Developed countries have collectively pledged USD 30 billion from 2010-2012 to support developing countries’ climate efforts. This pledge, known as “fast-start finance,” was initially made in Copenhagen in 2009, and reiterated in the 2010 Cancun Agreements.
The Cancun Agreements took the pledge one step further, by adding an important reporting provision not present in 2009: it invites Parties to submit information to the UNFCCC secretariat on the resources provided to fulfill their commitment by May 2011, 2012 and 2013. Unfortunately, this invitation provides few details on what these reports should include.
While the Cancun Agreements mandate a new standard of transparency for climate finance over the long term, revised guidelines will not be ready in time for reporting on the short-term, fast-start finance commitment. At present, countries are voluntarily reporting information on fast-start finance in an ad-hoc manner, which makes it difficult to track and monitor their pledges. This leaves developing countries in the uncomfortable position of wondering whether, and how, the expected financing will be fulfilled. To build trust with developing country counterparts, we present below seven elements that developed countries should include in their annual fast-start finance reports to make them transparent and comprehensive.
1. Scale: Developed countries agreed to collectively provide USD 30 billion in fast-start finance. Thus, developed countries should provide information on the scale of fast-start finance provided in order to allow an assessment of progress against the collective pledge. While providing information on the scale of finance may seem fairly straight-forward, a variety of other information is key to nuancing and understanding information on scale, as enumerated in elements 2-7.
2. Method for determining that the money is “new and additional”: The Cancun Agreements require that funding be “new and additional” – i.e. it represents an increase in ambition from previous years, and does not divert other funding for development. There is currently no internationally-agreed baseline to assess whether finance for climate change is new and additional. Short of such an agreement, countries should explain clearly what definition they used for their report and share supporting information. For example, they could provide information on current and previous levels of climate finance and of development assistance, and indicate whether they are counting climate finance towards their official development assistance commitments.
3. Channeling institutions: The Cancun Agreements also mandate that fast-start finance include “investments through international institutions.” Moreover, they invite Parties to provide information on “ways in which developing county Parties access these [fast-start finance] resources.” Therefore, countries should specify the institutions through which their fast-start finance will flow. The governance structure of the channeling institution, whether bilateral, multilateral, or public/private, has implications for the level of developing country access to the funds, and the effectiveness and perceived legitimacy of the overall climate finance architecture.
4. Objective: The Cancun Agreements require that fast-start finance be delivered “with a balanced allocation between adaptation and mitigation,” and include forestry resources. While countries should break down their fast-start finance using these three broad objectives, more information would be gleaned from a break down that specifies other categories as well, such as technology sector or type of activity, akin to those proposed by WRI.
5. Geographic distribution: Recognizing that the most vulnerable developing countries have a specific and immediate need to adapt to the changing climate, the Cancun Agreements mandate that funding for adaptation be prioritized for least developed countries, small island developing states and Africa. To ensure that fast-start finance collectively meets this need, countries should also report on the countries and regions receiving the fast-start finance.
6. Status of the pledge: The Cancun Agreements invite developed countries to report on finance provided to fulfill their fast-start finance commitment. However it remains unclear on the specific definition of ‘provided’ finance. In order to avoid confusion, countries should distinguish between finance that has been pledged or planned, committed or allocated by a national governing body, and delivered to the recipient.
7. Type of financial instruments: Countries should indicate the type of financial instrument used for their fast-start finance. For example, is it in the form of grants, loans, or equity?
Once information on fast-start finance is reported by developed countries, the UNFCCC Secretariat will compile it into an information document. As is usually the case with national communications, the Secretariat could provide a synthesis that highlights cross-cutting elements, and, based on that synthesis, provide recommendations to developed country Parties for the next round of reporting. Countries could give such a mandate to the Secretariat. Moreover, the bodies in charge of the drafting of enhanced reporting guidelines for the reporting of long-term finance should incorporate lessons learned from this fast-start finance process.
For more information about transparency of climate finance, see WRI publications here.