The UNFCCC work programme on long-term finance | Climate Change Mitigation

Please download to get full document.

View again

of 16
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.
Information Report
Category:

Others

Published:

Views: 0 | Pages: 16

Extension: PDF | Download: 0

Share
Related documents
Description
New sources of climate finance must be found to curb the alarming shift in Official Development Assistance (ODA) to climate finance and to protect the development gains of recent decades. Climate change is an additional burden for poor countries, and requires additional resources to tackle it. The outcomes of the UNFCCC Work Programme on Long-term Finance will determine whether the goals of reaching the target of $100bn per year by 2020 committed to at Copenhagen, and keeping global warming below 2ºC, let alone the 1.5°C needed, will stay within reach. Oxfam believes that the UNFCCC Work Programme must lead to a breakthrough in delivery of scaled-up, new and additional, predictable finance for adaptation and mitigation in developing countries. This briefing examines financing needs, possible sources of finance and delivery mechanisms, and action needed at COP 18.
Transcript
  OXFAM TECHNICAL BRIEFING AUGUST 2012 www.oxfam.org THE UNFCCC WORK PROGRAMME ON LONG-TERM FINANCE   SUMMARY: KEY MESSAGES    2012 is the last year of Fast Start Finance (FSF) beyond which there is no certainty on the trajectory of climate finance. The Work Programme must advance new sources of public finance to keep the $100bn/year commitment and 2°C goal within reach, and protect the development gains of recent decades from an alarming shift in ODA to climate finance.     A substantial evidence base indicates that financing needs for adaptation and mitigation in developing countries are much higher than $100bn/year in public finance alone.    FSF shows us that mitigation continues to be privileged over adaptation; that a fair, com-mon accounting system is needed, especially for determining whether finance is “new and additional” and how loans should be counted; and that predictability of funding requires the establishment of new innovative sources of additional public finance.    The most promising innovative sources of public finance include earmarking of revenues from a Financial Transactions Tax due to be implemented in 9+ EU countries this year; and establishing fair carbon charges for international shipping and aviation.    There are significant risks and uncertainties associated with the role of private finance in contributing to the $100bn/year that must be addressed by developed countries.    The Green Climate Fund should become the primary channel of climate finance, reducing transaction costs for recipient countries through an accessible, country-driven approach. It should be capitalised with initial pledges from developed countries at COP18 amounting to at least $10-15bn by 2015, as one part of a broader finance package. INTRODUCTION Since the commitment to mobilise $100 billion per year in climate finance by 2020 was made in Copenhagen and then confirmed by COP decisions, very little progress has been made towards ensuring this objective is realised. 2012 is the last year of Fast Start Finance, beyond which there is no certainty on the trajectory of climate finance . The outcomes of the Work Pro-gramme on Long-term Finance will determine whether the goals of reaching $100 billion per year by 2020 and keeping global warming below 2ºC, let alone the 1.5°C needed, stay within reach. Furthermore, new sources of finance must be found to curb the alarming shift in Official Development Assistance (ODA) to climate finance, and protect the development gains of recent decades . In 2010 OECD figures indicate 15% of ODA was counted as climate finance. Yet climate change is an additional burden for poor countries, requiring additional resources to tackle. 1  A failure to deliver new and additional resources – over and above existing commitments on ODA – risks diverting essential aid for health, education and other development priorities. Oxfam believes that the Work Programme must lead to a breakthrough in delivery of scaled-up, new and additional, predictable finance for adaptation and mitigation in developing countries. It is an opportunity to establish a legitimate consensus on the way forward. 2  This briefing note covers: 1. Financing needs in developing countries 2. Lessons learned from Fast Start Finance 3. Promising sources of public finance 4. Risks and uncertainties associated with private finance 5. Delivery mechanisms for climate finance 6. Outcomes of the Work Programme and action needed at COP18  2 1. FINANCING NEEDS IN DEVELOPING COUNTRIES $100bn per year is not an insignificant figure, but financing needs for adaptation and mitigation in developing countries are likely to be at least twice as high in public finance alone. On top of this, huge further investments of private finance for mitigation – perhaps running into the trillions of dol-lars – are needed. 