Climate Finance: Outcomes for Doha

Understanding the Elements of Doha Finance Package

AGN Lead Coordinators Meeting14 August 2012

Overview• Implementation of Decision 1/CP.13• African CRP.2 Draft Decisions• Work Programme on Long Term Finance • Standing Committee on Finance• Green Climate Fund• Fast Start Finance• Financing REDD+• Review of the Adaptation Fund• Biennial Budget• Finance under the ADP

Reminder: Elements of 1/CP.13 Enhanced action on the provision of financial resources and investment to support action on mitigation and adaptation and technology cooperation, including, inter alia, consideration of:• (i) Improved access to adequate, predictable and sustainable financial resources and

financial and technical support, and the provision of new and additional resources, including official and concessional funding for developing country Parties;

• (ii) Positive incentives for developing country Parties for the enhanced implementation of national mitigation strategies and adaptation action;

• (iii) Innovative means of funding to assist developing country Parties that are particularly vulnerable to the adverse impacts of climate change in meeting the cost of adaptation;

• (iv) Means to incentivize the implementation of adaptation actions on the basis of sustainable development policies;

• (v) Mobilization of public- and private-sector funding and investment, including facilitation of climate-friendly investment choices;

• (vi) Financial and technical support for capacity-building in the assessment of the costs of adaptation in developing countries, in particular the most vulnerable ones, to aid in determining their financial needs;

Outcomes to date: 1/CP.13• Agreement on the Green Climate Fund (GCF);• Establishment of the Standing Committee on Finance (SCF);• Agreement to have a work programme on long term finance (LTF);• Pledges of Fast Start Finance in relation to USD30billion;• Commitment to mobilize jointly USD100 billion per year by 2020;• Agreement that a significant share of the new multilateral sources

will be direct towards adaptation;• Recognition of the need to balance the prioritization of resources

between mitigation and adaptation• Acknowledgment of the need to relate sources and support to the

specific needs of developing countries, through a process to identify and assess the needs for both adaptation and mitigation

1/CP.13 More Work NeededMore work at the multilateral level is required in order to:

• fully complete the mandate of Decision 1/CP.13 from a policy and programmatic perspective, particularly as it relates to adaptation;

• ensure the effective and early operationalization of the new finance-related institutions;

• assess the financing needs of developing countries, particularly in light of the agreed global temperature goals (and outcome of the shared vision);

• ensure the adequacy, predictability and access to climate finance;• understand the needs, sources, and scale of climate finance• ensure the initial and early replenishment of the GCF (Decision 2/CP.17);

and• develop a transparent and accurate reporting frameworks to assess the

delivery of the pledges and commitments made by Annex I/Annex II countries.

Moving Forward

• Where to locate the discussion on the implementation of Decision 1/CP.13?;

• AWG-LCA Chair’s proposal, regarding the assessment/closure of the LCA;

• Mo’s Mantra: positive finish to the LCA is a positive start to the ADP;

• At this stage, there is no agreement on what to do/discuss on finance under the AWG-LCA

Africa’s CRP.2 (LCA)• Submitted in Bonn (June 2012)• Contains two draft decisions:

– Closing the finance gap (2013-2020)– Fast Start Finance

Closing the Gap: 2013-2020• developed country parties shall significantly scale up new and additional ,

predictable, adequate financing provided to developing countries from the 30 billion USD commitment for the period 2010-2012 to reach at least 100 billion USD annually taking into consideration the need for a balanced allocation between adaptation and mitigation, while guaranteeing direct and facilitated access.

• review the goal of providing 100 billion USD annually from developed countries to developing countries based on assessment reports of the needs of developing countries both for mitigation and adaptation.

• Equitable allocation of financial resources will be followed, including through criteria based on geographical and/or needs, including urgent and immediate needs related to climate change.

• Main sources of funding will be public sources, supplementary funding may come from private sources, while MRV of finance provided by developed countries will be measurable, reportable and verifiable.

Fast Start: Transparency

• Urges developed country parties to enhance transparency of the fulfilment of their commitment for the fast start funding, in particular regarding the implementation of a burden sharing process, securing additionality and predictability of these funds, and the ways in which developing country parties can access these resources.

Long Term Finance: Recap • Core elements agreed in Decision 1/CP.16• Process agreed, under duress, Decision 1/CP.17• Durban established a “work programme”• Options for the mobilization of resources from a wide variety

of sources, public and private, bilateral and multilateral, including alternative sources;

• Assess the sources of finance, including from AGF & G20 work• Relevant analytical work on climate-related financing needs

of developing countries; • Lessons from Fast Start• Co-Chairs to Report to COP

Long Term Finance: Process so far

• Informal consultations in Bonn (May)• First workshop held in Bonn (June)• Webinar 1 (August)• Informal consultations (Bangkok)• Webinar 2 (September)• Second workshop in Cape Town (1-3 October

2012)• Co-Chair’s report to COP• COP action, establish a contact group?

