COP 24 and Climate Finance: A Stepping Stone or a Blurred Line?

In December 2018, the 24th Conference of the Parties (COP 24) to the United Nations Framework Convention on Climate Change (UNFCCC), took place in Katowice, Poland. The main objective of those negotiations was to finalize the so called ‘Paris Rulebook’ [the Paris Agreement Work Programme (PAWP)], which would constitute a set of rules to implement and operationalize the Paris Agreement. The issues at stakes varied from mitigation, adaptation and loss and damage, to more technical issues, such as transparency, climate finance and carbon market mechanisms under the Paris Agreement.

This post will focus on the progress made on the issue of climate finance based on an analysis of the COP 24 decision on the relevant issues. I begin by reiterating the importance of the findings presented by the latest reports of the Intergovernmental Panel on Climate Change (IPCC) and the Standing Committee on Climate Finance (SCF) under the UNFCCC. The SCF report on the biennial climate finance assessment highlighted the current methodological challenges concerning the reporting and verification of public and private climate finance, referring to the existence of uncertainties and gaps regarding the collection of climate finance data. Some of the SCF recommendations to the COP include i) enhancing the transparency, consistency and comparability of data on climate finance, ii) encouraging Parties providing climate finance to enhance their reporting of climate finance provided to developing country Parties and iii) encouraging developing country Parties that provide support to report information on climate finance provided to other developing country Parties.

One of the most ambiguous, but at the same time significant issues of the COP 24, was that of accounting and reporting on climate finance. The Paris Agreement contains two main provisions on financial flows, namely: article 2.1(c) providing for a general framework of making financial flows climate resilient; as article 9, which, apart from the general climate finance obligation, also provides for the ex-post and ex-ante finance transparency. The operationalization of the latter has been one of the main tasks of COP 24. The formal COP 24 agenda provided for the negotiation of the following matters relating to climate finance:

1. long-term climate finance,
2. matters relating to the SCF,
3. the Green Climate Fund (GCF),
4. the Global Environment Facility (GEF) and
5. the identification of the information to be provided by Parties in accordance with Article 9, paragraph 5, of the Paris Agreement.

All of the above-mentioned issues were discussed extensively at COP 24, with progress on their operationalization slow and not as ambitious as expected. Most importantly, some Parties pushed back on the implementation of article 9.7 Paris Agreement, regarding the ex-ante finance transparency. As a result, agreement was only achieved on the terms of article 9.5 Paris Agreement, whereas article 9.7 Paris Agreement is nowhere present in the Paris Rulebook.

In terms of long-term finance, the COP 24 reiterated the goal of jointly mobilizing USD 100 billion annually by 2020, as well as the need to scale up climate finance and for Parties to enhance their enabling environments and policy frameworks to facilitate the mobilization and effective deployment of climate finance. The innovation of COP 24 is that it urged States to strike a great balance between mitigation and adaptation, while requesting the organization of in-session workshops, which will focus on i) the effectiveness of climate finance, including results and impacts of finance provided, and ii) the provision of technical support to developing States. In addition to this, COP 24 also decided on a new collective goal on finance starting from 2020, from a floor of UDS 100 billion per year.

Additionally, in terms of the matters relating to the report of the SCF, COP 24 decision included a summary of the overview of climate finance flows and the recommendations of the SCF 2018 biennial assessment of climate finance flows, following the example of COP 22 and COP 23. The COP also requested the SCF to prepare a report, every four years, on the determination of the needs of developing States, starting from 2020 and to map the available information under article 9.2 Paris Agreement.

The report of the GCF to the COP referred to the progress made in 2018 focusing, amongst others, on i) the strengthening of the GCF’s institutional capacity, ii) the transparency, standards and safeguards to be implemented by the GCF, iii) the initiation of a review process of the GCF progress, iv) the improvement of access to the GCF, v) the increase in the number of accredited entities, and vi) lastly, the implementation of simplified approval process. Some of the above mentioned issues had already been highlighted by the COP 23 and seem to have been successfully addressed by COP 24. In addition, the COP 24 focused on the launch of the first replenishment period and reaffirmed the necessity to focus on the implementation and speed up of the disbursement of funds.

Furthermore, the report of the GEF to the COP welcomed the seventh replenishment period, which had been the main concern of COP 22 and COP 23, and referred to the decrease in allocation of funds to climate change. It requested the support to developing States and invited the enhancement of the information reported by the GEF. Finally, it welcomed the GEF’s decision to develop improved fiduciary standards.

Most importantly, the COP 24 addressed the issue of the information that should be provided under article 9.5 Paris Agreement. The identification of such information to be provided was initiated at COP 22 and that process that was completed by COP 24. The latter decided on a detailed list of the types of information to be provided under article 9.5 Paris Agreement, while also deciding the need for this information to be updated. In addition, the COP requested for the organization of biennial in-session workshops and a biennial high-level ministerial dialogue on climate finance beginning on 2021.

Finally, COP 24 was the first COP after 2015 to decide on the role of the Adaptation Fund with regards to the Paris Agreement. Particularly, it decided that the Adaptation Fund should serve the PA under the guidance of the COP, effective as of 2019. Moreover, it shall be financed from the share of proceeds under the Paris Agreement market mechanism under article 6 Paris Agreement.

Following the above analysis, one should consider the progress made on climate finance within the past three years following COP 21, as well as whether such progress adequately corresponds to the need to act urgently, as this has been evidenced by the IPCC. Even though there has been progress since the adoption of the Paris Agreement, States have not, however, touched upon the crucial and most important issues of the Paris Agreement during COP 24. COP 24 has eventually clarified the key information that should be conveyed regarding ex-post finance transparency by recognizing the importance of such information for the developing States. In addition, it referred to the effectiveness of climate finance by requesting the organization of in-session workshops focusing on such aspects, while recognizing the need to provide technical assistance and support to developing States. What it failed, however, is to comprehensively address the types of information that should be reported by virtue of ex-ante finance transparency, as provided by article 9.7 Paris Agreement. As has been continuously reiterated by the SCF, one of the main deficiencies in climate finance is the existing gap in terms of the data available, in order to track the financial flows already disbursed. In that regard, the COP 24 failed to operationalize article 9.7 Paris Agreement.

Furthermore, COP 24 did not address the issue of defining the main components of climate finance. As evident by the wording of article 9 Paris Agreement, there is no concrete definition of climate finance. Many scholars have argued so far, that the UNFCCC itself provides for the defining elements of climate finance. The challenge, however, remains in determining what is ‘new and additional’, how to define ‘adequacy and predictability’ and how to avoid the duplication of tracking with the Official Development Aid (ODA). Such issues are still to be addressed, while COP 24 requested Parties to communicate an indication of how they determine ‘new and additional’. To conclude, COP 24 made progress that is crucial for the implementation of the Paris Agreement, without, however, addressing issues constituting the core of its implementation. Such concerns should be taken into consideration by later meetings of the Parties, in order for the Paris Agreement to produce meaningful outcomes and for climate finance to be effectively implemented based on precise and coherent terminology and methodologies.