WRI Stories Feed: Vulnerability and Adaptation: Finance

Operationalizing the Green Climate Fund: Informal Meeting of Prospective GCF Board Members and Other Interested Parties

Louise Brown — Tue, 12 Jun 2012 15:52:30 -0400

On 22-23 March 2012, the World Resources Institute (WRI) and Climate Analytics held an informal meeting of negotiators involved in the design of the Green Climate Fund (GCF) in New York City. The purpose was to provide an opportunity for prospective Board members, alternates, advisers, and other delegations involved in negotiations around the GCF, to exchange views on the next steps in the Fund’s design and operationalization.

Participants were invited to engage in an informal, structured conversation to share their views and reach a better understanding of what was agreed in the Durban decision and the governing instrument of the GCF. The meeting was designed to prepare for, but in no way preempt, the work of the GCF Board, and operated under the Chatham House rule.

WRI and Climate Analytics prepared an informal summary under their shared responsibility and it should not be taken to reflect the official positions of any government or institution present at the meeting, or of any organization that provided financial support.

Download the full summary (PDF, 11 pages)

Paying a Premium for Climate Resilience

Johan Schaar — Thu, 07 Jun 2012 15:29:34 -0400

What is the best way to protect vulnerable rural communities from the damaging impacts of climate change? Insurance could be an answer, but it raises a number of difficult questions.

To illustrate, the New York Times recently ran…

Have Countries Delivered on Fast-Start Climate Finance?

Clifford Polycarp — Fri, 20 May 2011 16:31:37 -0400

As the reporting deadline for 2010 looms, developed countries will need to prove that they are honestly meeting their modest $30 billion commitment.

Today, WRI releases an updated summary of developed countries’ “fast start” climate finance pledges. These funds are intended to help developing countries reduce emissions and adapt to climate change from 2010-2012.

To date, 21 developed countries and the European Commission have publicly announced individual fast-start finance pledges totaling nearly USD 28 billion to meet the USD 30 billion commitment in the 2009 Copenhagen Accord.

In last year’s Cancun Agreements, developed countries reaffirmed their commitment and also agreed to provide greater transparency on the delivery of their pledges – in other words, information not just on what the pledge is, but on how the country plans on meeting it.

The timing of this information is crucial as developing countries await progress in this area before moving other pieces of the Cancun Agreements forward. For example, major developing countries – Brazil, China, India and South Africa – have explicitly linked progress in the Green Climate Funds discussions to the sizeable flows of fast start funds.

Developed countries are invited to voluntarily provide this information in annual reports to the UNFCCC Secretariat in May 2011, 2012, 2013. Unfortunately, the Cancun Agreements contain no specifics on what format the reports should follow.

With the May deadline looming, what do we already know about what developed countries are providing? Our updated summary presents the most up-to-date information available. The summary reveals that most developed countries are making tentative progress towards delivering their commitments. However, the information available is neither complete nor consistent, and developed countries should provide comprehensive and comparable information on the delivery of fast start finance in 2010 in the reports they submit this month.

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The May Deadline

Some news reports have suggested that developed countries have “missed” the May deadline for reporting. This is based on the May 1 deadline specified by the secretariat. However, since the Cancun Agreements do not actually specify a particular date in May, countries are not obliged to provide information by May 1, and could reasonably be expected to submit their information by the end of May.

WRI is aware of several countries that are working on preparing these reports and we expect to see submissions fairly soon. It is important that they all meet the May deadline in the Cancun Agreement, and submit comprehensive and comparable reports and be completely transparent about underlying assumptions behind the numbers. The summary of pledges we are releasing today provides the most up-to-date information available, and will be updated once all country reports are formally submitted.

Changes in Pledges

While there have been no significant changes to the overall pledges, further details are emerging on how the pledged resources are being mobilized and allocated. There have been some concerns over the impact of Japan’s aid cuts and U.S. budget cuts on their respective fast start commitments. These events may have an impact on 2011 and 2012 allocations of these countries, but there have been no formal announcements by either country since these events.

The United States, in particular, has never made specific numerical commitments as part of their overall fast start pledge for the period 2010-12, always maintaining that it will contribute its “fair share.” The ambiguity in the overall pledge makes it hard to assess changes resulting from the budget cuts. Moreover, the budget documents do not allow us to accurately estimate the total fast start finance available for 2011. However, it is quite likely to be lower than the USD 1.9 billion that the administration had requested for FY2011 in early 2010 from the previous Congress, and some unofficial estimates indicate that it will be under USD 1 billion.

Did Countries Meet their 2010 Pledges?

Since many countries have not yet made public the resources that they have actually delivered for 2010, it is not possible to provide an accurate overall estimate. However, the updated summary does contain information on actions taken by the executive bodies of some countries. The amount requested and/or budgeted by these bodies totals roughly USD 12 billion.

