Topic A.

Climate Finance
1. Introduction
Climate finance refers to the transfer of financial resources from developed to
developing countries to assist them in the transition towards low-carbon, climateresilient economic growth and overall sustainable development. This is an obligation
in accordance with the principle of common but differentiated responsibility and
respective capabilities that has been set out in the United Nations Framework
Convention on Climate Change (UNFCCC).
Climate finance is currently a hotly debated issue in international climate
negotiations due to its tremendous significance in the global fight against climate
change as well as the numerous challenges in the mobilization and utilization of
funding. Climate finance plays a critical role in battling climate change because
there are huge variations in the contribution of countries to climate change and
their ability to cope with its consequences. Developing nations are extremely
vulnerable to the detrimental impact of global warming and environmental
degradation, but they often lack the necessary resources to enable drastic
economic, social and technological transformation that can effectively address
existing problems. Massive financial investments are required to ensure that all
countries, especially developing ones, are sufficiently equipped to reduce
greenhouse gases emissions, adopt environmentally sound technologies, and deal
with the adverse effects that come with changing climate. Therefore, it is of vital
importance that the climate financing needs of developing countries are recognized
and accurately assessed, while financial aid must be managed in a transparent and
efficient manner with stringent regulations at international, national, and subnational levels. The effective measurement, reporting and verification of climate
finance are the key to building trust between Parties to the UN Climate Convention,
and also for external actors.
2. Background information
2.1. Definitions of related terms
- Climate finance are often utilized for two primary purposes: Mitigation
and Adaptation
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Climate Change Mitigation: limiting the magnitude or rate of longterm climate change so that the risks associated with human-induced global
warming can be substantially lowered. This mainly refers to the reduction in
human emission of greenhouse gases but it can also involve the increase in
capacity of carbon sinks. Examples of mitigation include adopting renewable
technologies, switching to energy-efficient equipment, changing management
practices or consumer behavior, protecting natural carbon sinks like forests
and oceans.

Climate Change Adaptation: anticipating the negative impact of climate

change and taking appropriate measures to prevent or minimize the damage
they can cause. Adaptation policies seek to reduce the vulnerability of
communities to current climate change as well as strengthen their resilience
to its consequences. Examples of adaptation measures include using scarce
nonrenewable resources more efficiently, developing drought-tolerant crops,
building houses that can withstand extreme weather events, building flood
defenses, cultivating tree species that are less vulnerable to storms and fires.
Developing countries are often more reluctant to fund adaptation programs
because building new infrastructure is not as profitable as investing in
renewable energy, which can be utilized to boost economic growth.

- However, as the devastating impacts of climate change become more prevalent

and the limits of adaptation are reached, developing countries are pushing for
another type of aid: loss and damage, or climate compensation. According to
the UNFCC, loss and damage is the actual and/or potential manifestation of
impacts associated with climate change in developing countries that negatively
affect human and natural systems, including the effects of extreme weather
events (drought, flooding,) and slow-onset events (sea-ice loss, sea-level rise,
temperature rise,). In general, loss and damage refers to the irreparable
losses (loss of human lives, loss of biodiversity) and recoverable damages
(collapsed buildings, broken roads) that human-induced climate change causes

Loss and damage has been a controversial issue in global climate talks
because developing countries, which are often located in tropical regions, are far
more vulnerable to the adverse effects of climate change than developed ones,
even though they themselves are not responsible for causing such loss and
damage. The blame is put on developed countries, which have been discharging
tons of toxic wastes into the environment in the process of industrialization and
benefitting from such practices, thus being held accountable for global warming
and pollution.
2.2. Current Situation
2.2.1. Resolutions and protocols in place
United Nations Climate Change Conference 2015 COP 21 The Paris
Agreement
These are the main commitments regarding climate finance in the Paris Agreement
adopted at COP 21
- Cycles for Review and Commitments: Developed countries will continue to
mobilize $100 billion of per year from 2020 to 2025 to facilitate the transition to low
carbon economies and assist developing countries in their preparation for the

