Consistent modalities for climate action – why climate finance accounting is important

This article is written by Mona Hosseini

Climate finance has an outstanding importance for achieving objectives in the fight against climate change. Climate finance – meaning financial resources from the public but also private sector on the local, national and international level to tackle climate change – is the core condition for mitigation (reduction of GHG emissions) and adaptation (measures to adapt to the changing environment) and hence indispensable (cf. UNFCCC n.y). This is especially the case for countries of the Global South which depend on climate funds enabling them to pursue climate policies (cf. Paris Agreement, Art. 9,3).

Taking into account all the challenges of climate finance – lack of contributions, lack of transparency, different accounting modalities of climate finance between countries, different and partially ridiculous interpretations of what climate finance is etc. – the Paris Agreement in 2015 has several articles and paragraphs addressing climate finance and climate finance accounting. Thereby according to the Cambridge dictionary accounting generally means “the skill or activity of keeping records of the money a person or organization earns and spends” (Cambridge dictionary: n.y.). In the context of climate finance accounting has the role to help assess financial resources against climate change for countries of the Global South and report these financial aids when it comes to monitoring the $100bn roadmap of climate finance. The parties of Global North have agreed to provide this amount of money until 2020 for climate finance.

Climate finance accounting finds several standards in the Paris Agreement like transparency and the claim to avoid double accounting for instance (cf. Paris Agreement, Art. 4, 13). Therefore robust accounting is demanded (cf. Paris Agreement, Art. 6, 2). But what does this mean? How comes that there occurs double accounting? Which meaning does double accounting have regarding climate change objectives?

Climate finance accounting and thus climate finance itself are facing different challenges whereof one is double accounting resulting from intermixture of UNFCCC mechanisms and a lack of coherent accounting modalities. For instance the objective and core idea of climate finance is for countries of the Global North to pay in a fund which is assessable for countries of the Global South to undertake measurements for mitigation and adaptation they could not afford otherwise. This objective and manner of instrument is different to carbon market finance like the Clean Development Mechanism (CDM) (cf. Grießhaber 2002: 9). Back in 1997 CDM got part of the Kyoto Protocol in order to provide flexible mechanisms and a way for countries of the Global North to reduce GHG emissions with low abatement costs. But to account and report financial resources from CDM in global climate finance is double accounting which has to be avoided according to the Cancun Agreement considering that CDM aims to reduce emissions for a country itself whereupon climate finance wants to provide money to enable countries of the Global South to take action (cf. ebd.). An additional source of double accounting lies in the cooperation of a providing and a project country: Supposing country A from Global North offers country B from Global South a certain amount of money to undertake an adaptation project and both report to have spent the same amount in their climate finance accounting. This happens even though the project was only realised once and the money has only been spent once, too.

“But what is the matter?” one could wonder. “Let them all pretend to have been engaged in climate finance.” one could think. A working paper of the Stockholm Institute for Environment discussed this question defining double accounting that way: “Double counting occurs when a single GHG  emission  reduction  or  removal,  achieved  through  a  mechanism issuing  units, is  counted  more  than  once  towards attaining  mitigation  pledges  or financial pledges for the purpose of mitigating climate change.” (Schneider et al. 2014: 5). This definition makes clear: When wrongly accounting financial resources and mitigation twice, in country A and B, there occurs a double claiming and hence an overestimation of climate finance flows and climate action but too little effective provision. Regarding the urgency of climate action this is fatal: There is a need of financial contributions beyond 100bn USD not less due to biased accounting.

So what needs to be done is to find coherent, consistent and clear climate finance accounting modalities between all countries at the United Nation´s level in order to avoid this problem. There need to be strict rules clarifying which country accounts what in its accounting. On top of that climate finance is still intransparent and vague when it comes to its definition: What kind of financial flows can be really accounted for the original purpose? When can you claim financial resources of country A to country B have been partially or totally been dedicated for tackling climate change? This is a question even the Bonn Climate Change Conference in May 2017 could not answer but needs to be seriously discussed in future climate talks. Climate finance accounting is not nerdy but necessary to take climate action so let us be part of this discussion, too.

 

References:
Cambridge dictionary (n.y.): Accounting. Online: http://dictionary.cambridge.org/dictionary/english/accounting?q=accounting&a=british (Stand: 28.05.17).
Grießhaber, Lina (2012): The Goal of 100bn USD of Climate Finance. Online: http://www.climatefocus.com/sites/default/files/20160105%20-v.2.0%20Double%20Counting%20and%20Paris%20Agreement%20FIN.pdf.pdf (Stand: 28.05.17).
Schneider, Lambert/ Kollmuss, Anja/ Lazarus, Michael (2014): Addressing the risk of double counting emission reductions under the UNFCCC.
UNFCCC (n.y): Focus: Climate finance. Online: http://unfccc.int/focus/climate_finance/items/7001.php#intro (Stand: 28.05.17).
United Nations (2015): Paris Agreement.

About the author: Mona Hosseini is currently a master student in Environmental and Resource Economics at the University of Kiel, Germany with a one-year stay in Paris, studying Economics at University Paris 1 Panthéon-Sorbonne. She holds a bachelor degree in Environmental Studies and Economics from Leuphana University Lüneburg. After having written her bachelor thesis at the Institute for Ecological Economy Research in Heidelberg she moved to Kiel and has been fascinated by the Baltic Sea immediately so that she launched a CliMates project on oceans along with Marie Harbott. Mona speaks German, Persian, English, French and Spanish.

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