Assessment of Fast-Start Finance

A report published last year by the European Capacity Building Institute on the record of fast start financing by developed countries under the UNFCCC is well worth consulting by instructors who include an adaptation component in their courses. The report, which builds on assessments by the authors in previous years of reports filed by parties to the UNFCCC, seeks to determine “whether wealthy nations transparently contributed a fair-share of the $30 billion dollar pledge, while balancing adaptation and mitigation funding, sourcing funds through UNFCCC channels, and without reverting to debt-inducing loans in the place of grants.”

The assessment sought to answer nine pertinent questions. The first question was whether the amount of fast-start financing provided by developed countries was adequate. While concluding that developed States had exceeded the fast-start finance pledge of $30 billion for the period of 2010-2012, the authors contend that a large percentage of this funding was either not new or additional (see below for further analysis of this issue). Moreover, they noted that some analyses had concluded that as much as $200 billion would be necessary for mitigation and adaptation initiatives by 2030. The second proffered question focused on transparency of financing, including indicia eg. project-level reporting and the division of funding between mitigation and adaptation. The study found more countries woefully inadequate in this context, with even the top country, Switzerland, only scoring 67%.

The third question focused on equitable considerations, i.e. what developed countries were deemed to have contributed their “fair share” based on criteria of responsibility for the problem of climate change (defined as historical carbon dioxide emissions between 1960-2008) and capability, based on national income. The authors found that Norway and Japan had contributed far above their fair share, with New Zealand and Canada close to meeting this criteria, while all other developed States had contributed below fair levels. The fourth question centered on the balance of funding between adaptation and mitigation initiatives, given the mandate in the Copenhagen Accord to approximate an even division of funding between these two prongs of responding to climate change. In this accord, the authors found fast-start funding clearly lacking, with only approximately 18-25% allocated to adaptation projects.

The fifth question assessed the percentage of fast-start funds provided as grants vs. loans, the latter of which were deemed by the authors to be particularly inappropriate for adaptation projects because this form of funding can exacerbate the economic impacts of climate change and because it’s usually a response to damage caused by the very countries that might now be offering only loans. Question 6 of the assessment focused on whether funds are being delivered, per the Copenhagen Accord, through effective, transparent, and representative institutions, e.g. the Green Climate Fund, the Special Climate Fund, the Adaptation Fund and the Least Developed Countries Fund. The study concluded that only 4% of funding was directed through these channels.

One of the most critical questions is whether mitigation and adaptation funding is “new and additional,” or rather reallocation of foreign assistance from other sectors, e.g. health and education. The study concludes that there are serious problems in this context. First, a recent Oxfam study found that only 33% of fast start funding can be considered “new.” Moreover, the study notes that if all fast-start contributions were truly new and additional, overseas development assistance should be increasing by $10 billion annually. However, given the fact that all forms of overseas development assistance only increased by $11.7 billion annually between 2008-2011, the authors concluded that it was highly unlikely that almost 90% was concentrated in the climate sector.

UNFCCC negotiations have called for the needs of particularly vulnerable populations to be prioritized. The study deemed fast-start funding to be disappointing in this context also. For example, while LDCs have estimated that they would need $5 billion to meet their most pressing adaptation needs, as identified in National Adaptation Plans of Action, to date only $603 million has been pledged for such purposes. The study also cites a lack of transparency in reporting by developed countries as to whether they are seeking to meet the objective of focusing funding on the needs of the most vulnerable States and sectors.

The final question was whether pledges of fast start funds was actually translated into disbursement of funds. While most developed countries fail in their reporting to disclose such figures, a recent study suggested that only approximately a third of pledged funds had actually been delivered, while another concluded that perhaps only 10% of originally pledged climate funds make it to recipients!

The final section of the report provides some helpful suggestions on how to improve the process moving forward (a critical consideration as we move toward 2020, at which point contributions should reach $100 billion annually). These include improving the efficiency of the GEF project cycle, proving direct access to developed countries instead of through intermediary multilateral development institutions, and improved transparency, including standardized reporting that includes project mapping and progress tracking.

This report is certainly not a good portent for long-term financing of adaptation and mitigation initiatives in developing countries. While some of the more process-oriented issues, e.g. reporting requirements and structuring of priorities seem relatively easily rectified, more fundamental issues, e.g. the level of funding commitments (especially given the much higher funding requirements that will be necessary in the future) and the division of funding between grants and loans may prove far more challenging.

Among the discussion questions that might be pertinent if this study is used as a student reading include the following:

  1. Are there certain potential funding sources that might help to facilitate adequate levels of finance for mitigation and adaptation in developing countries over the next few decades, i.e. that are more politically viable?;
  2. Should adaptation and mitigation funding be viewed, as some developing countries argue, as a form of “reparations,” justifying very few constraints on disbursement, or a form of assistance in which “donors” are entitled to ensure that funds are used wisely?;
  3. What other considerations, beyond funding of adaptation, should be studied, i.e. how do we prioritize adaptation and mitigation projects, and how do we measure “effectiveness?”

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