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Fast Track Climate Finance: Do the Numbers Add Up?

This piece originally appeared on the World Bank Climate Change Blog.

The Copenhagen Accord commits developed countries to collectively “provide new and additional resources, including forestry and investments through international institutions, approaching US$ 30 billion for the period 2010 – 2012." This fast-start finance is critical to building trust among countries in the global climate regime and to lay the groundwork for the post-2012 climate finance architecture.

In the six months since the December 2009 Copenhagen Climate Conference, a number of developed countries have publicly announced their individual pledges to help meet this target. The World Resources Institute (WRI) tracks and monitors these so-called fast-start pledges.

$30 Billion -- But Is It New and Additional?

According to our research, pledges put forward so far total US$ 31.32 billion. [[!!]Note:[/!!] This number has since been updated. Please see our new interactive table for the latest.] However, many questions remain regarding the nature of the pledged funds. Some of the funds have yet to go through national budget appropriations processes. A number of pledges are often restated or renamed commitments made in the past, but with some added resources. For example, Japan’s Hatoyama Initiative resembles the previously announced Japanese Cool Earth Partnership, and countries such as the United Kingdom and the United States are counting previous commitments to the Climate Investment Funds (CIFs) as part of their fast-start finance pledge.

Since countries report in varying ways, the information provided is insufficient to determine whether these pledges can be considered “new and additional.” The use of the term “new and additional” in the international climate negotiations reflects the need to ensure (1) that there is an increase in overall ambition to respond to climate change, and accordingly, an increase in funds relative to allocations from previous years (i.e., ‘new’ funds) and (2) that delivery of climate funds does not result in the diversion of funds from other important objectives such as development (i.e., funds additional to development aid). To date, Parties to the UN Framework Convention on Climate Change (UNFCCC) have yet to achieve consensus on a clear and specific definition of additionality that can be applied uniformly to developed country financial pledges. As a result, countries have proposed various methods for defining additionality of their fast-start finance.

Developing a Common Reporting System

Tracking and monitoring climate finance is difficult in the absence of a common reporting system. Current reporting systems of the multilateral development banks (MDBs), the UNFCCC, and the OECD’s Development Assistance Committee are decentralized. The UNFCCC can play a role in helping to revise current reporting guidelines, building on these existing reporting systems, and coordinating synergies to maximize efficiency of reporting and review. The immediate next step is to secure a decision at COP16 in Cancun, Mexico that mandates a relevant body under the Convention to formulate draft guidelines for reporting financial information in a comparable, transparent, complete, accurate and efficient way.

Balanced Allocation Between Adaptation and Mitigation

The Copenhagen Accord states that these fast-start funds should have a “balanced allocation between adaptation and mitigation”. While there is no agreed-upon definition of what constitutes a “balanced allocation,” some countries specify the objectives of their fast-start funds. The European Union, for example, states that 63% of their EUR2.39 billion in 2010 will support mitigation while 37% will support adaptation. The portion of funding that will support REDD plus has been specified by several countries, particularly by those involved in the Paris-Oslo process. Obviously, many of the smaller, vulnerable countries such as Small Island Developing States and Least Developed Countries are concerned that the current balance is tilted towards mitigation, including REDD. The need for greater attention to adaptation fast-start funds should be addressed if we want a strong focus on building institutional and technical capacity in national-level decision-making processes that are inclusive, transparent, and accountable and ensure participation.

Choosing the Channeling Institutions and Mechanisms

Finally, there is the issue of channeling institutions and mechanisms. As emphasized in my earlier blog post, the institutions chosen to govern the funds have implications for the effectiveness and perceived legitimacy of the overall climate finance architecture. Our summary of pledges indicates that a significant portion of the fast-start funds will flow through bilateral channels. As a matter of donors’ historical preferences, the primary multilateral channels of choice are the MDBs, the CIFs, and the Global Environment Facility (GEF). However, civil society and developing countries’ are concerned over the effectiveness and approach to equity of these existing institutions. Those tasked with the governance of fast-start climate funds must ensure country ownership, strive for effective use of resources, and maximize impact while also ensuring funding for the most vulnerable countries and communities.

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