This article is written by Noémie Robin.
Since the Paris Agreement, it has been agreed that whether they are developed or developing, all countries have to fight against climate change and have to put efforts into the transition toward a low-carbon and resilient economy. Indeed all States need to be involved, because if change occurs only in developed countries, the result would not be enough to reach the target of 1.5°C presented by the Intergovernmental Panel on Climate Change (IPCC) in their last report in October. But as the article 9 of the Paris Agreement stated, it has been recognized that it would be difficult for developing countries to support the cost of their transition while they do not have the same financial resources or capacities as developed countries. Thus, developed countries have the duty to financially assist developing countries with respect to mitigation and adaptation and they shall lead the climate finance mobilization from a variety of sources, like public funds. In order to insure this transition, $100 billion per year by 2020 have been pledge from industrialized countries to help the poorer countries to achieve their transition toward a green economy.
But quid of reaching this goal?
In fact, it seems that huge discrepancies exist between decisions taken under the Paris Agreement and what is effectively done in reality. This is observable through reports written by the Green Climate Fund (GCF).
I am referring to the GCF because it is an official UNFCCC financial mechanism and it is also the Paris Agreement’s focal point institution which delivers the highest volume of climate funds, as the majority of countries pledged the largest amount of climate finance to GCF in order to reach the $100 billion goal. In the GCF 7th report published last June 2018, we can notice how far we are to reach our goal, as only $10.3 Billion have been pledged, and only $1.6 Billion have been implemented. Thus there is a clear need to accelerate and increase ambition for finance, and this has been urged by the GCF itself, who also plea for private actors to participate more into the Fund.
Although GCF is an important institution for insuring the implementation of the Paris Agreement, a main problem remains and need to be solved: there are neither means nor mechanisms to insure the future viability of the Fund. This has already been experienced through the president Donald Trump’s declaration, who has announced US withdrawal to the Paris Agreement while they had originally pledged $3billion to the GCF, which is non-negligible and hardly recoverable by other major donor countries like Japan, Britain, Germany or France, which might not make up the shortfall. As a consequence, uncertainty remains because developing countries are not protected from withdrawal of any industrialized countries, conjuncture or elections can disrupt resources of the Fund. Did States try to make up for this shortfall at COP24?
What’s new from COP24 ?
Finance is still a hot potato and really need solutions that were expecting at COP24. Indeed, right before the beginning of the COP at Katowice, the UNFCCC Executive Secretary, Patricia Espinosa stressed the importance of finance to address the Sustainable Development Goals, because a proper financing is not only about money but also fighting against poverty, issues of migration and promote equality. Hopefully this claim has been heard by some countries, and further contributions from certain developed countries have been announced. For the Adaptation Fund, Germany, who’s the largest contributor, pledged €70 million extra while France pledged 15 million, the EU Commission 10 million and Italy 7million Euros. Along with the upcoming replenishment of the Green Climate Fund, Germany and Norway pledged to double their contributions, which correspond to €1.5 billion and $516million respectively. Last but not least, Least Developed Countries Fund also benefited from new pledges from Sweden and France with $5.5 million and €20million respectively. However, not only States made new pledges, but also international institutions like the World Bank Group, which has made a significant pledge by the second day of the COP24. The World Bank Group has indeed double its investment plans which represent $200 billion for 2021-2025.
Furthermore, the final decision taken at COP24 about long-term finance employ the term ‘urge’ while addressing to developed countries to scale-up their mobilization for climate finance and to reach a balance in financing adaptation and mitigation projects, while recognizing the importance of grant-based resources for adaptation. Considering “the recognition of grant” as a way of financing adaptation project is not trivial, because over the $100 billion pledged, the majority of finance appears through loans. However, loans have to be repaid and there are accompanied with interests, so at the end it would be very costly for poorer countries to achieve their NDCs. In fact, over the $200billion pledged by the World Bank, the half will come in direct funding while the other half will be allocated in forms of loans and others forms of assistance from different parts of the World Bank Group, which would mainly further develop finance from the private sector. Did the COP24 succeed to make climate finance stronger? Well, even if States made new pledges, it remains insufficient to reach the goal. On top of that, it is still not sure that this politically-determined goal of 100billion per year will be really impactful and sufficient. Indeed further scientific research and assessments, mainly done by the Standing Committee on Finance, are needed to indicate the concrete amount of finance necessary to achieve mitigation and adaptation measures, as well as how to pay losses and damages.