New publication on “fast track” financing under the Copenhagen Accord

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For instructors looking for good assessments of developments since the Copenhagen Accord was established at COP15 of the UNFCCC, the International Institute for Environment and Development released an excellent paper this week looking at the track record to date of developed country parties in providing the $30 billion in “fast start” financing for mitigation and adaptation needs of developing States through 2012.

Among the take-aways of the report:

  1. While both the Stockholm Declaration in 1972 and government representatives at the Rio Conference in 1992 pledged “new and additional” finance resources to foster sustainable development in developing countries, very little came of these pledges;
  2. Both the UNFCCC and the Kyoto also pledged new and additional financial resources, but the failure of developed countries to deliver has exacerbated mistrust between developed and developing country parties;
  3. In assessing the pledges for fast starting financing under the Copenhagen Accord, as well as the longer term pledges of $100 billion annually by 2012 the authors suggest that the baseline for new funding could be set in 8 ways, most of which are flawed:
    • Funding should be construed as “new and additional” if it exceeds 0.7% of their gross national income for overseas development assistance. However, many countries, notably the United States, will never accept this threshold since their ODA contribution is much lower; moreover, countries that exceed the 0.7% level may simply divert ODA above that and claim it’s new and additional financing;
    • Having no agreed baseline is an unacceptable approach because it precludes transparency, which would obviate efforts to build trust between the North and South in climate fora;
    • Only funds channeled through dedicated institutional mechanisms, e.g. the new Green Climate Fund or the Adaptation Fund could count as new and additional, but in some cases it might be more appropriate to channel funds to other mechanisms, and the inflexibility might discourage contributions;
    • Another option would allow States to use the best channels and mechanisms, but would not count ODA money as climate finance; while a good solution, most industrialized countries find this approach unacceptable.
    • The baseline could be defined as existing funds pledged for climate finance and those pledged before Copenhagen. However, this would still permit diversion of ODA, and it’s difficult to distinguish old and new source of financing;
    • The amount of foreign assistance countries would be expected to provide in any given year could be assessed in the absence of new climate finance. Business-as-usual funding levels would be renegotiated every year, taking into account current economic growth and ODA commitments. While this would be an extremely sound way of making a “new and additional” assessment, it would be difficult to negotiate and wouldn’t do much to build trust since developed countries would always be suspected of “fixing” the baseline;
    • One way to avoid permanent renegotiation of baselines would be to utilize a baseline of predefined projections of development; of course, there would be a debate about the most realistic ODA growth path;
    • A final approach would combine all the issues of  newness, additionality and acceptability. “This baseline would count new sources only, meaning that only assistance from novel funding sources – such as international air transport levies, currency trading levies or auctioning of emission allowances – would be seen as new and additional.” Downsides of this approach are that it would bar the use of effective current funding streams, and would arbitrarily define which sources are new.
  4. Ultimately, the authors conclude that the last two options are the best in terms of avoiding potential loopholes or being too onerous. However, they emphasize that this doesn’t ensure new and additional funding. This also argues for the need for clear rules on monitoring, reporting and verification of funds. It might also be salutary to at least initially have reporting on funding channeled through a central entity to engender trust.

While this reading is a bit “in the weeds” in terms of the issues it addresses, and thus might not be appropriate for introductory classes, it would be an excellent selection for more advanced courses. Moreover, it provides a very tangible example of how the legitimacy of regimes are critically dependent on whether their stakeholders perceive their mandates as fair and equitable.

Related posts:

  1. New Study on Private Financing of Adaptation/Mitigation Climate Change Efforts
  2. REDD & Financing
  3. Analysis of the Copenhagen Accord
  4. New Article on Adaptation and Trust Issues
  5. WWF Analysis of the Copenhagen Accord

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