This issue brief discusses different ways to improve the current system for reporting and compiling information on public financing for climate change. Its goal is to help Parties to the UNFCCC develop robust reporting processes for climate finance.
Reporting and reviewing financial information has become an increasingly urgent issue in the international climate negotiations. In the Copenhagen Accord, which resulted from the United Nations Climate Change Convention in Copenhagen in 2009, developed countries pledged to provide USD$30 billion for the period of 2010-2012 and $100 billion per year by 2020 for climate adaptation and mitigation in developing countries. Developing countries want assurances that developed countries are fulfilling their climate finance pledges. To address this need, the Bali Action Plan (2007) mandates that support from developed countries for developing country Nationally Appropriate Mitigation Actions be “measurable, reportable and verifiable.” The Copenhagen Accord, building on these provisions, calls for “financing by developed countries [to] be measured, reported and verified in accordance with existing and any further guidelines adopted by the Conference of the Parties,” and that accounting of such finance is “rigorous, robust and transparent.” However, countries have yet to agree on next steps for tracking progress against climate finance pledges under a post-2012 international climate regime and what, if any, common reporting format will be required.
Current United Nations Framework Convention on Climate Change (UNFCCC) reporting guidelines are neither transparent nor comprehensive, and efforts by multilateral and bilateral development finance institutions to fill this gap are emerging but have so far remained limited in scope. As a result, existing data collection systems provide only limited information on the levels of financing, what financing is used for and which countries are benefiting. They do not provide information on whether funds are new and additional. The result is a lack of coordination among donor countries to ensure that funding efforts address needs in a balanced and thorough way that avoids duplication. This also generates a lack of trust between developed and developing countries that hinders progress in the negotiations for a post-2012 international treaty to address climate change.
Therefore, for public climate financing to be evaluated and flow effectively and efficiently, it is critical that data on climate finance are reported using a common reporting system as well as reviewed. Depending on the level of detail required by a reporting system, the reported data should help determine how Parties are meeting their financial commitments, improve understanding of sectoral and technological investment trends, and lead to assessments of the effectiveness of different forms of financing.
The goal of this paper is to help Parties to the UNFCCC develop robust reporting processes for climate finance, starting with a decision in Cancun that addresses the measurement, reporting, and verification (MRV) of finance. The paper discusses:
The characteristics and principles of an improved reporting system for climate finance.
How and what kind of financial data are currently collected and reported by the UNFCCC, the OECD DAC, private organizations, and multilateral development banks (MDBs).
Options to improve on current reporting systems, including a proposed reporting format.
The potential implications and operational consequences of an improved reporting system for the review process, institutional structures, and fast-start climate finance.
This paper aims to inform not only the nature of the text to be adopted by the Conference of the Parties at COP-16, but will also be pertinent over the next two years as improved reporting guidelines are drafted, agreed to, and implemented.