LTF So Far

• First workshop focused on:– Financial Needs of Developing Countries– Enabling Environments– Sources and Scale (public and private)– Lessons from Fast Start

• Second workshop to look more closely at these issues, with the aim of presenting concrete recommendations, approaches and actions

LTF After COP18• Avoid locating the political discussion on sources

and scale under the Standing Committee;• A continuation of the LTF work programme under

the COP to feed into the 2015 review process, with the aim of focusing on defining the finance needs to meet the global 2 degree target with the aim of informing the outcome of the ADP process; and/or

• A continuation of the LTF work programme as a substantive element of the ADP work programme to be agreed in Doha.

Standing Committee on Finance

• Durban agreed on composition and mandate• SC to present work programme to COP for

endorsement.• SC to meet in Bangkok (6-8 Sept), 2nd meeting

scheduled for October. • Not clear the SC can deliver on key issues for

Doha, in particularly issues related to its mandate on presenting draft guidance to the operating entities.

Standing Committee in 2013

• Situation: SC to be reviewed in 2015.• Need an AGN process to engage in the

development of the work plan:– Timing, nature and frequency of the “forum”– Maintaining linkages with the SBI and thematic bodies– Draft guidance to the COP– Recommendations on coherence, effectiveness and

efficiency of the operating entities– Periodic reviews of the financial mechanism (5th review)– Biennial assessment of climate finance flows

GCF

• First Board meeting: 23-25 August• Scheduled second Board meeting: October• First report to the COP: October• COP endorsement of the Host Country for the GCF

Secretariat;• COP provides initial guidance to the GCF regarding

programme priorities and eligibility criteria, and matters related thereto; and

• COP approves the arrangements between the Board and the COP in relation to the Governing Instrument.

• GCF board reports on appointment of interim- head of secretariat.

After Doha

• Ambitious timeframe would see the following timeline (dependent on board agreement on work programme in August)

• 2012: Host country; head of interim secretariat; work programme; arrangements with the COP.

• 2013: Focus on policy, programmes, windows, country coordination, M&E, including formal GCF readiness phase/process;

• 2013/14: Fast tracked replenishment;• 2014/15: first disbursement phase.

BUT

We urgently need an African GCF process that starts now (or as soon as possible) and works to see the region operationally

ready for the GCF in 2015

WHY

• Country approaches should not be seen as merely the “end of the pipe” entry points for the global climate finance architecture;

• The future of climate finance should be based on country needs, conditions and national priorities

• Country experiences should inform global decision making

GCF: Pre-Doha

• Concerns regarding the location of the GCF debate, in particularly issues related to the “arrangements” between the COP and Board

• Under the LCA contact group in Bangkok?• Under a COP appointed contact group in Doha?• Sequencing debate: does the COP needs to clearly

instruct the Board via a decision or are the previous decisions enough to make this clear?,

• First guidance (2012) must be practical, focused and structured.

Fast Start Finance

• No clear Durban mandate for a Doha decision but clear mandate through Cancun decision on reporting, and a signal in Durban that further enhancing of the reporting process is needed

• Concerns remain over nature, scale and delivery of FSF;

• Lessons learnt-dealt with somewhat under LTF work programme, but process is not a methodological assessment of FSF;

• Still necessary to understand, assess and evaluate the impact, success and failures of the FSF process

2005 2006 2007 2008 2009 2010 Other Other Total

GEF 492.45 350.38 307.15 272.61 26.00 26.00 1 529.91 164.34 3 168.84

LDCF 5.85 16.52 19.23 12.61 6.73 60.94

SCCF 4.46 14.46 4.34 30.66 11.93 65.86

LDCF/SCCF

1.33 0.06 1.39

Total 504.09 381.43 330.72 315.88 26.00 26.00 1 548.57 164.34 3 297.04

Reported Contributions to Funds under the GEF (2010)

Reported Contributions to Multilaterals (2010)

Institution NC3 (98-2000) NC4 (01-04) NC5 (05-2010)

WB 6 037.5 3 884.5 15 028.0

IFC 360.8 733.9 96.3

AfDB 1 113.1 727.4 1 195.2

ADB 1 412.4 1 025.2 1 007.7

EBRD 326.8 248.7 225.3

IADB 373.1 207.7 211.9

UNDP 1 436.7 1 663.9 2 999.1

UNEP 105.6 108.4 292.8

UNFCCC 20.5 13.8 167.5

Others 6 297.6 11 012.3 22 810.2

Total 17 484.1 19 625.8 44 034.1

Initial Observations on FSF• A general assessment of the FSF trends indicates no substantive change or

transformation of Annex I country finance patterns. Substantial resources remain outside the financial mechanism of the convention, with the majority of resources being allocated to multilateral development banks.