effects of global warming. In addition, they are strongly urged to take the lead in the
mobilization of funding and increase their current level of financial support. They are
also required to provide biannual updates on the amount of public climate finance
they manage to scale up as well as on the projected levels of financial aid they will
supply in the future to ensure predictability on climate finance. All the information
given must be transparent and consistent. By 2025, a new collective quantified goal
from a floor of USD 100 billion per year will be set based on the needs and priorities
of developing countries.
- Broadening the donor base: Developing countries are encouraged to provide
climate finance for less developed ones as many countries which used to be in the
low-income group have moved to a new position where they can allocate a certain
amount of aid to climate finance. Countries including Vietnam and Chile have
already pledged funds to the Green Climate Fund, and China has pledged $3.1
billion for South-South cooperation between developing countries. The expansion of
the donor pool is important because it recognizes the contribution of developing
countries to international climate funds. Despite the participation of developing
countries, the new Agreement maintains that developed ones must still commit to
their responsibilities for climate finance in continuation of their obligations under
the UNFCC.
- Creating a balance between mitigation and adaptation: The majority of
current funding is geared towards mitigation programs, so there needs to be a
significant increase in the provision of financial resources for adaptation activities in
order to strike a balance between these two areas. Donor countries should take into
account country-driven strategies as well as the specific needs of each developing
country, especially those susceptible to the serious consequences of humaninduced climate change.
- Loss and damage:
Going into COP21, loss and damage was a sensitive and contentious topic,
particularly surrounding the concept of compensation and legal liability. Developing
countries demanded that developed ones be held liable for the devastating impact
of climate change and pushed for compensation. However, developed countries
wanted to distance themselves from such legal obligations because the enormous
amount of compensation required would have serious economic and political
implications for domestic affairs.
In the final agreement, developing countries had to concede that it is impossible to
claim liability and compensation for loss and damage. Instead of compensating, rich
countries can subsidize risk or flood insurance beforehand for home and business
owners in low-lying developing countries who face unaffordable premiums. The
Paris Agreement emphasizes the importance of solidarity and cooperation in the
fight against climate change rather than evoke liability. However, some

countries which take a strong stance on climate justice, notably India, are not
completely satisfied with the terms of this agreement.
2.2.2. Case Study
Bangladesh
Bangladesh has been considered the most vulnerable country in the world to the
effects of climate change. National Geographic predicted that in 2100, 10 to 30
million people along the southern coast would be displaced due to rising sea levels,
but the reality is that local inhabitants in affected areas have already experienced
extreme environment and must relocate to other areas. In response to climate
change, Bangladesh has established a good strategic framework, including the
National Action Plan on Adaptation (NAPA) of 2005, the Bangladesh Climate Change
Strategy and Action Plan (BCCSAP) of 2009 and the Bangladesh Climate Change
Resilience Fund, which was founded on the countrys own budget. Acknowledging
that financial resources for adaptation and mitigation are necessary to help
Bangladesh, the international community has been responsive in addressing the
urgent needs of the country. However, there are still numerous issues surrounding
the direct access to global climate finance in Bangladesh. First of all, the country is
notorious for high corruption level in the public sector, which leads to serious
concern about the lack of transparency and efficiency in the management of climate
finance. Secondly, enhanced institutional capacity is required to overcome the
access barriers as most funds adopt high standard fiduciary systems, and social and
environmental protective measures. Other problems include inaccurate information,
limited involvement of affected people, political influence in selecting contractors,
violation of public procurement rules, lack of accountability and proper monitoring
in project implementation, poor quality of funded projects.
The United States of America
As the worlds largest economy and second largest emitter of greenhouse gases,
the United States plays an integral role in international climate negotiations.
Mobilizing climate finance is a major priority to the country, which has a history of
leadership to support environmental action. In 2008, the Bush Administration
contributed $2 billion to the Climate Investment Funds. In 2014, President Obama
pledged $3 billion to the Green Climate Fund (GCF) despite the disapproval of
Republicans in Congress. At COP21 2015, Secretary of State John Kerry announced
that the U.S will scale up more than $800 million a year to specifically fund
adaptation programs in developing nations. He also reiterated the countrys position
on the issue: The U.S. not only recognizes our role in creating this problem but
doing something about it. However, the U.S maintain that all countries including
developing ones must take action to address climate change instead of putting all
responsibility solely on the developed world.

2.3. Overview of climate finance monitoring mechanism in developing

countries
In accordance with the obligations under the UNFCCC, developed countries must
report on the amount of financial aid they have provided for adaptation and
mitigation programs in developing countries, which must also report on the money
they received. However, some findings have pointed out that there still remain
some inconsistencies between information on climate finance provided and that on
climate finance received. Monitoring climate finance is not only important in
maintaining compliance with the UNFCC but also in helping recipient countries make
more informed decisions about planning, prioritization, and allocation of resources
for climate change.
According to the World Resources Institute, here are the key challenges in the
monitoring of climate finance and the next steps to address them
Challenges

Poor coordination among development partners and unpredictability of

financial flows can make it difficult for developing countries to keep track of
climate finance received. In addition, development partners make limited use
of recipient country systems for managing financial flows, so recipient
countries cannot fully develop their own climate tracking systems.
Insufficient, unclear institutional arrangements and limited inter-agency
coordination impede effective information management.
The lack of climate change considerations in budgeting, monitoring, and
reporting processes and systems creates numerous complications
surrounding the effective tracking of climate finance
Private actors lack access to data on climate finance channeled through
nongovernmental organizations and climate-related investments, thus
limiting the accuracy of climate finance estimations.

Resolutions

Development partners should improve the transparency and predictability of

their support, and make efforts to use recipient country systems for
monitoring and reporting where possible. It is important to strengthen
communication and co-operation between development partners and
recipient governments.
Developing countries should establish or reinforce institutional arrangements
that enhance inter-agency coordination. This could include
o The creation of focal units for climate change in ministries
o Multi-stakeholder coordinating committees on climate change
o Climate finance committees to prioritize projects for funding and track
public expenditure on climate change.

