The last in a series of expert workshops and consultations under the UNFCCC’s work-programme on long-term finance concluded late yesterday. This 2013 extended work programme on long-term climate finance is designed to “identify pathways for mobilizing the scaling up of climate finance to USD 100 billion per year by 2020 from public, private, and alternative sources” and inform “enabling environments and policy frameworks to facilitate the mobilization and effective deployment of climate finance in developing countries.”I had the opportunity to participate quite actively in this year’s series, as WRI is working with co-chairs from the Philippines and Sweden to facilitate discussions on how to mobilize scaled-up finance for climate action.
Participants from government, the private sector, academia, and civil society deepened their understanding of pathways to mobilize and scale up climate finance. They also discussed the necessary policy and regulatory requirements to both attract climate-friendly public and private sector investment and deploy it towards low-carbon development. This process is an important contribution to enhancing the dialogue between contributor and recipient countries as they lay the foundation for shifting to low-carbon, climate-resilient economies.
Three key issues came up during the discussions: pathways to scale up climate finance, the need for transparency, and the importance of enabling environments. These discussions could set the stage for encouraging climate finance developments at COP 19 in Warsaw.
1) Pathways to Increase Climate Finance
In order to fund the projects that will prevent climate change’s worst effects and help developing countries adapt to impacts, a clear road map for mobilizing scaled up finance from developed countries is needed. This road map will need to consider developed countries’ circumstances, make projections based on what is being budgeted by different countries, outline specific milestones, and schedule periodic reviews. This is obviously a politically sensitive issue given the fiscal constraints faced by many countries, but there is a real opportunity here to act collectively and scale up financing. Colombia has put forward a proposal to help unpack what this pathway could look like based on national budget projections.
The road map should also consider various sources of finance for climate change activities, including not only public sources, but also private sector finance and other innovative sources. Some participants also shared the view that this road map should not be limited to the $100 billion commitment, but rather used as a springboard to catalyze and leverage additional private sector investments. One difficulty is projecting pathways from private sector finance and other innovative sources.
We need consistent, comparable information on how countries are meeting their financial commitments, how climate finance is deployed, and what the results are on the ground. As the experience of fast-start finance has shown, transparency is key to building trust amongst countries and helps ensure predictability in financial flows.
3) The Importance of Enabling Environments
A set of enabling policies, regulations, and institutions that help countries attract funding and effectively deliver climate finance is critical to scaling up climate-related investments. The co-chairs of the long-term finance work programme refer to these enabling environments as a combination of “push-pull” factors. On one hand, developed countries will have to create a set of institutional arrangements and adopt laws and regulations in order to effectively mobilize climate finance. Good climate policies and renewable energy or energy efficiency programs could generate revenue and be used as a source of climate financing domestically and overseas. On the other hand, developing countries will need to put in place appropriate policies, institutional capacities, information, rules, and tools in order to attract public and private sector investment. For example, renewable energy legislation in key developing countries attracted overseas investments in domestic clean energy. In short, the combination of these push-pull factors—together with a clear road map for scaling up climate finance—will enable a shift in investments towards low-carbon, climate-resilient economies.
What Does this Mean for COP 19 in Warsaw?
Participants emphasized that the findings and recommendations from this long-term finance work programme will inform the negotiations at COP 19 in Warsaw this November—in particular, the Ministerial roundtable on finance. Korea, as host of the workshop, reiterated its pledge of 40 million USD to the Green Climate Fund. This was received well and taken as a sign of goodwill and strong political commitment to the overall goal of scaling up climate finance. Others like France echoed their commitment at COP 18 in Doha, pledging 2 billion euros a year for climate change action in the next couple of years. These public commitments are a good way to establishing predictability in climate financing. It’s important that others follow as countries gear up for UNFCCC negotiations in Warsaw.
Making progress on long-term finance will eventually unlock some challenges in scaling up international climate action overall. After all, global climate action rests on the shoulders of finance and other critical support mechanisms. On this note, New Zealand proposed a Warsaw platform for effective climate finance. If used ambitiously, this platform has the potential to enhance developing countries’ abilities to create the right enabling environments for scaled up climate finance. That achievement—paired with developed countries’ commitments to ramp up financial, technical, and capacity-building support—may very well set the stage for some critical climate finance outcomes at COP 19 in Warsaw.