WRI Publications Feed: COP 17: Durban

Summary of Developed Country ‘Fast-Start’ Climate Finance Pledges

Maggie Barron — Mon, 26 Nov 2012 15:41:50 -0500

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Reiterating a pledge made in Copenhagen in 2009, the Cancun Agreements of December 2010 formally commit developed countries to collectively provide resources “approaching USD 30 billion for the period 2010 - 2012” to support developing countries’ climate efforts. This so-called “fast-start” finance will help developing countries, particularly the poorest and most vulnerable, mitigate (reduce) their greenhouse gas emissions, and adapt and cope with the effects of climate change. These pledges also present an opportunity to build trust between developed and developing countries in the international climate arena, in turn fostering progress towards a comprehensive post-2012 international climate agreement.

WRI has synthesized available information on countries’ pledges and measures they have taken to make the pledged resources available to developing countries. The accompanying table sets out both the amounts and the mechanisms by which funding would be delivered. WRI has also looked at how countries indicate whether their pledges will provide “new and additional” funds compared to what they provide as official development assistance. In-depth analysis on a subset of countries’ fast-start finance contributions is available separately.

This table will be continuously updated as more information becomes available.

Q&A on this Analysis

(Updated on November 26, 2012)

Have developed countries met their fast-start finance pledge?

Based on our research, as of November 26, 2012, 23 developed countries and the European Commission have publicly announced their individual fast-start finance pledges, in addition to the European Union’s collective pledge. These pledges total USD 33.92 billion. While this represents a significant step in the right direction, the extent to which these pledges are consistent with internationally agreed principles for fast-start finance is unclear. The Cancun Agreements mandate that fast-start funds have a “balanced allocation between adaptation and mitigation,” be “new and additional,” be “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa,” and include “forestry and investments through international institutions.” Because the details of this mandate have not been defined, it is not clear that developed countries’ fast-start finance contributions fulfill these criteria.

Finally, ensuring that pledges are actually delivered will be essential. According to reported information of the pledged funds, USD 28.06 billion has been requested and/or budgeted by the executive bodies of the countries during the fast-start period. In some cases, the legislative bodies have also approved these requests. The actual delivery and implementation of the finance, however, can be complicated to track, and is generally not documented in countries’ fast-start finance reports.

Do the funds have a “balanced allocation between adaptation and mitigation”?

Countries often specify the general objective that their fast-start funds will support. For example, of the USD 1.58 billion mobilized for fast-start by Germany in 2010 and 2011, 48 percent will support mitigation, 28 percent will support adaptation, 21 percent will support REDD+, and 3 percent will support multipurpose activities. In its 2010 fast-start finance report, Germany highlighted the challenges of identifying suitable adaptation projects as the reason for this, and recognized the need to adjust the allocation of funds across the three areas of mitigation, adaptation and REDD+. In the case of both Japan and the United States, a large majority of fast-start finance supports mitigation objectives. The grant-based portion of their contributions, however, gives more balanced consideration to adaptation. Several countries involved in the Interim REDD+ Partnership — a process created parallel to the UNFCCC to ensure effective and sustainable REDD+ (reduced emissions from deforestation and forest degradation) actions over the next few years — have also specified that at least 20 percent of their funds will support REDD+. However, there is no agreed-upon definition among countries of what constitutes a “balanced allocation.”

Are the pledged funds “new and additional”?

“New” funding represents an increase relative to pledges or allocations from previous years. A number of pledges include restated or renamed commitments already made in the past. For example, Japan’s Hatoyama Initiative is a restructuring of the previously announced Japanese Cool Earth Partnership, with some new resources included in the Initiative. 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. The United States also counts its annual contribution to the Montreal Protocol Fund, a long-standing commitment that dates back more than two decades.

Funds that are “additional” ensure that their delivery does not result in the diversion of funds from other important development objectives. In other words, climate mitigation and adaptation funds should be additional to development aid. Parties to the UNFCCC have not yet achieved 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 a variety of methods for defining the additionality of their fast-start finance.

Do the pledges include “investments through international institutions”?