Developing countries should establish the appropriate technical processes

and systems to monitor the funding toward climate action. They also need to
determine whether to modify existing systems or develop new systems to
track climate finance.
Countries will need to determine the level of detail that they wish to capture
in their climate finance tracking systems. They should also collect information
on the financial flows to non-government actors.

3. Major blocs and positions on the issue

The Umbrella Group
The Umbrella Group is informal group consisting of non-EU developed countries
which formed following the adoption of the Kyoto Protocol, including the US,
Australia, Canada, Japan, and the Russian Federation. The US, Japan and Canada
are among the top 10 contributors to the Green Climate Fund, but Australia tends
to be more outspoken in its resistance to donating to the international climate fund
while Russia has not been active in global climate talks. During COP21, the Umbrella
groups called for developing nations to equally contribute to global climate finance
since many of them have made significant economic progress and are able to
provide a certain level of financial assistance to less developed countries. This
group is also keen that the agreement should reference various sources of climate
finance, such as private finance and development banks. Regarding loss and
damage, the Umbrella Group is reluctant to discuss legal liability and suggested that
it should be removed from the agreement.
European Union (EU)
The European Union is the largest contributor of climate finance to developing countries
and the world's biggest aid donor. EU countries are also committed to scaling up
climate funding:
- At least 20% of the EU budget will be spent on climate action by 2020.
- At least 14 billion, an average of 2 billion per year, of public grants will support
activities in developing countries between 2014 and 2020.
- The EU and its Member States exceeded their commitment to provide 7.2 billion
in "fast start finance" over 2010-2012 for immediate action in developing countries.
Despite difficult economic circumstances, they provided 7.34 billion.
However, the EU has drawn criticism for the lack of transparency in its provision of
fast start finance. Furthermore, its progress is sometimes held back by countries like
Poland, which is reluctant to donate to the global climate aid. During COP21, this
group agreed that developing countries should also share the costs of climate
finance.

G-77 (Group of 77) and China

Developing countries generally work through the Group of 77 to establish common
negotiating positions. During COP21, the G-77 + China group expressed their
frustration with the Umbrella group for refusing to negotiate on climate talks and
failing to provide the sufficient amount of financial aid. Many countries in this group
also maintain that funding should flow exclusively from developed to developing
nations, which goes against the Umbrella groups proposal to include developing
countries as donors. They also disagree with the Umbrella group on the sources of
aid, insisting that the agreement should only deal with public, not private finance.
Regarding loss and damage, this group strongly demanded that developed nations
admit legal liability for the negative consequences of climate change and give out
some kind of compensation for disaster-stricken countries. In general, G-77 + China
group and the Umbrella group hold opposing viewpoints on major issues.
Africa group
This is one of the largest blocs within the G77 and China group, consisting of
developing countries from Africa. This is also one of the strongest blocs demanding
financial assistance from developed nations, as Africa contributes the least to
climate change but is among the most vulnerable to its consequences. Therefore, it
is paramount that the additional climate financing needs of Africa are addressed in
a meaningful and effective manner, especially in the area of adaptation. The actual
implementation of the technology mechanism is also among the key issues for this
group.
Latin America group
Latin America has been called the squeezed middle in global climate policy circles
because the region does not emit as much greenhouse gas as developed nations,
but neither is it in extremely urgent need of financial assistance like African
countries. As a result of growing energy demand, oil and petroleum- related
production in Latin America is on the increase, which contrasts with many countries
stated intention to invest in low carbon economy. However, there are still ample
opportunities for mitigation and adaptation activities that are consistent with the
goals of sustainable development. In general, climate related projects in Latin
America are increasing in number, with many countries in the region, notably Brazil,
playing an active role in climate finance provision. The main problem is that funding
is not distributed evenly and financing for adaptation remains limited. Being in the
middle income group, Latin American countries have to accept that they are not the
first priorities for global climate finance. Nevertheless, it is still important to
recognize that the region still needs substantial support in terms of technology and
finance to enable the transition to low carbon development and build climate
resilience.
4. Questions for further considerations

What is your countrys general position on climate finance (for or against)?

Which major bloc does it belong to? Which area of funding does it focus on
(mitigation or adaptation)? What is its attitude towards climate justice and
loss and damage?
What challenges does your country encounter in the mobilization and
utilization of climate finance? What policies can be adopted to address these
problems?
How to enhance coordination efforts in climate finance on both international
and national level?
What policies can be adopted to strengthen climate finance tracking system?
How can governments ensure that financial aid will reach those most in
need?
What policies could provide incentives and mitigate risks in the mobilization
and untilization climate finance? How can governments mobilize and redirect
national public finance towards climate mitigation and adaptation?
How can climate finance be mainstreamed and the development of green
technology be better facilitated and diffused?

5. Bibliography

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