Climate Change: Funding uncertainties and different definitions

By Rehana Dada

Posted on December 5, 2014 12:36

On Thursday, the Standing Committee on Finance (SCF)* presented its report on finance flows at the Climate COP20**. While there are still some uncertainties around the real amounts, the total climate finance can be estimated between $340 and $650 billion per year.

UNFCCC executive secretary, Christiana Figueres, said this is the first time that there is “light shining into what has been a black box” with regards to understanding whether there is a flow of climate finance, what its sources and channels are, and whether it is reaching the most vulnerable.

Trying to create a distinction between development assistance and climate finance is not all that helpful

Presenting a summary of the report, SCF committee member, Seyni Nafo, said that of the total estimated amount, $600 million falls under the UNFCCC, not including a +/-$10 billion recently pledged to the Green Climate Fund.

Total flow from developed countries is in the range of $40 to $175 billion, and of this $25 to $50 billion is through public institutions.

The estimate of the total is “highly uncertain” but considered to be conservative. There is some adjustment to reduce double counting.

Asia and the Pacific regions receive the largest share of the funds, in the region of 38 to 53 per cent.

Latin America, the Caribbean and Sub-Saharan Africa receive around 12 to15 per cent, with Africa receiving more than 25 per cent of climate related development assistance.

About half of the climate funds are grants or concessional finance, and leveraging of private finance is “still in its infancy”.

Concerns about the use of private finance in addressing climate change, and particularly with regards to adaptation in least developed countries, were not within the scope of the SCF report to address.

Different definitions

Among the many challenges around data gathering for the assessment was that different institutions and banks have different definitions of climate finance, although there are some discussions on trying to develop common definitions.

The report, however, used the following definition: “Climate finance aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts”.

In response to a concern raised about the potential for development finance to be re-channeled into adaptation work, SCF member Roger Dungan said that, “Trying to create a distinction between development assistance and climate finance is not all that helpful, and if there is support for projects that deliver on sustainable development, then it makes sense to make those projects climate resilient”.

Nafo clarified that the SCF is “not making an assumption of which type of public flow is or is not acceptable” but rather relying on countries to provide their own definition of additionality, although he did acknowledge that there are some challenges with regards to transparency and accounting.

The assessment also did not analyse the “acceptability” of instruments or technologies used.

But to contextualise why this is important, Climate Action Network International reported this week that Japan is funding coal and gas power stations in developing countries with funds allocated to climate change.

Figueres was positive about the varied sources of the funds, saying that, “It is completely impossible to meet the transformation required to deal with climate change if we are relying on only a limited number of sources or channels”.

She also considered it encouraging to see that climate finance is flowing to the most vulnerable, “I think this is something we should celebrate and continue”.

She talked further about the need to increase finance flows to adaptation, and rapidly. The report states that 11 to 24 per cent of the estimated total is allocated to adaptation, with some indication that adaptation finance is increasing.

Figueres cautioned that trillions of dollars are needed in order to effect the transformation that is necessary to address the causes and impacts of climate change. For this to happen, she said, there needs to be “strategic and wise” use of public resources to leverage private sector flows to increase the total.

The report presented some key recommendations to the COP, notably that financiers work with recipient countries to ensure that national needs and priorities are being met and that they inform UNFCCC focal points about the finances committed.

This first review did not include reporting from developing countries that receive funding but Nafo said that this type of reporting is important for transparency and will be part of the next cycle of biennial assessment.

*The Standing Committee on Finance (SCF) assists the UNFCCC COP** with its Financial Mechanism functions.
** United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP). The 20th COP and 10th Meeting of the Parties of the Kyoto Protocol (COP20/MOP10) is currently taking place in Lima, Peru.

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