Some countries have reported more specific information. For example, in November 2010, Germany indicated that it would disburse 356 million Euros in 2010, while the UK indicated that it had approved GBP 568 million for specific programs in 2010-11. This means that Germany and the UK will still need to allocate 904 million Euros and GBP 932 million, respectively, in fast start funds by 2012 in order to meet their pledges.

Better Reporting Standards Going Forward

Since we started tracking fast start pledges over a year ago, voluntary reports by each developed country have been quite varied, making it very difficult to track and monitor progress against the pledges.

To ensure clarity, WRI recommends that countries include the following elements in their submissions: the scale of finance provided, the method for determining that the resources provided are indeed ‘new and additional’, the institutions through which they are channeling resources, the objectives, geographic distribution, whether the amount pledged has been allocated or delivered, and the types of financial instruments used.

The uncertainty in estimating the exact amount of funds clearly underscores the need for greater transparency and consistency in reporting. Yet what is more important is that the finance is actually delivered at the pace and scale needed to address the growing threat from climate change. We are yet to see this sense of urgency as developed countries continue to teeter in honoring even their modest commitments.

How Should Wealthier Nations Help Poorer Ones Combat Climate Change?

Jennifer Morgan — Mon, 14 Dec 2009 09:54:11 -0500

Assisting poor countries now and in the future in adapting to climate change must be a top priority.

This post first appeared on National Journal.

The world’s poorest countries will face the most devastating effects of climate change, despite contributing the least to the problem. While we must immediately reduce the emissions that cause global warming and avoid impacts, it is also clear that assisting poor countries now and in the future in adapting to climate change is an equal priority. Little support internationally has been given thus far to the poorest in the world, which is one reason why those countries now in Copenhagen lack trust to seal a deal.

Beyond the moral and ethical priority to ensure that these countries can adapt to the changes, however, the U.S. security community has said very clearly that these conditions can create chaos and lead to conflict. Competition for scarcer resources and increased migration — two possible outcomes of climate change — can breed instability in volatile regions. Serious commitment to adaptation from the developed world can lessen these threats. As General Chuck Wald said in recent Senate testimony: “In the military, you learn that force protection isn’t just about protecting weak spots; it’s about reducing vulnerabilities well before you get into harm’s way,” an apt analogy for adaptation.

Should we act now? Many preeminent economists estimate that the cost of inaction on climate is around five times the cost of taking action today to build the clean energy economy. Those costs are primarily in rebuilding after natural disasters, coping with security threats and trying to secure the food supply. Another group of U.S. economists have criticized studies that look only at the costs of action without considering the substantial benefits to society and particularly to the vulnerable. For example, large numbers of Americans suffer from asthma and other pulmonary diseases that are worsened by pollution – reducing emissions therefore will have a large societal benefit. Furthermore, investments in the clean energy economy will create productive new assets, industries and jobs.

American ingenuity has contributed to solving some of the world’s most pressing problems, and climate change technology should be no exception. But helping poor countries is not the only reason the United States should make clean technology a priority.

Investing in clean technology allows the United States to get in the game. Countries around the world understand that a low-carbon economy is the only way forward, and a vast new marketplace is growing. In China, they are quintupling their wind capacity goal for 2020 after consistently outpacing their previous goals. The world clean technology market is exploding, and U.S. businesses want to compete. Here at COP-15, technology will be a critical part of an agreement, providing that much more certainty about the demand for clean energy technology. American companies, such as those in the U.S. Climate Action Partnership are here to ensure they are poised to catch that wave.

Acting now to develop and deploy clean technologies is not just a win for the climate, it’s a win for our country.

Following the Money in an International Climate Agreement

Athena Ballesteros — Mon, 02 Nov 2009 10:18:35 -0500

Athena Ballesteros explains how international climate finance could make or break a deal in Copenhagen.

WRI has released a new paper on climate finance. What is climate finance and why is it important in climate negotiations?

In order to avoid the worst impacts of climate change, the world will have to act quickly and at scale. Developing countries have indicated their readiness to act, alongside the industrialized nations. But to do so, they will need significant financial support. Such assistance is necessary to help developing countries deal with climate change by: adapting to its destructive impacts, such as stronger storms, droughts, and sea level rises; reducing greenhouse gases by switching to cleaner fuels and energy sources; and building capacity so that they have the expertise and institutions to make the necessary changes.

This support will come in a range of forms – private investment and carbon markets, but also public finance. Though there is increasing agreement about the amount of finance required to satisfactorily tackle climate change, there is still no consensus on how this money will be actually be delivered.

