What Language on Climate Finance at the COP?

It is time for an update to the $100 billion climate finance goal that was agreed to in 2009 as part of the United Nations Framework Convention on Climate Change process. In April, Cartagena hosted the first meeting under the ad hoc work programme on the new collective quantified goal on climate finance, which is meant to come up with a proposal. The second session takes place this week in Bonn. Hopefully there will be lots of progress from the current notes-for-a-text that emerged from Colombia in time to agree something at COP29 in Azerbaijan later this year.

Your mileage may vary on starting from the basis of the original $100 billion goal. For some reason, the current consensus position appears to be to accept the climate finance numbers produced by the OECD club of rich countries—the ones that are meant to provide the finance. This is like trusting my kids to accurately report on how much time they have spent staring at TikTok (“I wasn’t principally staring at TikTok, I was only significantly staring at TikTok!”).

The result is that we reached the financing goal this year by including lots of finance that wasn’t really about climate, lots of mitigation finance that doesn’t seem to have had much impact on mitigation, and lots of finance that wasn’t new and additional despite the (arguable) promise it would be. Depending how you count, some or most of the financing target has been met by relabeling or redirecting existing official development assistance, and much of the rest through labeling market-rate flows only arguably connected to any real financial effort on the part of donor countries. Certainly, the new goal(s) should avoid some of these problems.

I see the attraction of a single, combined climate and development goal, but I think it can’t stand alone. First, having one combined goal risks yet more redirecting of assistance from development in poorer countries towards mitigation projects in richer countries and, second, a lot of the financing that can help mitigation is market or near-market rate, and the kind of grant equivalent measure you probably want for development and adaptation isn’t appropriate to capture (legitimate) mitigation financing.

At the same time, it is in the spirit of the Convention that climate action is in the context of sustainable development and poverty eradication, and so a goal that covers development is not out of place in a climate accord, especially if the goal is there to limit diversion of financing from poverty eradication. And it is particularly hard to separate development and adaptation financing in part because good development finance accounts for the needs of adaptation and even more because development itself is the most powerful force for adaptation.

That all suggests a potential value in (at least) two (sub-)goals and two standards (the dollars and percentages I’ve left as ‘X’):

The goals:

1. To finance adaptation and development, a collective goal of financing equal to [$X bn? X percent of high income country GNI? Other?] grant equivalent in country-programmable assistance verified by recipients. Recognizing that the world’s least developed countries are also some of the least responsible for climate change, as well as the most at risk from its impacts and in greatest need of development finance, at least [X] percent of collective adaptation and development finance would be targeted to those countries.

2. To finance mitigation, financing equal to [X$bn] to support investments included in recipient country Nationally Determined Contributions. This financing to include market rate and ‘mobilized’ private finance (the G7 “onion”).

The standards:

1. For accounting purposes towards the goals, and while finance should wherever possible focus on investments which meet multiple goals of development adaptation and mitigation, financing should not be double counted as both mitigation spending and adaptation and development spending.

2. Detailed accounting metrics for tracking progress following the principles laid out above will be developed by a group of experts selected by the COP Chair with input from member states, which will also oversee verification of the financing data supplied by contributing states.

There are a bunch of other questions to be addressed—not least, should the agreement specify which countries should be asked to provide finance and on at what scale? Should the agreement discuss allocation mechanisms? One contribution to the negotiating document calls for three thematic subgoals, covering mitigation, adaptation, and loss and damage, each with public finance and mobilization goals –what would be a separate loss and damage target? And, of course, how large are the financing goal(s)?

But it would be good at least if whatever goal is agreed ring-fences support for development and adaptation in the poorest countries and moves toward an accounting mechanism that will allow everyone to see (and agree) if that target is met.