Lead up to COP 24 and the Need to Scale up Climate Finance
As the recent Intergovernmental Panel on Climate Change (IPCC) report makes clear, we must transition at a rapid pace to net zero emissions if we are to stabilise the climate system. We are currently way off track for keeping global temperatures rising less than 2 degrees Celsius (or 1.5 degrees). Decarbonisation must be central to every country’s planning and this requires scaling up flows of finance and technology.
The UN Climate Change negotiations are at an important stage in getting an international framework on how things are going to proceed in achieving these ambitious targets. Between 2-14 December, the 24th Conference of the Parties (COP24) to the United Nations Framework Convention on Climate Change (UNFCCC) will take place in Katowice, Poland. .Our team has been tracking the progress of climate change negotiations for many years and their implications and opportunities for our clients and networks. Over the next few weeks we will provide short updates of different aspects of the negotiations.
Negotiations at Katowice
The central focus at COP24 will be the finalisation of the Paris agreement work programme (known as the “Paris Rulebook”) that outlines how the Paris Agreement will be implemented. The Paris Agreement was a breakthrough for climate diplomacy as it is a comprehensive legally binding agreement that has global consensus. However, much of the detail around implementation remained to be negotiated between 2016 and 2018, ahead of its implementation after 2020. Hence, COP24 in Katowice is significant as it is expected to provide a series of decisions that conclude 2 years of negotiation.
A lot of work remains outstanding, as the conclusion of meetings in Bangkok in September produced a 300-page text of the rulebook that will be negotiated down in Katowice. Many of the most important decisions are made by ministers during high-level meetings during a COP.
Climate Finance and the $100 billion
Climate finance has always been a major point of contention between countries in climate change negotiations. Industrialised developed countries are historically responsible for a greater proportion of emissions and have greater financial resources, and thus bear a larger burden in unlocking a low-carbon future for both developed and developing countries. According, under the Paris Agreement, developed countries are obliged under the UNFCCC to take the lead on climate finance.
Developed countries have made a pledge to ‘mobilise’ $100 billion per year for climate finance from 2020. This includes both private and public funds. But, leading into COP24, there is a significant shortfall of climate finance. There are real fears, particularly from developing countries, that the $100 billion target will not be met. Developing countries argue that climate finance is essential to the implementation of the Paris Agreement, particularly as these economies try to build out new renewable and cleantech infrastructure as well as adapt to the impacts of climate change.
Green Climate Fund
The Green Climate Fund, founded in 2010, has been a significant factor in mobilising flows of finance to fund future international climate projects. The GCF has not been without controversy however. There have been issues with the selection of board members, the veto of particular projects, and geo-political tensions. Crucially, there is a large financial gap caused by the US’s intended withdrawal from the Paris Agreement and general climate diplomacy. While President Obama had pledged $3 billion into the GCF, already injecting $1 bn of that before he left office, President Trump has essentially blocked any further transfers. More recently, Australia has also withdrawn its future funding of the GCF.
Despite these obstacles, slowly, GCF projects have started to get approval., 19 projects worth $1 billion USD were approved in October. These include a project for rural electrification in Burkina Faso, geo thermal energy urban transportation in Pakistan, and USD43 million for coastal climate adaptation in India.
Ways ahead in Katowice
The GCF projects are one of many streams that will be required to scale up finance to $100 billion per year. At COP24, countries will have to come together to decide on a number of aspects.
First, adequate and accessible finance is essential to enable countries to move forward with their climate goals. Getting to the $100 billion per year goal will require bold leadership, particularly from developed countries as part of their obligations under Article 9 of the Paris Agreement. Encouragingly the EU has reaffirmed its commitments and the need to work towards this goal. Other countries and regional blocs now need to step up in their commitments. High level meetings will be crucial at Katowice.
Second, public finance is one aspect, but to reach the $100 billion goal private finance has to play a significant role, particularly in mitigation. Here, a massive redirection of finance from fossil fuel investments to renewables and cleantech will be integral. Governments can play an important role in framing policies that facilitate investment into climate projects, including expanding the use of green bonds. There have been some other positive measures in recent times, for example the work of the ClimateAction 100+ which is a global investor led movement to shift investment from fossil fuels to renewables. Or the divestment movement which now is more than £4.6 trillion divested with almost 1000 institutional investors making pledges of divestment away from fossil fuels. The task now is for governments and the private sector to transform this ‘divestment’ into ‘investment’ into renewables and clean energy.
Finally, with the US withdrawal from the Paris Agreement, Australia’s withdrawal of support for the GCF, as well as the recent election of a climate sceptic president in Brazil, it is important to rebuild trust between countries and not allow the momentum of the Paris Agreement to die out. Paris was historic because it was the first time there was a truly global climate deal in over twenty years.
A lot of hard work has gone into framing the deal and the rule book. But a lot of hard work lies ahead and trust between nations becomes crucial in driving investment. As the IPCC report earlier this year makes clear, time is not on our side. It is imperative that all countries work together towards financing more mitigation and adaptation projects.