3   Public, grant-based finance is essential for adaptation . Poor people on the front lines of cli-mate change with the least resources to cope do not tend to live in places that attract private in-vestment. Developing community disaster preparedness plans, planting mangroves for protection from storms and rising seas, or developing small-scale irrigation systems, for example, do not generate internal returns and will not attract private sector investment. Only grant-based, public sector funding directed through governance arrangements with the meaningful participation of affected communities can ensure these adaptation needs are met. The private sector will learn to invest in adaptation measures to protect its investments, and pub-lic regulation can help channel that private investment to support not hinder local communities’ adaptation efforts. But such efforts must be complementary to, not a substitute for, meeting adap-tation needs defined by people and communities facing climate change impacts according to their own priorities, not those determined by the private sector. Significant public resources are also needed for mitigation . Under the UNFCCC, developed countries are responsible for meeting ‘the agreed full incremental costs’  of essential mitigation action in developing countries. These are the costs of investing in a more expensive wind farm instead of a cheaper coal-fired power plant – the extra costs of development in a carbon-constrained world. By their very nature, such costs will not be met by the private sector alone, rather public money will be needed to incentivise their action and to ensure pro-poor outcomes, such as the expansion of renewable energy to rural areas. Further public resources will be needed, for example, for capacity building related to mitigation in developing countries, or through Reduced Emissions from Deforestation and Degradation (REDD). Numerous estimates of the incremental financing needs of mitigation and adaptation in poor countries indicate that more than $100bn per year is needed in public finance alone  (see table below). On the basis of this range of studies, Oxfam estimates that at least $150bn per year is needed in public finance alone from 2013, rising to at least $200bn per year by 2020 (of which at least $100bn should be for adaptation and $100bn for mitigation). 4  These costs could be even higher. The inadequate emissions cuts proposed since Copenhagen put the world on course for 2.5-5ºC of warming, 5  very likely entailing much higher costs for adap-tation and loss and damage from more severe climate impacts, and increased mitigation costs for each year that adequate action is delayed. Table 1: Estimates of incremental finance needs in developing countries Stablis-ation of CO 2 e Year for estimate  Area of use of funding Low-end estimate ($bn) High-end estimate ($bn) South Centre (2012), Presentation to UNFCCC 6  Mitigation 500 1 100 World Bank (2010), World Development Report 7  450ppm 2030 Mitigation 140 (+ incre-mental capital needs of 265) 175 (+ incre-mental capital needs of 565) McKinsey (2009), Pathways to a low carbon economy 8  400ppm 2030 Mitigation 146 (+ incre-mental capital needs of 592) 256 (+ incre-mental capital needs of 592)  Project Catalyst (2009), Financing Global Action on Climate Change 9  450ppm 2010– 2020 Mitigation 67 (+ incre-mental capital needs of 36) 97 (+ incre-mental capital needs of 158) EC/JRC (2009), Economic Assessment of Post-2012 Global Climate Policies 10  450ppm 2020 Mitigation 107 UNFCCC (2009), Investment and Financial Flows 11  450– 550pm 2030 Mitigation 92 97 Stern (2009), The Global Deal 12  500ppm Next decade Mitigation 65 (+ carbon market flows of 100 by 2020s) South Centre (2012), Presentation to UNFCCC  Adaptation 100 >450 Parry et al. (2009),  Assessing the costs of adaptation 13  2030 Adaptation 56 (or 2-3 times the UNFCCC estimate) 201 (or 2-3 times the UNFCCC estimate) World Bank (2010), Economics of Adaptation to Climate Change 14   Average 2010-2050  Adaptation 70 100 UNFCCC (2009), Investment and Financial Flows 15  550pm 2030 Adaptation 28 67 Stern (2009), The Global Deal 16  500ppm 2015 Adaptation 50 100 UNDP (2007), Human Development Report 17  450ppm 2015 Adaptation 86 Oxfam (2007), Adapting to climate change 18  Immedi-ately  Adaptation 50 Source: Oxfam compilation    Although the agreement struck at COP16 in Cancun was to ‘mobilise $100bn per year by 2020 from a wide range of sources – public, private and alternative,’  it is critical that the Work Pro-gramme takes account of this scale of public financing needs. Notably, it should:    Ensure that at least $100bn per year by 2020 is mobilised from public finance alone;    Establish sources of finance capable of scaling-up to meet the needs of poor coun-tries. Aiming for $100bn per year must be the floor not the ceiling if a global climate catastrophe is to be avoided. 