Climate finance in one country can have a significant impact on the economy of its neighbours
It is a global consensus that all countries must contribute to mitigation and adaptation efforts. Capacity building, technology transfer, and climate finances are among the key enabler for strengthening climate actions, especially for the most vulnerable and developing countries. Moreover, around 130 nationally determined contributions are conditions upon receiving climate finance to support them. Despite the fact that we are assisting today of an expansion of climate finance (with developed countries pledging to set a new climate finance goal for the period after 2025 and going beyond the so far promised $100 billion per year starting 2020), we are far from reaching the financial requirements for the necessary climate change actions to prevent the 2 degree Celsius world from becoming a reality.
Despite the importance of climate finance, there is still a lack of an agreed definition of what it encompasses. However, in the post-Paris Agreement, we need to consider climate finance in a broad way as including private sector finance alongside the flows of funds and capitals from the international and national public institution for mitigation and adaptation actions. Indeed, budgetary restriction of the public entities will not allow having adequate climate finance funded solely from public sources. Additionally, in the dynamic and fast-moving nature of climate governance, law (legal structures) and finance represent two constants. As such, legal and climate finance are both intertwined with law having the capacity to reinforce and guide climate finance, as well as changing the current economic system towards a more just and less carbon-intensive one. However, to achieve such potential, the law and regulations need to exist, be well informed and understand the complexity of current climate challenges. Thus, there is a need for each country to examine its own legal readiness for climate finance. Legal geography, a newly emerging branch at the crossroad of law and geography discipline, represent a promising area of study for the improvement and creation of adequate legal systems for mobilising the so much needed climate finance.
Law is defined as the sum of rules (based on a common value of society) that aims to regulate the various relations and actions among the various existing entities in a given space and at a given time. As such, law focus on the organisation of a given society and contribute to making things happen in a particular way. Geography, on the other hand, study the surface of the earth and more precisely the relationship between people and their environment, location on earth, their interaction and mutual influence, existing differences and how the general landscapes are changing over time. Indeed, location and place, do have an impact on how humans adapt to their environment and influence the structure of society. Legal geography draws upon those two approaches of understanding society and its organisation at different scales of space. Indeed, space influences the structure of the society and therefore the law and vice-versa the law structure the society and thus influence the structure of the space they live. Both are contributing to the world the way we know it. In the context of climate change, which is today a significant factor of our changing landscape (sea level rise, land erosion, increase natural risk disasters, climate migration etc.), this dual and integrated approach can help create a real legal climate corpus. This process is possible by accessing feedback from the ground (different territories have different contexts, history and level of development) can fully understand and respond to the impacts of climate change on our livelihoods. Thus, legal geography can help the law achieve its transformational potential by creating an adequate legal framework for climate finance mobilisation and mainstreaming it into the most vulnerable communities as well as necessary activities and actions for mitigation and adaptation.
Some practical implication of legal geography to create and improve climate finance at the international level resides in its ability to make the guiding principle of climate finance more concrete. The article 4.3 of the UNFCCC and article 11 of the Paris agreement, both consider that climate funding needs to be adequate, predictable, sustainable, new and additional. However, as with all guiding principle, they express a goal, an idea to achieve without a concrete road to do so. Additionally, recent studies have shown that climate finance possesses a spill-over effect depending on the type of climate action. Moreover, climate finance in one country can have a significant impact on the economy of its neighbours and generate an added value (generate economic growth or additional climate finance). Therefore, understanding the geographical distribution of those added value according to the type of actions that are required in a given space, can help shape new climate finance international regulations that ensure an equal distribution of wealth and access to the benefit for all vulnerable communities. Indeed, understanding the geographical spillover effect can help the countries in climate finance negotiation for finance allocation rules by having a better understanding or the economic gain distribution.
Furthermore, it can reshape the approach towards legal requirements for climate project financing by informing the donors of the projects that have the most significant added value in a given space including the donor country. Indeed, ensuring that donors can capture some of the economic gain of financing a particular climate action can work as a stimulant for investments but should always be coupled with the interest of the host country. Finally, legal geography can help not only develop better climate finance rules but also ensure effectiveness and efficiency of used funds (ensure that the funding is meeting the specific needs in the location where those needs do actually exist) and improved transparency and thus the trust at the international level climate change governance.
At the national level, legal geography can guide countries in developing their readiness for climate finance. Indeed, there is a wide range of possible financial instruments (legislation, contracts, regulations, costume, concessional arrangements, public-private partnership etc.) at countries disposition to create a robust legal framework for direct climate finance. However, each of these instrument does have different on the ground effect, space of application and procedure of adoption that can be the best apprehend by geography analyses. Furthermore, creating adequate laws to create an environment that facilitates climate finance (such as capacity building, project pipeline, legal knowledge sharing platforms inside and among the countries etc.) is equally important and vary from place to place. Indeed, society is influenced by its environment, and the same actions might not have the same effect in two different locations. A better understanding of the effects of financial instrument and facilitative instruments at the national level can help create better climate finance enabling legal framework and strengthens country ownership of the financial process and leverage its financial resources.
Finally, when it comes to private sector finance, legal geography can help introduce the business logic into the legal system to help mobilise this new source of funding. Indeed, not only a robust legal framework for finance do encourage the trust of the investors but also taking into account the logic of the “location”. Indeed, each location will attract different business according to the climate actions possibilities (technology transfer investment, capacity building, mitigation etc.) and the economic results they will have and the legal implication that will be at play. Understanding those different considerations at play can help create better invectives for private sector investment in climate change actions.
As much as legal geography can help developing countries and international legal readiness for climate finance, it still requires more research to strengthen the interdisciplinary ramification and agree on a common vocabulary. However, legal geography represents a promising and innovative approach to scale up climate finance.
Anne-Laure Pilat, a visiting researcher at ICCCAD with a background in Public and European environmental law.