A constant question at the UNFCCC meetings is of how we are going to pay for the cost of curbing and tackling climate change. While climate finance may sound tedious and technical, it is actually a crucial component of the negotiations hotly debated every year. Without climate finance, many developing countries -- particularly the most vulnerable -- will neither be able to adapt to climate change nor move towards path of low-carbon development. COP21 this year in Paris is no exception, with negotiators frantically trying to come up with an agreement both developed and developing countries can get behind.
Climate finance has been a key issue ever since the UNFCCC process first started more than 20 years ago. However, it was only in 2001 at COP7 in Marrakesh that the first substantial funds were created to help vulnerable countries adapt to anthropogenic climate change. These are:
• Least Developed Countries Fund -- suitable for countries like Bangladesh
• Special Climate Change Fund -- complimentary fund for other vulnerable countries not included in the “LDC bracket” such as small island states
• Adaptation Fund -- created specifically for adaptation
By 2010 at COP16 in Cancun, there was a general realisation at the negotiations that if the world was going to be serious about tackling climate change, a lot more money would be needed. This was the impetus behind the Green Climate Fund (GCF). Although the previous funds are still operational, the GCF has come to symbolise the most promise for the future, declaring at least a $100b each year from 2020 onwards for climate finance.
As with most aspects of the UNFCCC proceedings, working out the mechanics of the GCF is an incredibly long arduous process. At COP21, the details of the GCF are still being worked and climate finance is one of the more contested issues. Article 6 of the Paris Agreement deals with climate finance and as these last two weeks have shown, there are still many details that need to be worked out with regards to the mechanics of climate finance.
A lot of the official negotiations occur in closed rooms and through back channels, but we do know some major issues that came up these past two weeks involving climate finance.The first is whether the Green Climate Fund will give out grants or loans. Most vulnerable countries, including Bangladesh, would much prefer grants, because they contributed least to global emissions and are often already struggling financially,
Annex 1 countries (also known as “developed” countries) favour the use of loans. Dr Saleemul Huq of the International Center for Climate Change and Development suggests this is an issue that will be worked out later by the Board of the GCF.
There was also the issue of where the money for the GCF will come from. The Organisation for Economic Co-operation and Development (OECD) came out with a report earlier this year claiming two-thirds of financial assistance pledged by countries had been accounted for; But India, South Africa and China rejected this assertion, arguing the OECD double-counted aid-money that is supposed to be separate from climate finance.
As of November 2015, $10.2bn has been contributed to the GCF with many Annex 1 countries recently declaring further contributions. There was, however, good news at COP21 with many world leaders backing their statements with financial backing. For instance, the United States in the last two weeks has pledged $51.175 million for the LDC Fund, $30m for climate risk insurance for small island states, and $861m for the GCF, ear-marked as grant money to help the most vulnerable countries deal with adaptation. Other developed countries that contributed include France, Canada, the UK, and Germany.
Nevertheless, the question remains whether or not this will be enough. A recent report published by the United Nations Environment Program (UNEP) called,The Adaptation Finance Gap: With Insight from the INDCs, which examines the discrepancy between “the cost of meeting a given adaptation target and the amount of finance available to do so.”
The report suggests that, while “adaptation finance flows have increased ... current levels fall short of adaptation needs.” These costs are in addition to the heavy costs of mitigation outlined by each country’s INDC plans, which still could result in global temperature as high as 3C.
Climate finance is a major issue within the UNFCCC proceedings. Unlike development aid, climate finance cannot be understood as a matter of charity whereby the richer nations give to poorer nations.
Climate finance is rather an obligation of the rich because of their role in causing climate change, and the nature of this obligation is what causes climate finance to be so contentious at each year’s Conference of Parties.