2. LESSONS LEARNED FROM FAST START FINANCE  At COP15 in Copenhagen, developed country governments made a collective pledge to provide ‘new and additional resources’  for climate action in developing countries, ‘approaching $30 billion for the period 2010-2012,’  with a balanced allocation between adaptation and mitigation. This ‘Fast Start Finance’  (FSF) is often considered as a testing ground for longer term arrangements for climate finance. A number of lessons stand out for long-term climate finance.  1. Fast Start Finance has privileged mitigation over adaptation. The Copenhagen Accord’s call for ‘balanced allocation’ between mitigation and adaptation is a partial recognition of the ‘Adaptation Gap’ which currently sees only approximately 10–20%  4 of total funding flow to adaptation, in spite of an increase in adaptation funding in 2011. 19  The first lesson of Fast Start Finance is therefore that the reference to ‘balanced allocation’ is in-sufficient to guarantee a fair proportion of resources flow to meet the adaptation needs in the poorest and most vulnerable countries. 20       A quantified requirement that 50% of funding should be made available for adaptation is needed. 2. There have been no common standards for counting Fast Start Finance. Industrialised countries have so far reported on Fast start Finance through different reporting formats, and have used different definitions and baselines to assess whether pledges have been met. For example, Japan has counted ‘leveraged’  private finance; the US has counted contributions via its export credit agency, while France has counted non-concessional loans. This has made the information produced by industrialised countries difficult to compare, 21  and obscures whether industrialised countries are doing their fair share to mobilise the resources needed for climate action in developing countries.     A fair, transparent common accounting system is needed.   In particular:   (a) There is no common baseline against which funds are considered “new and addi-tional” . Oxfam considers that ‘new’  should mean funds not previously announced or pledged when the commitment is made, and that ‘additional’  should be compared to the existing prom-ise to provide 0.7% of GNI as Official Development Assistance (ODA), since climate change is an additional burden to developing countries requiring additional resources to tackle. On the basis of these criteria, we estimate little more than half (at best) of the FSF committed is new, and barely any is additional to finance provided by countries to reach their 0.7% ODA target. 22       A common baseline for additionality is needed – which should be the target to pro-vide 0.7% GNI of rich countries as ODA – and new sources of public finance addi-tional to ODA budgets must be found.   (b) There is no common standard for accounting for loans.  Oxfam believes that adapta-tion finance should only be provided in the form of grants, based on the scale of needs of the most vulnerable people and communities for whom private or loan-based financing, even if concessional in nature, is inappropriate. Yet FSF shows that some countries have used con-cessional loans for adaptation. While there may be a role for use of concessional loans as mitigation finance, Oxfam believes that only the grant equivalent of the loan should be counted towards developed country commitments. FSF shows that some countries, like France, have counted the full gross value of loans given, while others, like Germany, have only counted the grant equivalent.    No loans for adaptation should be eligible, and only the grant equivalent of loans for mitigation should be counted. 3. Fast Start Finance has not been predictable, but dependant on the annual political will of developed countries.  Each year of the FSF period has seen a significant struggle within developed countries to maintain even the relatively small sums committed only a year or two earlier by Heads of State and Government at an historic and high profile international meeting. Oxfam warns that the limits of this approach may be apparent in 2012, when some developed countries are expected to struggle to maintain their FSF commitments, and/or in 2013 when climate finance may drop below the FSF level. This shows the importance of establishing in-novative sources of public finance which can generate predictable funding from developed countries but outside of and additional to national budgetary processes.    Budget contributions should be provided according to a binding and “assessed” approach, based on responsibility for emissions and capacity to pay.      Innovative sources of supplementary public finance – such as Financial Transac-tion Taxes and fair carbon charges on international transport – are needed to guar-antee scalable predictable finance outside of and additional to national budgetary processes.  
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks