Common challenges in climate finance delivery and new demands within different country settings

1 December 2011
Comment

The world is an incredibly diverse place and the efforts of the UNFCCC to reach a common understanding regarding a way forward on global climate change needs to be seen in that light. This week at the Durban COP we are seeing this diversity play out both within the negotiating auditorium as well as at a succession of side events in the adjacent building. The challenge is how to accommodate this diversity of view within a framework agreement that all countries can support.

Climate finance is one of the areas of contention and this has been the case ever since the Copenhagen Accord, when Annex II countries first put their monetary pledges on the negotiating table. The target of $100 billion per year from 2020 was brought into the UNFCCC text a year later within the Cancun Agreements, and this remains the goal – or at least we hear no major dissenters that the level of international finance flows from Annex II to non-Annex I countries should be radically different. That in itself is a surprising political consensus, reached in record time.

Therefore, in less than 10 years time a significant new flow of funding can be expected to reach many developing countries. Are these countries beginning to prepare for this additional finance? It is not too early to examine the national policies, structures and processes being established or strengthened. What is happening today will set a path dependency for how climate finance will be managed in the future. This was the subject of an ODI/Transparency International side event on Tuesday here in Durban. And what we heard was a diversity of viewpoints reflecting quite different country realities. Yet, there were also some common threads running through the presentations.

Chantal Naidoo of the Development Bank of Southern Africa first spoke on South Africa’s national climate response policy. The key message of this policy is to begin the transition to a low carbon and climate resilient economy. The policy needs a national investment plan to make sense of the complicated channels of funding that have developed in the last few years – a point repeated by all the following speakers. A long-term framework for climate finance needs to be put in place to improve overall coordination and efficiency.

If that is the situation in a middle -income country that has considerable internal resources at its disposal, what is the situation in less well resourced countries? The answer to this question could be pieced together from the other three presentations. For example, Professor Prem Jain of the University of Zambia described how climate finance delivery within that country is dominated by a few donor projects, which appear to respond more to the perspective of major international initiatives than necessarily meeting country needs.

Samuel Rotta of Transparency International provided a civil society perspective on climate finance. He highlighted the lack of domestic transparency in funding flows, which raises the obvious risk of the misuse of such funds. Much more needs to be done to strengthen the national budgetary system. That was also the observation made by recent ODI-led research in Nepal, where no definitions of climate change expenditure are in use within the Government Budget Estimates. To obtain an understanding of the financial resources required to respond to climate change the national budget classification needs to be able to identify such expenditure. This is made all the more difficult in the absence of any international attention to reviewing and revising the Classification of the Functions of Government (COFOG), which is the international standard.

What is clear is that climate finance is already starting to make new demands on national budgetary systems within a wide range of country settings. This is an area that warrants further attention – and where ODI research is making its contribution.