• The FSF trends simply reinforce the same financial trends as highlighted in the fifth synthesis of Annex I National Communications.

• FSF pledges include contributions to the funds under the Financial Mechanism of the Convention, (GEF, SCCF, LDCF);

• FSF pledges include contributions made to the Climate Investment Funds and in several cases the funds leverage are being accounted for;

• In some case funds provided for formal UNFCCC workshops mandated by COP decisions have been accounted for as part of FSF (Swiss contribution to the regional adaptation fund capacity building meeting for Africa) (Denmark’s contribution to the UNFCCC Trust Fund for Participation) (UK’s contribution to the Transitional Committee for the design of the Green Climate Fund);

• Some countries reporting funds provided to international institutions and civil society (Denmark’s contribution of 12 million to the Global Green Growth Institute)

Initial Observations on FSF• In terms of the EU, the largest share of its 2011 contribution is attributed to grant

finance at 63.3% and ‘loans, equities or others’ at almost 36.7%. The preferred channel for the EU is bilaterally with 53.3% allocated to this channel, compared to 46.4% allocated to multilaterals.

• Of the EU’s contribution to multilaterals, the large proportion goes towards the CIFs, World Bank and European Investment Bank.

• In overall terms, 765.5 million was allocated to MDBs, 271.0 million to the UNFCCC financial mechanism, and 42.8 million allocated to UN initiatives/programmes and funds.

• In terms of Japan, its contribution to mitigation activities in Africa is predominantly based on the provision of loans compared to grants (781 million compared to 118 million)

• Not all donors have provided a breakdown or an assessment on the balance between mitigation and adaptation.

• The EU also reported that 32.2% was allocated to adaptation and 49.4% for mitigation. There are some examples of double accounting and no methodologically supported processes for examining and verifying pledges, even within the EU, which provides a FSF report as a block.

FSF: What is needed?

• Basic requirement is the need for a common reporting framework for climate finance, AGN text from Durban a good basis for moving forward (location issue: under mitigation?)

• AOSIS Proposal for another fast start type process with a bigger sum than the USD30billion-type pledge- need an AGN/G77 response to this

Financing REDD+• Decision in Doha on financing results based actions;

establishes a process ( workshop, technical paper)• Seemingly two potentially disjointed processes and

agendas• Major concern over definitions of what is meant by

“results-based actions” and “results-based financing”, particularly in the context of the UNFCCC ;

• Many countries want a dedicated REDD+ window, and related institutional arrangements.

Review of the Adaptation Fund

• AGN paper (Bonn): Additional sources, adequacy and predictability regarding the AF;

• Options for widening sources away from CDM levy, given the crash in prices – October 2011: Euro: 12.43/USD 15.20– July 2012: Euro 2.93/USD 3.60

• Institutional options/reforms for the Secretariat, interim trustee;

• Future of the AF in relation to CDM and KP;• Future of the AF in relation to the GCF Adaptation

Window and/or PPCR.

AGN Paper on the AF• The predictability, adequacy of financing for the Adaptation Fund based on the

application of the 2% levy. Given the uncertainty of the Kyoto Protocol and its market mechanisms as well as the low price of carbon and related market uncertainties, how will the Fund be financed in the future?;

• The procedures of monetizing certified emission reduction units by the Trustee;• Future measures under the CMP that can be used to provide higher levels of

financial sustainability for the Adaptation Fund. • The application of the 2% levy across Joint Implementation and International

Emissions Trading schemes in annex b of the KP • Allocation of 10 % of the carry over units• Consideration of a set of measures to stabilize the price of CERs including through

dealing with the level of ambition• Application of 2% levy on emission trading schemes in annex b countries • Considering a replenishment process with a clear burden sharing process through

assessed scale of contribution from annex b countries of the KP • Stressing the importance of voluntary levies being applied to national and regional

emission trading schemes, such as the EU ETS

Biennium Budget

• Need to make sure that the budget adequately responds to the “new” institutions mandates from Cancun, Durban, and potentially Doha

• Need to look at UNFCCC Secretariat programme priorities and respective staffing

Finance under ADP• Finance recognized in Decision 1/CP.17• No clarity yet on what finance mandate needs

to be developed for the post-2020 phase;• Need to separate out the pre-2020 from the

post-2020 financing issues;• We need to be clear on approaches for this,

beyond just a legal/institutional lense;

• Thank you