to make sure that the $100 billion does not meet the same fate and that it is in fact the pledge is fulfilled. The LTF is tasked to (1) inform developed country Parties in their efforts to identify pathways for mobilizing the scaling up of climate finance to USD $100 billion per year by 2020 from public, private and alternative sources in the context of meaningful mitigation actions and transparency on implementation; and (2) inform Parties to enhance their enabling environments and policy frameworks to facilitate the mobilization and effective deployment of climate finance in developing countries. The purpose of the Work Programme is to reduce uncertainties and assure developing countries that promises will be kept and that they will be supported in their mitigation and adaptation programs.
The context of the Work Programme on Long-term Finance is the United Nations Framework Convention on Climate Change. Article 2 of the Convention summarizes its two-fold objective – for countries to mitigate and at the same time to adapt to climate change. Specifically, the agreement encourages all countries to reduce greenhouse gas emissions that cause climate change and to implement programs that would help counties adapt to climate change. However, the implementation of these programs by poor countries depended on the availability of financial and technology support by rich countries. Since March 1995 when its Conference of the Parties first met in Berlin, climate finance has been one of the biggest issues in the annual climate change convention meetings. Sometimes, bitter fights have erupted on the issue; at time breakthroughs happen as when the Green Climate Fund was agreed on in Cancun, Mexico in 2010 and the LTF last year in Doha, Qatar.
In an analysis that my colleague Margarita Roxas and I published earlier this week, we observed that $100 billion per year is not really a huge sum of money and much more is needed to mitigate and adapt to climate change. We observed that there are barriers that prevent the effective and efficient generation, deployment and collection of funds. Likewise, we pointed out how important tracking of climate finance is and the necessity of creating a mechanism for reporting the flow of money to hold developed countries accountable. Finally, we noted that there is debate about leveraging private sector investment although it is, in my view, probably inevitable.
During the meeting in Manila, there was a general understanding that finance is needed to reach the overarching goal of the Convention. Public funds, however, fall short on current projections as the major source of financing. Among the popular options presented as possible sources of finance are removing oil subsidies and setting higher carbon tax. The former can generate as much as $600 billion a year while the latter can raise as much as $50 billion with a carbon price set at $20-25. These actions consequently have respective reductions in carbon dioxide. Private finance, still contentious among developing countries, represents the greatest share of finance with current contributions at $230 billion and is expected to further increase in the future.
The realization of these projections is obstructed by current structures and policies of governments and financial institutions. Some of the cited recommendations to enable the mobilization and deployment of finance are mainstreaming climate change in national budget, having a national fund for climate change related activities, and developing a tool to determine a country’s readiness to receive significant amount finance. Others stressed the importance of being able to track finance. Some view that the most important aspect of enabling environments is ensuring that risks are minimized and controlled.
The second meeting of experts next month in Bonn will most likely follow the same structure with adjustments on the format and guide questions to facilitate a more in-depth and focused discussion. These important meetings, among others, will form the recommendations that will be submitted to the high-level ministerial dialogue in November at Warsaw. It is there where all these technical inputs will be translated into political discussions. The best scenario is to have an agreed decision that clearly outlines pathways with a set of recommendations or parameters describing enabling environments for mobilization and deployment of funds.
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