Countries are channeling investments through a mix of multilateral, bilateral, and public-private institutions. Several countries, including Japan and the United States, are channeling a considerable amount of their funds through export credit agencies and other public-private channels. The Climate Investment Funds(CIFs) and the Global Environment Facility (GEF) are the primary multilateral institutions of choice through which other funds will be channeled. The governance of the funds has implications for the effectiveness and perceived legitimacy of the overall climate finance architecture. Developing countries generally prefer that institutions governing finance ensure developing country ownership of funded activities and prioritize funding for climate vulnerable countries. Developed countries tend to emphasize the need to minimize bureaucratic costs and ensure the effective use of resources.

Why is fast-start finance “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States, and Africa”?

Countries under the Convention recognize that developing countries are highly vulnerable to climate change impacts because they have fewer resources to adapt to the effects of climate change, which can include increased droughts and floods, rising sea levels, and greater uncertainty in the agricultural sector. Least developed countries (LDCs) and small island developing States (SIDS) in particular are recognized as needing special consideration due to their extreme vulnerability. For these reasons, developed countries have pledged to prioritize fast start funds for the “most vulnerable countries.” Several countries are channeling their fast start finance through the Least Developed Countries Fund or the Adaptation Fund, many are channeling finance directly to SIDS and LDCs, and Australia in particular states that it will channel about one third of its fast-start finance to SIDS and about one quarter to LDCs.

What types of financial instruments are countries using?

There are several different types of financial instruments countries are using to deliver their fast-start finance, including grants, loans, equity, loan guarantees, insurance, and private investments. Many countries have provided some information on the type of financial instruments used. For example, the US reported providing USD 4.7 billion in grants through Congressional appropriations, USD 2.7 billion in development finance and export credits, which mostly take the form of concessional loans. Norway reports that all of its fast-start finance will be grants. Meanwhile, Japan’s fast-start finance includes grants and loans that meet ODA standards, finance in the form of ‘other official flows’, and may also count leveraged private finance, though this is ambiguous. However, reporting on the type of financial instrument used is neither comprehensive nor consistent. For example, little information is reported on the concessionality of the loans when used.

What are the next steps to ensure clarity on the delivery of climate finance pledges in the future?

The UNFCCC system for developed countries to report on the delivery of climate finance faces several challenges, which limit the utility of available data. For example, countries currently use multiple methods for reporting and often provided insufficient information even where requested. To address this, the Cancun Agreements mandate more frequent reporting by developed countries using an enhanced common reporting format.

While these enhanced reporting provisions will be essential for successful tracking of developed country climate financial flows, they will not be ready in time to provide guidance for reporting on the short-term, fast-start finance. In the meantime, the Cancun Agreements invited developed country Parties to submit information to the UNFCCC secretariat, for compilation, on the resources provided to fulfill their fast-start finance commitment by May 2011, 2012, and 2013. Nine developed countries and the EU submitted their reports on or around the most recent May 2012 deadline. While the Cancun Agreements include reporting provisions for fast-start finance, it does not provide guidance on what these reports should include, resulting in reported information that is neither fully comparable, transparent, nor complete, as is demonstrated by the gaps in information in WRI’s fast-start table, the Open Climate Network’s fast-start finance assessments, and in a report by IIED assessing the transparency of the May 2011 fast-start finance reports. The UNFCCC secretariat hosts a fast-start finance module on its finance portal that enhances the comparability of the reports but it remains limited to information provided by developed country Parties. It also does not capture information available on the faststartfinance.org website or on individual donor or recipient websites, or other sources such as NGOs, the private sector or multilateral development banks.

To build trust with developing country counterparts, developed countries should improve their fast-start finance reporting in the future, for example, by including more comprehensive, comparable and transparent information on the following seven elements in their annual fast-start finance reports: scale, method for determining that the money is “new and additional,” channeling institutions, objective, geographic distribution, status of the pledge, and type of financial instrument.

Athena Ballesteros, Emily Chessin, Kirsten Stasio, and Remi Moncel contributed to earlier versions of this Q&A.

Building the Climate Change Regime: Survey and Analysis of Approaches

Maggie Barron — Fri, 28 Oct 2011 15:45:08 -0400

About this Paper

The purpose of this paper is to help climate change negotiators, other government officials, international institutions, and civil society experts as they jointly work to build the post-2012 international climate regime. The climate regime is defined here as the set of international, national and sub-national institutions and actors involved in addressing climate change. The paper seeks to identify concrete pathways for building a regime capable of delivering a level of action consistent with the objective of the Convention. It does so by surveying and analyzing the academic literature as well as proposals by non-governmental organizations (NGOs) and governments. The authors group proposals according to the key issue they tackle in the design of the regime and the “approach” they take. The five key issues discussed are:

Options under the UNFCCC to increase ambition
Options outside the UNFCCC to increase ambition
Sharing the mitigation effort under the UNFCCC
The role of various actors in tracking country performance on mitigation
The legal form of a future climate agreement

It is important to note that all approaches are meant to be complementary rather than mutually exclusive. While the paper does not make recommendations about which approach to adopt, it assesses each approach against three criteria: adequacy, equity, and implementation.

World Resources Report 2010-2011: Decision Making in a Changing Climate

Maggie Barron — Mon, 17 Oct 2011 10:13:29 -0400

Recent extreme weather events including floods, heat waves, and droughts present a vivid image of the direction the world is heading. As climate change intensifies, more events like these, combined with longer-term changes in the climate’s average state - including rising seas, melting glaciers, and shifting precipitation patterns — will have profound impacts on people, ecosystems and infrastructure.

Together, these changes call for different approaches to planning and policymaking, enabling societies to adapt effectively to a much hotter tomorrow.

World Resources Report 2010-2011: Decision Making in a Changing Climate is a major resource to help developing country national-level officials make decisions that support communities and economic sectors to become more climate resilient.

Based on input from more than 100 experts in 36 countries, the report offers specific, practical strategies and innovative case studies to inform how to integrate climate change risks into national policies and planning.

It also provides recommendations in five key public policy areas for developing country government officials and donor agencies: public engagement , decision-relevant information, institutional design, tools for planning and policymaking, and resources.

Produced by the United Nations Development Programme, the United Nations Environment Programme, the World Bank, and the World Resources Institute, WRR 2010-2011 is essential reading for policy makers, donors, and decision makers who must start now to prepare for a changing world.

Making Adaptation Count: Concepts and Options for Monitoring and Evaluation of Climate Change Adaptation

Kevin Lustig — Fri, 14 Oct 2011 10:07:25 -0400

This report was made possible with support from the German Agency for International Cooperation (GIZ) on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).

Executive Summary

Adaptation, Development, and Monitoring and Evaluation

The impacts of climate change increasingly threaten the achievement of poverty reduction and other development objectives, including the 2015 Millennium Development Goals (MDG). Research suggests that impacts over the course of the 21st century, if unaddressed, could cause a 5–10 percent loss in global gross domestic product (GDP), with poor countries’ wealth declining in excess of 10 percent.¹ Even more significant are the potential threats to human security – reduced agricultural production, heightened water scarcity, exposure to droughts, floods, storms, and diseases.²

As developing country governments and their international partners grow increasingly aware of these threats, they are turning to options for adapting to climate change in the development context. However, the national, sectoral, and project-based adaptation plans and policies now emerging are largely in their infancy and relatively untested. Monitoring and evaluation (M&E) of such initiatives, as they are implemented across the developing world, will be critically important for judging their effectiveness and making decisions on which efforts to scale up as climate impacts intensify. Industrialized countries and donor agencies channeling billions of dollars into adaptation finance, including under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC), will require such systems as an important dimension to the adaptation initiatives they support.

About This Publication

This paper aims to provide adaptation and development practitioners with a practical framework for developing M&E systems that can track the success and failure of adaptation initiatives in the development context. It is based upon a series of convenings, case studies, and interviews conducted by the World Resources Institute (WRI) in collaboration with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, with financial support from the German Federal Ministry for Economic Cooperation and Development (BMZ). In particular, the authors reviewed M&E systems in the planning and implementation stages for several relevant GIZ and Kreditanstalt für Wiederaufbau Bankengruppe (KfW or German Development Bank) natural resource management and adaptation projects in India.

We expect adaptation M&E practice will evolve substantially in the years ahead. We offer this guidance in the hope that capturing early lessons in adaptation can propel future successful efforts. This paper addresses the planning, design, and early implementation stages of adaptation interventions. The key framework can also serve as a basis for funders and their partners to develop or analyse programmatic agendas, formulate evaluation questions, or supplement guidance on M&E in a specific sector or thematic area.

The core principles presented in this report center around the importance of M&E as a tool to shape successful adaptation efforts. We also recognize, however, that M&E can serve other useful purposes. For example, it can help identify positive synergies between efforts towards adaptation and other objectives, such as economic growth or climate change mitigation.

The guidance presented here is limited to the scope of our research and consultations and has not yet been substantially tested in the field. Practitioners will undoubtedly need to adjust their use of this paper to the unique needs of specific interventions, and to existing M&E systems and management standards. Furthermore, analysis of adaptation strategies and efforts beyond the intervention level are largely beyond the scope of this paper. Very different methodologies may be needed to assess, for example, large-scale, countrywide adaptation strategies, or sector-wide adaptation efforts. Finally, as practitioners, governments, and other development cooperation partners progress in this emerging field, much remains to be tested and learned about “what works” in adaptation and how to measure it.

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Greenhouse Gas Protocol Product Life Cycle Accounting and Reporting Standard

Maggie Barron — Mon, 03 Oct 2011 22:58:31 -0400

The GHG Protocol Product Life Cycle Accounting and Reporting Standard (referred to as the Product Standard) provides requirements and guidance for companies and other organizations to quantify and publicly report an inventory of GHG emissions and removals associated with a specific product. The primary goal of this standard is to provide a general framework for companies to make informed choices to reduce greenhouse gas emissions from the products (goods or services) they design, manufacture, sell, purchase, or use. In the context of this standard, public reporting refers to product GHG-related information reported publicly in accordance with the requirements specified in the standard.

Related Standards

New! Corporate Value Chain (Scope 3) Accounting and Reporting Standard

Corporate Accounting and Reporting Standard

As awareness about climate change increases and concerns grow, investors are demanding more transparency, and consumers are seeking greater clarity and environmental accountability. Companies are increasingly receiving requests from stakeholders to measure and disclose their corporate GHG inventories, and these requests often include a company’s products and supply chain emissions. Companies must be able to understand and manage their product-related GHG risks if they are to ensure long-term success in a competitive business environment and be prepared for any future product-related programs and policies.

This standard focuses on emissions and removals generated during a product’s life cycle and does not address avoided emissions or actions taken to mitigate released emissions. This standard is also not designed to be used for quantifying GHG reductions from offsets or claims of carbon neutrality.

Ultimately, this is more than a technical accounting standard. It is intended to be tailored to business realities and to serve multiple business objectives. Companies may find most value in implementing the standard using a phased approach, with a focus on improving the quality of the GHG inventory over time.

Watch the Video

Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard

Maggie Barron — Mon, 03 Oct 2011 22:57:38 -0400

The primary goal of this standard is to provide a standardized step-by-step approach to help companies understand their full value chain emissions impact in order to focus company efforts on the greatest GHG reduction opportunities, leading to more sustainable decisions about companies’ activities and the products they buy, sell, and produce. The standard was developed with the following objectives in mind:

Related Standards

New! Product Life Cycle Accounting and Reporting Standard

Corporate Accounting and Reporting Standard

To help companies prepare a true and fair scope 3 GHG inventory in a cost-effective manner, through the use of standardized approaches and principles
To help companies develop effective strategies for managing and reducing their scope 3 emissions through an understanding of value chain emissions and associated risks and opportunities
To support consistent and transparent public reporting of corporate value chain emissions according to a standardized set of reporting requirements Ultimately, this is more than a technical accounting standard. It is intended to be tailored to business realities and to serve multiple business objectives. Companies may find most value in implementing the standard using a phased approach, with a focus on improving the quality of the GHG inventory over time.

Watch the Video

Two Degrees of Innovation: How to Seize the Opportunities in Low-Carbon Power

Maggie Barron — Fri, 09 Sep 2011 10:38:40 -0400

This paper offers a strategic framework for those seeking to capitalize on the low-carbon transition. The first section presents innovation as a key strategy to achieve economic development, energy, and environmental goals. The second section explains why the innovation process is unique in the low-carbon power sector and introduces the innovation ecosystem. The third section lays out a stepby- step process to identify and capitalize on the enormous potential and emerging opportunities in this sector.

Key Points

A global transformation of the energy infrastructure is urgently needed to meet the need for modern energy services while avoiding a climate disaster.
There is a large and growing global market for utility-scale, low carbon power technologies as this transformation begins. Both developed and emerging economies can benefit from it but competing in the global value chain will require explicitly building innovation capacity.
Innovation—improvements in price and performance—will close the gap between low-carbon technologies today and the low-cost, high performance technologies that are needed.
Innovations include new products, processes, or policies that reduce costs or improve performance and can happen at any point in a technology’s lifecycle—from design through manufacturing through operations and maintenance.
The innovation ecosystem approach captures the complexity, uncertainty, and heterogeneity of innovation processes and identifies the critical services innovators need to thrive. These are the services policymakers need to focus on when investing in innovation.
The framework provides step-by-step guidance to identify the opportunities in the sector and build a robust innovation ecosystem to capture them.

Power, Responsibility, and Accountability: Re-Thinking the Legitimacy of Institutions for Climate Finance

Maggie Barron — Tue, 14 Dec 2010 12:27:05 -0500

Executive Summary

The 2009 Copenhagen Climate Summit left unresolved major questions about how to fund lowcarbon development in developing countries. In a high-level political declaration—the “Copenhagen Accord”—developed countries agreed to “provide new and additional resources … approaching USD 30 billion for the period 2010–2012” and to a goal of jointly mobilizing USD 100 billion a year by 2020 from both public and private sources, to address the needs of developing countries. As the negotiations on a global climate deal continue, disagreement remains on how much of these funds will come from public or private sources and whether these billions should be delivered through new or existing institutions. There is also heated debate over whether a single centralized institution or a decentralized approach that coordinates international, regional, and national institutions would be more effective.

Although there are many variations in government positions, broadly speaking, developed countries favor a substantial role for existing institutions, such as the multilateral development banks (MDBs) that they have funded and led for the past 60 years. Developing countries prefer new institutions, arguing that existing ones favor the interests of contributor countries and have failed to deliver on promises to support poverty alleviation and sustainable development. The ongoing negotiations on a global climate deal reflect this “northsouth” gulf. Despite these differences, one thing is clear: if the institutional arrangements entrusted with managing new flows of climate finance are to succeed in raising the required resources and in investing these resources effectively, they will need to be perceived as legitimate by both contributors and recipients.

Institutional Arrangements for Climate Finance: Power, Responsibility, and Accountability

Box A. Dimensions of Power, Responsibility, and Accountability in the Design of a Climate Finance Mechanism

Power: The capacity—both formal and informal—to determine outcomes

How will the financial mechanism’s governance structure distribute voice and vote between and among contributors and recipients?
What role will the United Nations Framework Convention on Climate Change’s (UNFCCC) institutions, including the Conference of the Parties, play in guiding the financial mechanism?
To what extent will contributors be able to determine funding priorities by placing conditions on the resource mobilization and allocation process?
How influential will the secretariat and management staff of the financial mechanism be in determining project design and selection?
Will advisory groups, civil society observers, and local communities play a role in determining how the financial mechanism operates?

Responsibility: The exercise of power for its intended purpose

Are the financial mechanism’s standards, program priorities, and eligibility criteria strong enough to ensure its resources are invested fairly and effectively?
How do cost-sharing formulas (e.g., incremental, marginal, transformative costs) allocate responsibilities between contributor and recipient countries, and between the financial mechanisms and recipient countries?
To what extent are national institutions and local civil society entrusted with ensuring the effective design and implementation of investments?

Accountability: The standards and systems that ensure power is exercised responsibly

How does the financial mechanism measure, evaluate, and incentivize results?
Are effective environmental and social safeguards in place to ensure the investments do no harm?
How are fiduciary duties and financial management standards supported and enforced?
Are grievance and inspection mechanisms in place to ensure that standards are followed?

The full report seeks to ground the debate on the future of climate finance in an objective analysis of existing efforts to finance climate mitigation and adaptation in developing countries. The authors step back from the question of which institutions should be entrusted with new flows of climate finance to examine instead how governments can design a climate financial mechanism in a way that is widely perceived as legitimate. We identify three crucial dimensions of legitimacy: power, responsibility, and accountability (see Box A). While these three dimensions interrelate and overlap, we have found them to provide a useful analytical framework to analyze and guide choices in institutional design.

We review the governance structures, operational procedures, and records to date of 10 international and national financial mechanisms, with reference to these core dimensions of legitimacy, to draw lessons for future institutional arrangements (see Box B). We place special emphasis on the experiences with the Global Environment Facility (GEF), which, in operation since 1994, is the longest serving operating entity of the United Nations Framework Covention on Climate Change (UNFCCC) financial mechanism. In addition to the GEF, we review experiences from the Multilateral Fund for the Implementation of the Montreal Protocol, in operation since 1990, which is often referred to as a model for future funds. The remaining funds reviewed are much newer and yield more insights with regard to design, rather than operation.

We recognize that perceptions of the legitimacy of a financial mechanism are inherently subjective and that this subjectivity is revealed in the very different preferences expressed by contributor and recipient countries. We believe, however, that if governments were to discuss the dimensions of legitimacy more explicitly, the stakes and the trade-offs would become more apparent, and a more shared understanding on how to design a legitimate financial mechanism would emerge. We believe that the failure, thus far, to address the distribution of power, responsibility, and accountability more explicitly has led to a proliferation of financial mechanisms that are underfunded, which in turn leads to calls to create new mechanisms.

We recognize that perceptions of a financial mechanism’s legitimacy will also depend upon an institution’s performance—its demonstrated capacity to commit funding to investments that reduce greenhouse gas emissions and build resilience to climate change. Most of the climate financial mechanisms studied have not been operating at a scale or for a time period that would allow a full assessment of their performance. We nonetheless seek to make recommendations that could improve the design and the performance of new and existing climate financial mechanisms.

We conclude that a new global deal on climate finance is likely to significantly redistribute power, responsibility, and accountability between traditional contributor and recipient countries. Most significantly, the power of emerging economies to control climate finance mechanisms will grow, as will their responsibility and accountability for the performance of these institutions. In light of the dramatic changes in global politics and the global economy in past decades, this redistribution seems both long overdue and necessary to provide the basis for a successful global partnership on climate finance.

Conclusions and Recommendations

This is a dynamic time for climate finance, as the international community struggles to craft mechanisms that are perceived to be legitimate by all UNFCCC Parties and that are capable of funding climate-related activities efficiently and at scale. Our analysis of established and new climate financial mechanisms and the current UNFCCC negotiations leads us to conclude the following:

Change is coming. A new global deal on climate finance will likely reinterpret the principles that in the past have guided the design of climate finance mechanisms in a way that significantly redistributes power, responsibility, and accountability between traditional contributor and recipient countries.
A new balance of power, responsibility, and accountability could enhance recipient country ownership. Greater representation of developing countries on the governing bodies of international financial institutions more generally, and climate finance mechanisms more specifically, should help ensure greater emphasis on the national and local “ownership”—and thus the effectiveness—of climate finance investments.
A new understanding of how to balance national interests with global responsibility and accountability is required. This will require assurance that nationally driven investments contribute to global benefits in the form of net emission reductions and that investments protect the most vulnerable countries and communities.
New financial mechanisms—at both the global and the national level—are necessary. If the international community raises the scale of public finance necessary to move developing countries onto a low-carbon, climate-resilient pathway, the capacity and the creativity to spend these resources well will necessitate the creation of one or more new financial mechanisms at the global level and multiple nationallevel institutions.
Existing institutions must also be reformed. The scale of the climate change challenge and of the scale of the funding necessary to respond to that challenge will also necessitate the reform of existing financial institutions, many of which have been supporting fossil fuel–led growth and have yet to mainstream concerns about the impacts of climate change into their strategies.
Current negotiating positions reflect deep historical and ideological divisions—particularly between developed and developing countries—that will need to be overcome by building trust and experimenting with new kinds of relationships. Developed countries have been keen to build on existing financial institutions they have shaped and traditionally controlled. Developing countries are wary of these same institutions, which they see as historically having advanced contributor interests and theories of development, through both the formal and informal exercise of donor power.
At the international level, the choice between reforming traditional development agencies, such as the GEF, U.N. Development Programme (UNDP), the U.N. Environment Programme (UNEP), and MDBs, and creating new financial mechanisms will raise issues of institutional economy and effectiveness. In order to generate a greater sense of trust and ownership, backers of existing agencies may have to accept a degree of duplication of existing capacity through the creation of new mechanisms—particularly where significant gaps in capacity are identified—and to accept strengthened lines of accountability of climate finance mechanisms to the UNFCCC Conference of the Parties (COP). On the other hand, those calling for the creation of new institutions may need to concede that it may waste precious resources to replicate the staff and services provided by existing agencies.
Balancing the roles of international and national institutions will also involve trade-offs. Traditional development agencies have gained the trust of contributors by putting in place systems to both measure and manage impacts of their investments. Developing country recipients, however, have been frustrated by the bureaucracy and the focus on generic rather than country-specific concerns that these systems can generate. Many developing countries will likely struggle to convince contributors that their national institutions have the capacity to manage large-scale development finance without the support of development agencies. Notably, a number of developing countries are taking steps to build and strengthen this capacity and will need support to do so.
Delivering climate finance at scale, at least in the short term, will likely involve multiple mechanisms, both new and reformed. This is true because of the complex politics of the international negotiations and the differing views of legitimacy held by contributors and donors. The urgency and complexity of delivering funds at scale argues for moving forward, at least in the near term, with the institutions that we have, and investing in the strength and quality of COP guidance and national planning processes to ensure coordination and coherence. This experience should then guide the design and operation of the new institutions that will become necessary as the scale of resources grows.
Low-carbon, climate-resilient development is an unexplored frontier for all countries and has potential risks as well as benefits. While high standards will have to be developed and maintained to ensure emissions fall and the vulnerable are protected, climate finance will necessarily entail experiments with new policies and technologies that will need to be watched closely for unintended environmental and social impacts.
Policymakers must agree on ways to diversify the sources of climate finance and to de-link them from the levers of informal power. If existing institutions are to meet evolving standards of legitimacy, then their fundamental governance structures, as well as their operational procedures, will need to be reformed to give greater voice to developing country recipients. If formal grants of power are to lead to the effective exercise of that power, the international community must also make greater efforts to identify sources of revenue, such as new levies or longterm commitments, that are independent from the discretion of contributor governments.
It is necessary to build the capacity of non-state actors and civil society to monitor climate finance governance. Civil society groups at all levels can and are playing an important role in monitoring and influencing decision-making within climate finance funds. But they need to occupy such spaces more effectively than they have to date by monitoring and engaging in more inclusive decision-making processes with technical rigor and authority. However, “representation” of nonstate actors can be a very difficult issue—civil society is diverse with widely differing views.
Near- and medium-term climate finance should focus on strengthening national institutions. A next generation of climate investments should promote the responsibility of recipient countries by strengthening the national institutions that will implement mitigation and adaptation activities and by ensuring their transparency and accountability to citizens within countries, as well as to the international community. While it is important that development agencies provide technical support to national institutions, they should work in closer partnership with national stakeholders. It will be particularly important to engage with stakeholders outside of government, including the private sector, independent research institutions, and civil society. Such collaborations can help ensure climate finance proposals more appropriately reflect national circumstances and priorities.
It is important to draw from the lessons learned from decades of development finance to build national institutions that reflect universally accepted principles of good governance. Traditional finance and development institutions have decades of experience—both good and bad—in translating internationally agreed upon agendas into national and local investments. National institutions should draw from these experiences and be designed and supported to operate in accordance with universal principles of good governance. Strong provisions for accountability should be put in place, including sound fiduciary management, anticorruption measures, and grievance mechanisms and inspection procedures that ensure compliance with environmental and social standards and safeguards.