Part 2, Section 1: The International Climate Change Financing Regime
By Rear Admiral (Rtd.) Gary A. R. Best, Presidential Advisor on the Environment
IN PART 1, we looked at the International Climate Change Regime, focusing on key
environmental shifts from the 1940s leading up to the United Nations Framework Convention on Climate Change in 1992. The objectives of the Convention, articles that detail obligatory financing for developing states, a broad overview of the Convention’s financial architecture, along with efforts in mobilizing the US$100 billion by year 2020 were also highlighted.
In Part 2, we examine the climate change financing regime. In order to maintain cognitive consonance, we repeat the problematic.
THE PROBLEMATIC
NOTWITHSTANDING decades of conferences and summit and embedded financial provisions in conventions and pledges, SDS, as a whole, has been unable to access sufficient CCAF to meet their CCA needs. In the result, their nation states and economies have become more susceptible to sea level rises and vulnerabilities exacerbating their economic, social and environmental development.
The International Climate Change Financing Regime: Quantifying Climate Change Adaptation Funding
In quantifying climate change adaptation funding (CCAF), the Organisation for Economic Cooperation and Development (OECD) acknowledged that adaptation funding provision ranges between US$100 and US$200 million per year, in contrast with the US$14 to US$21 billion per year required. Even this is a conservative figure by many other standards. In the result, a large number of climate adaptation projects go unfunded due to financial shortfalls.
There are various opinions on the amount of funds needed for climate adaptation. According to the Integrated Regional Information Networks (IRIN) of the United Nations (UN), no one is really sure what amount is really needed for climate adaptation. The UNFCCC has estimated that, by 2030, poor countries would need between US$28 billion and US$59 billion a year to adapt. The World Bank thinks that a sum between US$20 billion and US$100 billion should do it. The European Union Commission put the amount between US$10 billion and US$24 billion a year by 2020; and the African Group of climate change negotiators arrived at a sum of more than us$67 billion a year by then.
Notwithstanding this uncertainty, IRIN posits that only five per cent of the funding needed for climate adaptation is being realised. Meanwhile, the OECD has recognized that mobilizing US$100 billion per year by 2020 requires funds from private, public, multilateral and bilateral sources.
Moreover, the recent UNFCCC (GCF) text proposes the GCF as the mechanism for coordinating total financial flows from the diverse sources.
Sufficiency of Adaptation Funds and Generating Options
Though Kate Miles acknowledges that the Global Environmental Fund (GEF) is a significant source of funding for global response to environmental protection, she posits that GEF funding is insufficient to ensure sustainable financial flows to meet incremental costs of agreed global environmental benefits. Additionally, Miles argues that Agenda 21 recognizes the need for additional funding and makes a case for innovative financing to supplement the funding deficit because of inadequate funds. These innovative financial ventures include: debt-for-nature swaps, conservation trusts funds, tourism-related taxes and fees, tradable quota systems, private sector payment for environmental services, right-of-way and access fees and fish catch levies. Miles calls these initiatives “a development tax for global environmental damage”.
Importantly, Lord Nicolas Stern, supported by Global Green Growth Institute’s (GGGI) Chairman Lars Rasmussen (GGGI), echoed the need for increased funding for climate adaptation at GGGI’s side meeting at the Eighteenth Meeting of the Conference of the Parties (COP 18). He posited that additional funding beyond the Green Climate Fund (GCF) would be necessary, and international institutions must use their “power of example” to garner increased funding support for climate finance.
However, in the context of Guyana’s green economy pathway, these innovative ideas reflect fiscal and financial options on both sides of a green economy equation — that equation being that increased human well being + social equity = (equal to)/function of reducing environmental risks + ecological scarcities.
NEW AND ADDITIONAL FUNDING?
However, some developed countries insist that climate finance should be counted as overseas development assistance (ODA), which some developing states argue represents payment for implementing specific climate measures, and therefore should not be counted as ODA. Even though, under the Copenhagen Accord, developed nations were to provide new and additional resources under the ‘fast start ‘mechanisms up to the tune of US$30 billion, there are no means to determine if indeed such funds would be new and additional, and there is additionally no agreement on which agency should disburse these funds.
The World Bank (2009), in a discussion paper on monitoring and reporting on financial flows relating to Climate Change, highlighted that official development assistance (ODA) is tied to developing countries meeting their Millennium Development Goals (MDGs), and funds allocated to climate change are not part of the ODA commitment.
However, several OECD countries see a close connection between climate change and development financing, and argue for their non-separation.
In contrast, developing countries see climate financing as an entitlement for environmental damage done by developed countries, and argue for their separation. Further, the Bali Action Plan emphasised the need for climate finance flows to be to new and additional funding that is verifiable, reportable and measurable.
This difference in opinion, however, makes it difficult to effectively track and record funding for climate adaptation. The World Bank paper (2009) suggests that climate change financing needs should be recorded in a systematic manner, allowing for tracking, analysis, and monitoring of progress made in the Copenhagen and post-Copenhagen decisions.
It is in Guyana’s interest to treat ODA as separate from adaptation funding, in order to track developed countries’ financial contributions in accordance with their obligations under the UNFCCC.
THE ADAPTATION FUNDING MECHANISM
There are four adaptation-related funds that were established at the international level. There are three under the UNFCCC: the Least Developed Countries Fund (LCDF) in 2001, the Special Climate Change Fund (SCCF) in 2005, and the GEF Trusts Fund’s Strategic Priority on Adaptation (SPA) in 2004. The Adaptation Fund (AF) was the fourth to be set up under the Kyoto Protocol to the UNFCCC in 2007 (Haegstad et al, 2009). The AF will finance implementation of concrete adaptation projects in non-Annex I countries, including activities intended at avoiding forest degradation and combating land degradation and desertification (Bouwer and Aerts, 2006:49).
Of critical note is the fact that all three of these funds are undersubscribed by the developed countries, for reasons that include lack of confidence in accounting procedures and mechanisms in developing states (Ayers and Huq, 2008). One disadvantage to most developing countries lies in the fact that parties to the Kyoto Protocol have access, and possible influence over, the AF; contrastingly, developing nations were able to establish an independent GEF Board comprising a majority of members from the developing nations under that GEF arrangement. The Fund is not donor-dependent. It is funded through a 2% levy on CDM transactions. However, it is difficult to predict quantities, as the fund depends on the CDM market and the price of CDM credits, which is very unpredictable.
In Guyana’s context of achieving a green state through a green economy pathway, adaptation financing is just a part of the quantum required for a green state. But, more importantly, climate financing must be accessible, predictable and quantifiable.
In the next article, I will examine the coordination and integration, high transaction accosts, and determining adaptation costs. (Comments can be sent to towardsagoodlife@gmail.com)
Mr. Gary A. R. Best is a retired Rear Admiral and former Chief of Staff of the Guyana Defence Force. He is an Attorney at Law and is the Presidential Advisor on the Environment. He is a PhD. candidate at the University of the West Indies. He holds a BSc in Nautical Science (Brazil) and Masters degrees from the University of the West Indies and the University of London. He is also an alumnus of the National Defence University and Harvard Kennedy School. His research areas include climate change governance, climate change finance, international relations and environmental law.
