Climate finance is central to ambitious climate change action, as anticipated and reported at COP24, December’s climate conference in Katowice.
In 2019, my ‘to-do list’ for progressing climate finance is about getting beyond the numbers – making sure we have good finance, not just more money, and understanding the concrete actions governments can take to help shape wider finance flows.
Here are the three things that are top of my list:
1. Track the effectiveness of climate finance for developing countries, not just the amount
Climate finance from developed to developing countries is increasing, according to the UN Framework Convention on Climate Change (UNFCCC). The OECD and Climate Policy Initiative agree. Developed countries have made progress on their commitment to mobilise at least $100 billion per year from public and private sources to help developing countries adapt to climate change and minimise future emissions (though debate continues as to what counts towards this commitment).
Yet this money could be wasted unless it is delivered effectively. We need more and better data on climate finance flows. Working with climate finance providers and recipients alike, I want to understand if we are being most effective with the money we are spending. I want to know the sectors and recipient institutions to which finance is flowing, and how these will affect emissions and climate resilience.
Developed countries have until 2020 to improve their systems for reporting finance flows to developing countries, as agreed at COP24. I’m all for thinking these systems through now and testing them in 2019 so that what is delivered in 2020 allows us to really understand if money is being spent well.
2. Outline concretely how countries can shift trillions in investment towards climate goals
In addition to ramping up the scale and impact of climate finance, we need to shift trillions of dollars away from carbon-intensive investments and towards meeting the Paris Agreement objectives.
Last year’s assessment by the UNFCCC was the first to include information on how governments and private actors are making financial flows consistent with a pathway towards low emissions and climate-resilient development, a commitment enshrined under Article 2.1.c of the Paris Agreement.
This assessment could not be prescriptive as to what 2.1.c might entail, but recent ODI research proposes a toolkit that supports governments and non-state actors to identify opportunities to align finance flows with climate goals.
While we need to approach the transition through many angles, I will seek to understand what action around Article 2.1.c could look like in a country context and what actions countries are already taking. And, how this might be captured in the Global Stock Take – a five-yearly review of country climate action plans.
I’m interested in an approach that does not reduce efforts around 2.1.c in a country to a number or single indicator, but instead considers the breadth of levers that governments can deploy across financial policies and regulation, fiscal policy, public finance and information instruments.
I’ll be building on the actions outlined by ODI and our partners that can embrace a wide toolkit for aligning investment with the Paris goals in a way that is country-specific, but also allows comparison across countries.
I hope to draw lessons from progressive countries to encourage a more rapid evolution actions to shift and mobilise finance by gathering knowledge and sharing best practices.
3. Support a more nuanced understanding of developing country finance needs
Within their national climate action plans, very few countries have elaborated their financial needs in a way that is clear or comparable. It is not simple to do this. Financing needs are highly context-specific and change all the time. They rely on changing technology costs and availability of information, and have roots in the functioning of institutions and governance.
In Katowice, the UNFCCC Standing Committee on Finance was requested to undertake a needs assessment by 2020. While some countries have progressed needs assessments, I want to support these across all countries to have a better idea of how international public finance and domestic government tools can help countries to meet these needs. How can we capture fossil fuel subsidy reforms or institutional and governance changes in the water sector, for example, in these needs assessments?
There is a lot of work to be done. Not least given the urgency of the challenge as made clear by the IPCC 1.5 Special Report. Irrespective of whether the COP welcomed or took note of the report, I’ll be pushing ahead. Join me?
While ODI is transitioning away from using terms like ‘developed countries’ and ‘developing countries’, the Paris Agreement refers to ‘developed country Parties’ and ‘developing country Parties’ and so I have used this language in the blog to refer to these groups.