Traditionally, aid has been managed by existing institutions like the World Bank, which in turn have been controlled by the developed, donor countries. The climate issue is different. It is not only about giving aid but also about jointly solving a common problem. Therefore, a new global agreement on climate finance is likely to significantly redistribute power, responsibility, and accountability between traditional donor and recipient countries. This is both long overdue and necessary.

Why is climate finance being described as a deal breaker in Copenhagen?

Climate finance is one of the most contentious issues in the ongoing negotiations among the 192 member countries of the UN Framework Convention on Climate Change (UNFCCC). Whichever finance mechanism they choose will mobilize and then allocate funds, prepare and approve projects, provide technical advice, set standards for performance, and then monitor projects to ensure that they are held accountable. It is a huge task, so it is no wonder that its design and governance has been a sticking point in the negotiations between developed and developing countries.

The key point of contention is whether this job should be done by existing institutions, which are traditionally dominated by developed countries, or by creating reformed or new institutions that would provide a greater voice for developing countries. There is also heated debate over whether money should be administered and distributed by one large, centralized institution, or through a decentralized approach, one that would incorporate international, regional, and national institutions.

How does a new publication from WRI inform the negotiations?

Power, Responsibility, and Accountability: Rethinking the Legitimacy of Institutions of Climate Finance is meant to draw lessons for negotiators. We reviewed the governance structures, operational procedures, and records of 11 international and national climate funds to see what has been most effective to date. This is the first publication to move beyond the issue of “which institution will we use?” and explore an equally important issue: “what will it take for these institutions to have legitimacy?”

What do you mean by “legitimacy?”

No matter what institutions are eventually charged with managing these new flows of climate finance, they will only be successful if both donor and recipient countries see them as legitimate. The key elements we identified as required for legitimacy are power, responsibility, and accountability.

Power: To be legitimate, the distribution of power within the governing body of the financial institution has to be balanced. We examined whether developed and developing countries have an equal say in how existing funds are managed and operated. Looking ahead, if existing institutions are to meet evolving standards of legitimacy, then their fundamental governance structures, operational procedures, and institutional capacities will need to be reformed.
Responsibility: Efforts to address climate change must be “country-driven” and reflect national priorities and circumstances in order to be successful, rather than being mandated by donor countries. Direct access to climate funds is important in enabling developing countries to take direct responsibility at the country level without having to rely on implementing agencies such as the World Bank or the UN Development Program (UNDP), or having to navigate layers of donor conditionality.
Accountability: Strong provisions for accountability are needed to ensure that money is managed well, to promote good governance, and to manage potential environmental and social impacts. If done well, the institutional re-designs that shift power and responsibility towards developing countries will also entail more accountability for how the money is spent.

Can existing institutions follow this framework for legitimacy?

Our research finds that relying on existing institutions could work if significant reforms are put in place. For example, if the World Bank wants to continue to play a role, it needs to demonstrate to both member countries and civil society that it is willing to embrace fundamental changes in its governance structures and operational procedures in order to give greater voice to developing countries. This would include (through the guidance and authority of the Parties to the UNFCCC) taking advice from civil society, technical experts, and the private sector.

To be viewed as legitimate, the Bank’s “business as usual” practices – including its support for fossil fuel projects in developing countries, and its minimal attention to climate change and low-carbon development strategies – will need to change.

What are some of the critical elements of a climate finance agreement in Copenhagen?

First, we need an agreement on a fund that can put money towards a range of urgent purposes, such as adaptation to the impacts of climate change, technology transfer, and greenhouse gas reduction measures, including reducing emissions from deforestation and forest degradation (REDD). In addition, a climate fund must be able to trigger new, additional and predictable climate funding from many other sources, including the private sector, carbon markets, and national public and private finance sources.

The fund must have a governing body that will oversee its operations under the guidance and authority of the Conference of the Parties (COP) to the UNFCCC, with equitable and balanced representation from both developed and developing countries, and with input from civil society and technical experts.

The international community must also de-link the source of finance from the power and influence traditionally exerted by donor countries, for example by adopting new levies such as those on Clean Development Mechanism (CDM) projects. Also essential is agreement to scale up existing climate financing. Yvo de Boer, UNFCCC chief, recently estimated that funding needed “both to curb emissions and help people adapt to changes such as droughts or floods could total $250 billion per year in 2020.” Whatever financing is agreed in Copenhagen should include immediate mobilization of at least 10 billion dollars. This ‘start-up’ fund is urgently needed to help the poorest countries to build capacity to design and implement adaptation and low carbon development plans.

Fact Sheet: The Role of Adaptation

Heather McGray — Mon, 18 May 2009 12:31:07 -0400

Examining the role of adaptation in U.S. climate legislation and an international climate agreement.

