Download Financial Mechanism under the UNFCCC

Financial Mechanism under the UNFCCC
Maria Netto
United Nations Development Programme
3 September 2008
Important provisions on financial support in the Convention
• Common but differentiated responsibilities
• Action by developing countries to address climate change
depend on the financial support that these countries would
receive from developed countries (Article 4.7)
• Climate change requires “new and additional finance” (to ODA)
because it is a public good. Developed countries (Annex II) are
expected to support developing countries with new and
additional resources for “agreed full incremental costs”
(Article 4.3).
• A number of areas for which support is to be provided are
identified (articles 4.1, 4.4, 4.5, 4.8 and 9).
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Article 11 – the financial mechanism
• Does not stipulate what are to be the sources of funding for the
mechanism
• Provides for some concepts of governance:
- Shall function under the guidance of and be accountable to the Conference of
the Parties
- Shall have an equitable and balanced representation of all Parties within a
transparent system of governance
• Grants or concessional basis.
• Allows that its operation shall be entrusted to one or more existing
international entities.
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Article 11 – the financial mechanism
• Provides for issues the COP and entity(ies) operating the mechanism
are to consider for:
• Ensuring operations
• Determining predictable and identifiable manner of the amount of
funding necessary and available for the implementation of this
Convention and the conditions under which that amount shall be
periodically reviewed.
• Acknowledges that donors may also support countries through other
sources (bilateral or multilateral).
• Article 11 of the KP – mainly refers to the Financial Mechanism of the
Convention!
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Global Environment Facility
•
Became at COP 3 “an entity operating the financial mechanism of the
Convention” (before was operating the financial mechanism on interim
basis)
•
Operations of the GEF as an entity operating the FM are to be reviewed
every 4 years
•
Comprehensive multilateral financial mechanism for environmental
Conventions (as opposed to fragmented bilateral / multilateral funds)
•
Has its own criteria and principles (such as the principle of global
benefits)
•
Has its own governance system and specific procedures.
•
Replenishment follow a burden sharing system and is “voluntary”.
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Frustrations with the financial mechanism
More than 40 decisions referring to the FM…. perception of little progress as result.
While at Marrakesh/Bonn (2001):
• A number of donors declared they would contribute collectively $ 410 million
annually by 2005, with this level to be reviewed in 2008.
• Parties agreed that there would be an increase of contributions to the FM
(decision 7/CP.7)
• The LDCF and SCCF were created to cope with areas the GEF trust fund could
not cover.
In reality:
• Most donors have not reported on the contributions referred to at Bonn
• GEF 4 is in real terms smaller than GEF 3 – COP has little input on replenishment.
• The SCCF and LDCF took about 3 years to be operationalized and have very
small amounts of funds.
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FM negotiations – challenges
•
Relatively small amount of funds in Convention Funds.
•
Financial mechanism discussions have suffered of reflecting “donor
recipient” traditional development cooperation relationship - resulting
in “ossification” of negotiations.
•
Difficulty to track what “new and additional” resources other than the
GEF that have been provided by Annex II Parties.
•
Difficult experiences of developing countries in accessing and
receiving support through existing funds.
•
Frustrations with regard to interpretation of guidance and lack of
transparency.
•
The recognition that additional financial flows will be needed to cope
with needs and that one has to move from project by project to
programmatic approaches.
•
New mechanisms were created since – CDM and AF – “international
funds” with innovative governance.
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Financial Mechanism – evolution in negotiations
• Financing has been acknowledged as one of the building blocks of the Bali Road
Map: challenge – need for innovative approaches that can be negotiated and put in
place by 2009.
• Negotiations regarding financing to address climate change have evolved to a
much broader range of issues relating to relationship between the costs / needs to
address climate change and economic growth an development.
• Governments want to be in the “driving seat” on discussions regarding financing to
address climate change – while acknowledging strong need for input from other
players.
• Developing countries have stressed strongly the importance of balanced
governance and effectiveness of new mechanisms.
• Some proposals to better deliver support are being tabled: regional centers of
excellence, programmatic approaches for adaptation, etc..
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Options under discussion
• How to best allocate international public funds and what is the role of the GEF
(as entity operating the financial mechanism) given their small share?
• What governance changes are needed to ensure more equitable representation
of various Parties interests and improve effectiveness of access to finance?
• What are the possible innovative mechanisms to leverage additional funding and
how should these new mechanisms be governed and used?
• What is the possible role of, and what are the possible incentives to, promote
national and international policies and regulations that can stimulate shifts in
private and public investment and finance?
• How to ensure consistency of investments and finance to address climate
change with overall investment and finance for development?
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Funds
Convention /
Kyoto Protocol
Mandates
Governance
Support services
Level of funds
Source of funds
GEF
Trust
Fund
Art.11 FCCC
GEF Council
- Members selected under GEF system
- Members represent GEF constituencies
- Equal representation of developed and
devoting countries (with special weight voting
rights to donors)
GEF secretariat
GEF
implementing and
executing
agencies
Mitigation:
$ 3.3 billion* (from
1991 - 2010)
Adaptation: $50
million (until 2010)
Contributions by
donors following
“burden sharing”
agreement
SCCF
Art. 11 FCCC
SCCF Council (under the GEF)
- Members selected under GEF system
- Members represent GEF constituencies
- Representation of depends on constituencies
willingness to participate in this fund
GEF secretariat /
$ 74 million (until
March 2008)
Voluntary
contributions by
donors
LDCF Council (under the GEF)
- Members selected under GEF system
- Members represent GEF constituencies
- Representation of depends on constituencies
willingness to participate in this fund
GEF secretariat
$173 million.
pledged (until
March 2008)
Voluntary
contributions by
donors
Adaptation Fund Board
- Members directly elected by the CMP
- Members representing 5 UN regions
- Majority of developing countries
GEF secretariat
World Bank as
trustee
2 % share of
proceeds of CDM
Voluntary
contributions by
donors
CDM Executive Board
- Members directly elected by the CMP
- Members representing 5 UN regions
- Majority of developing countries
UNFCCC
secretariat
DOEs
Depending on
quantity and price
of CERs (until
2012).
Assumingly
$ 80−300 million
per year
Depends on price,
estimated
revenue per year
(based on 2006):
$ 5.5 billion
LDCF
AF
Art 11 FCCC
Art 12.8 KP
Art 11 KP?
CDM
Art 12 KP
GEF
implementing and
executing
agencies
GEF
implementing and
executing
agencies
CERs
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