The need for a reliable worldwide climate finance structure has never been greater
“We live in constant fear that a direct hit from intensifying cyclones could wipe out our economy altogether and set back our development by decades. This is not the way our children and our children’s children should live,” Inia Seruitaru, climate champion for Fiji, portrayed the potential adverse impacts of climate change induced extreme events. In 2017, a significant increase in climate impacts had been observed all over the world - floods in South Asia, hurricanes in the Caribbean, droughts in Africa.
The 2015 Climate Analytics predicted that annual climate change induced economic loss would be US$428 billion and US$1.67 trillion by 2030 and 2050 respectively if the planet gets warmer by even 3 degrees celcius. To find out sources of funding for loss and damages and the role of sustainable development in reducing the risk of loss and damage (L&D) in vulnerable countries, which mostly include Least Developed Countries (LDCs) and Small Island Developing States (SIDS), the Warsaw International Mechanism (WIM) on Loss and Damage with its Executive Committee was established at the 19th Conference of Parties (COP19) of the United Nations Framework Convention on Climate Change (UNFCCC) held in 2013. However, though the WIM has developed their five-year work plan on specified nine areas of work and Parties are obliged to identify the financing process including modalities for the WIM by the end of 2019, five years have passed with not much to show for except imposing insurance, either financing mechanism or entity to provide the supports needed. Not a single penny has been mobilized for the millions of climate victims. The Bonn meeting of UNFCCC, which took place between April 30 and May 10 this year, has obligations to identify the means, tools and processes to implement the Paris Agreement.
The Paris Agreement “Acknowledged that climate change is a common concern of humankind, Parties should, when taking action to address climate change, respect, promote and consider their respective obligations on human rights”. However, most developed countries except Germany have done little in terms of taking measures to deal with loss and damage finance. This is contradictory to the Paris Agreement that recognized the “need for an effective and progressive response to the urgent threat of climate change”. That’s why there is no room to impose ‘insurance’ to minimize risks of L&D in LDCs; the poor and marginalized climate victims deserve climate justice. At COP23, under the leadership of Fiji, the vulnerable countries argued over the need to address the issue of finance for loss and damage and they were able to get an agreement to finally discuss the issue as part of the “Suva Dialogue”. Under the UNFCCC the innovative sources of finance for L&D would be a fair, equitable, polluters’ pay based ‘Climate Damages Tax’ to protect free riding of the developed Parties. It’s required that financing for L&D under the WIM shouldn’t be a standalone mechanism but that which will also be integrated with both national and international funding sources, e.g. proposed Climate Damages Tax, Green Climate Fund (GCF) etc. Moreover, funding for L&D and climate adaptation in vulnerable countries would be compensation or grant based finance as ‘new’ and ‘additional’ to official development assistance (ODA). The LDC group, along with other vulnerable countries pushed towards finally putting this issue on the agenda the Bonn meeting earlier this year.
In 2014, the United Nations Environment Program (UNEP) estimated annual adaptation and L&D cost would be US$50 billion and US$100 billion only in the LDCs by 2030 and 2050. Against the concrete commitment by the developed countries to annually provide US$100 by 2020 as “new” and “additional” to ODA, with emphasis on public grants, Oxfam highlighted that net climate specific public finance in 2015 and 2016 is estimated to be around US$16 to US$21 billion per year - significantly lower than the estimated $48 billion per year. Moreover, only from US$16 to US$21 billion of the ODA commitments fell under the strict definition of climate finance for altogether adaptation and mitigation. Existing climate finance accounting rules are inadequate, with an inaccurate accounting of climate relevance that is allows loans to be counted, which is unfair. That is why, Parties have to agree on a fair and robust new accounting standards for climate finance under the Paris agreement.
Against the requirement of at least an additional US$4 billion to implement all of the LDCs’ National Adaptation Programs of Action, public finance assistance required from developed countries has been predicted to go up to US$67 billion by 2020. However, we need to focus on how the developed countries are going to raise funds of at least $50 billion a year by 2022 and up to $300 billion a year by 2030 as some estimates project. Non-concessional loans and hard loans, as well as other instruments, should not be counted as climate finance as contrary to the provision against the obligation under Article 9.1 of the Paris Agreement. Also, Article 2 Para 1(c) refers to finance flows that are “consistent with”, rather than aimed at, a pathway towards low-carbon and climate-resilient development.
The international community is failing to move to important discussions about sources, mechanisms and access modalities of the Standing Committee on Finance, which has been an issue since 2012. To raise the confidence of developing countries about the US$100 billion goal, a clear time-bound roadmap towards real mobilization of support or climate finance is required; as well as a means to finance these tools in a fair and robust way. To recover the huge gap in climate finance, vulnerable developing countries must be united to mobilize public contributions by developed countries. It is estimated that by imposing such taxes, US$50 billion could be raised from the global polluter companies, which can be then deposited into a L&D fund under the UNFCCC. Though that amount is peanuts with respect to the profit that amounts to billions of dollars made by the polluter companies each year, it will serve as the much needed major contribution to meet the dire needs of climate vulnerable countries.
The Paris Agreement’s “rule book” will include details on how countries will communicate their efforts with regards to adaptation, climate finance, transfer of technology and capacity building; how Parties will be held accountable for their commitments; how collective efforts will be reviewed, leading to scaled-up actions and support every five years; and how to create a mechanism/process to facilitate implementation and promote compliance focusing on “Whole-of-Governance” in climate finance under the robust and meaningful ‘Enhanced Transparency Framework’ in the upcoming COP24. Parties should work together to propose measurable indicators of climate finance, using the Measurable Reportable and Verifiable (MRV++) process with anti-corruption safeguards to meet the compliance requirements under both the Paris Agreement and climate related Sustainable Development Goals (SDGs) especially SDG13 in light of SDG16.
M Zakir Hossain Khan is climate finance governance analyst at Transparency International Bangladesh; Email: [email protected]