Download fact sheet as PDF (PDF, 123 Kb)

Developed and developing countries are now grappling with ways to slow greenhouse gas emissions, but global warming is already causing more severe storms, unpredictable planting seasons, and melting glaciers around the world. Adaptation means learning to live with these changes – and preparing for other changes that are unavoidable – in order to minimize harm from climate change impacts.

Vulnerable countries … must be supported in our efforts to adapt to a phenomena caused by others. This will require a fraction of the trillions mobilized in short order to address the global financial crisis.

—Denis Lowe, environment minister for Barbados

As Congress debates climate legislation in the United States, a financial commitment to funding adaptation in developing countries is critical to achieving a global climate agreement. This agreement, likely in the form of the United Nations Framework Convention on Climate Change, will protect the United States and all countries from global warming damages. Enactment of cap-and-trade legislation will signal U.S. commitment to the agreement and create a new source of revenue to fund adaptation. A signal of support by the United States will help advance the multi-year international climate negotiations culminating in Copenhagen this December.

Why congressional commitment to adaptation is important:

A commitment to adaptation in a U.S. climate bill is critical to getting other countries to act on a global climate deal. Just as the United States won’t act on a global deal without commitments from other major emitting countries, the global community is looking for a signal that the United States is serious about climate change. In addition to reducing greenhouse gas emissions in the United States, climate change legislation must include a clear legislative commitment to assist those developing countries who will require humanitarian and other support.

“Military planning should view climate change as a threat to the balance of energy access, water supplies, and a healthy environment, and it should require a response. Responding after the fact with troops—after a crisis occurs—is one kind of response. Working to delay these changes—to accommodate a balance among these staples—is, of course, another way.”

– General Paul J. Kern (Ret.)

Adaptation funding is national security funding. In 2007, eleven retired three-star and four-star admirals and generals recommended that “The U.S. should commit to global partnerships that help less developed nations build the capacity and resiliency to better manage climate impacts.” Competition for scarcer resources and increased migration – two possible outcomes of climate change – can breed instability in volatile regions. Adaptation funding can lessen these threats.
The United States has a moral responsibility to fund adaptation. The world needs the United States to provide leadership in helping poor countries adapt. The poorest countries – those that have contributed least to the causes of global warming – are most vulnerable to climate change, and likely to face its harshest effects. As the world’s largest historical emitter of greenhouse gases, the United States has a responsibility to do its share to help those who may suffer because of climate change.

Why cap-and-trade legislation is a preferred source of funding for international adaptation:

Using emissions allowances under a cap-and-trade program would create a new source of revenue to fund adaptation, rather than drawing on tax revenues.

“Although the federal government must guide the policy toward a future with climate protection, the decisions that need to be made are not primarily political, they are spiritual and moral.”

- Rev. Jim Ball, Ph.D., President & CEO, Evangelical Environmental Network

As funding would come from a new market, it would be genuinely new funding – over and above existing development assistance. This “additionality” is important in the international climate arena and responds to the fact that climate damage is creating a new threat to development, beyond the poverty that already exists.
Funding from a cap-and-trade system would be predictable, consistent, long-term, and subject to careful monitoring. This would help to assure that recipient countries can plan effectively and use U.S. funding wisely.

How adaptation assistance would work:

As the climate changes, developing countries will need to make many changes, including new agricultural practices, water management practices, and approaches to managing forests and fisheries. In many places, cities will need stronger protection from storms and new sources of clean drinking water. Making these changes – and many others – requires substantial resources that poor countries do not have, as well as technical know-how and policy reform.

USAID, NOAA, the World Bank, and the Global Environment Facility all have small programs up and running that support adaptation activities. These programs are all limited in scope, but provide important lessons to draw upon as the world works to scale up adaptation efforts to meet the growing need. Policy makers might consider a combination of bilateral and multilateral options for supporting adaptation, in order to draw on the strengths of these different approaches.

Support for adaptation assistance is strong:

Using a cap-and-trade system to fund adaptation is an idea supported by both the environmental community and the business community. The United States Climate Action Partnership, a group of leading businesses and environmental groups made a specific recommendation in its 2009 Blueprint for Legislative Action on adaptation: “Congress and the Administration should establish a U.S. climate policy that strengthens support for efforts by developing countries for the adaptation of human and natural systems to the impacts of climate change.”

Assuring that adaptation assistance is spent wisely:

A robust monitoring and evaluation program is essential to the success in adaptation. Fortunately, there is a shared set of core adaptation functions that all countries will need to perform, including climate information management, risk assessment, and coordination of activities across sectors. Growing understanding of these functions provides a basis for effective monitoring and evaluation.

Moreover, the United States and its global partners have learned important lessons over the years regarding what makes foreign aid work well. These “aid effectiveness” findings have tremendous relevance to adaptation and can be incorporated into the design of initiatives.