Expectations and the emerging picture of the GCF are creeping apart (source: UNclimatechange)

In advance of COP 17, the Green Climate Fund’s (GCF) Transitional Committee (TC) have passed the Parties a report, recommending it “take note” of the report’s findings. It is worth analysing this report since it  brings in to clearer focus the contrast between the expectations that some have for the fund – largely the private sector – and the the emerging picture of the fund.

Specifically, the overarching sentiment from the report is that the GCF will be a vehicle for aid-based disbursement. This is not necessarily consistent with the guiding principle of “catalyzing climate finance.” It is this apparent confliction – between the guiding principle of acting as a catalyst for climate finance, supposedly inclusive of the private sector, and the emerging picture of aid-based finance – that has recently attracted criticism from figures such as Yvo de Boer, and the frame in which we should view the suggested design of the GCF given to Parties at COP 17.

Sourcing the money

The report states that the finance will be delivered at a country level. This means that finance delivered by the GCF could, for example, be delivered to a sovereign-administered fund that lends to projects or programmes that aim to execute a particular objective arising from a national policy.

A natural consequence is that the GCF can be expected to deliver finance in much the same way as existing multilateral funds. Notably, it will place far more importance on public rather than privately sourced finance, since private investors would find it more difficult to contribute to a fund that’s lending criteria focus on promoting a particular national or regional policy, first and foremost, delivering returns as a somewhat more ancillary benefit.

The report, however, does state that the GCF should have a private sector facility that employs the private sector in fund contributions. It is unclear if the reference to a separate “facility” should be interpreted to mean that the privately sourced finance will be disbursed through mechanisms separate to those for public sector finance, nor if such a distinction should emerge, how the private finance will be delivered.

Disbursing the money

Inspecting the financial instruments recommended for disbursement of the funds gives perhaps no clearer demonstration of an aid-based picture. Disbursal will be focussed on grants and concessional lending. The instruments will be used to finance the additionality gap – taking the risky investments that the private won’t take alone in order to get a programme or project off the ground.

Clearly, grant-based disbursal limits the involvement of the private sector in the fund’s capitalisation. This also extends the earlier question: will concessional lending on a country level attract private investors to the fund, and if not, will the private sector facility employ delivery mechanisms that are different to grants and concessional lending.

A stark contrast

In contrast to the emerging picture of the GCF, the Green Climate Finance Framework (GCFF) suggested by BNEF is a manifestation of the expectations of the private sector. In this proposal the public sector contributions make up around 10% of the fund, are delivered by aid-based finance and used to leverage the remaining 90% from the private sector, i.e. fulfilling the mandate of catalysing finance for climate change from the outset.

It could be argued that the difference between the GCF and the GCFF is based largely on the level of the involvement of the private sector, and that both can catalyse finance by funding the additionality gap. This is true, but a design like the GCFF does far more catalysing from the outset, precisely because it is leveraging nine times more private than public sector capital.

The GCF, as it stands now, is the inverse of the GCFF – predominantly aid-based delivery of finance at a country level, with a small, but “non-negligible,” role for the private sector. This set-up, if justified properly, is not in-and-of itself objectionable. It is, however, of concern that the emerging picture of the GCF seems to contrast sharply with the expectations of the private sector, whilst also limiting the fund’s ability to catalyse private sector finance from the outset.

UNFCCC Bonn conference – June 2011. (Image by: Adopt a Negotiator)

The UN Climate Change Conference kicks off this week in Bonn, Germany as governments continue framework discussions in preparation for the Seventeenth Conference of Parties (COP17) to be held in Durban, South Africa, at the end of the year. Over three thousand participants representing 183 countries are attending the conference in Bonn from June 6-17, including government delegates, business and industry representatives, environmental organizations, and research bodies.

Speaking on the first day of the conference, UNFCCC Executive Secretary Christiana Figueres reminded governments that they hold an unavoidable responsibility to make clear progress towards the 2011 climate objectives agreed to at COP16 in Cancun.

“Governments lit a beacon in Cancun towards a low-emission world which is resilient to climate change. They committed themselves to a maximum global average temperature rise of 2 degrees Celsius, with further consideration of a 1.5 degree maximum. Now, more than ever, it is critical that all efforts are mobilized towards living up to this commitment.”

Ms. Figueres expects that the meeting in Bonn should provide clarity on the architecture of the future international climate change regime to reduce global emissions. In addition, negotiators will focus on the design of the finance, technology and adaptation institutions agreed to in Cancun which will allow developing countries to successfully adapt to climate change while still building their own sustainable futures.

The conference comes amid a backdrop of new warnings from the International Energy Agency (IEA) of a sharp rise in the volume and concentration of greenhouse gas emissions in the atmosphere. The IEA announced last week that 2010 emissions from global energy generation have returned to record highs, marking an unexpectedly sharp rebound from the reduced emission levels caused by the financial crisis. Reports now show that carbon dioxide concentrations have once again peaked at just under 395 parts per million (ppm).

The two week conference includes the thirty-fourth sessions of the Subsidiary Body for Scientific and Technological Advice (SBSTA 34) and the Subsidiary Body for Implementation (SBI 34), the sixteenth session of the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP 16), and the fourteenth session of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA 14).

New items under discussion include: SBI’s consideration of proposed items on work programmes relating to reporting by Annex I and non-Annex I countries, adaptation, and response measures, as well as SBSTA’s consideration of the work programme on agriculture, the impacts of climate change on water and water resource management, and the initiation of a new work programme on issues regarding reducing emissions from deforestation and forest degradation in developing countries (REDD+) identified within the Cancun Agreements.

Bangkok pre-sessional workshop in the main plenary hall (image by: UN Climate Talks)

The current round of Climate negotiations under the UNFCCC in Bangkok comes to a close tomorrow, but do this week’s developments inspire new hope for reaching a binding international agreement on emissions reductions?

The ‘first commitment period’ of the Kyoto Protocol binds 37 industrialised countries to collectively reduce their overall greenhouse gas emissions by an average of 5% below 1990 levels from 2008 – 2012. Despite the imminent expiry of this period, no second commitment period has been agreed.  Even Christiana Figueres, Executive Secretary of the UNFCCC, has publically commented that ‘a gap in this effort looks increasingly impossible to avoid.’

Negotiations at Bangkok have been slow to get off the ground, bogged down with discussions related to the agenda itself, rather than making real progress. The AWG-KP has not agreed how to organize their work, and no consensus has been reached on whether to form spin-off groups. So should we be losing patience with these negotiations?

The international mood was desolate after the post-Copenhagen ‘crash of 2009’ leading some to reject a ‘Kyoto type of climate policy’ altogether. It has been argued that trying to reach such a broad international agreement has simply slowed political progress and, at the very least, climate policy must be broken down into its separate issues such as adaptation, forestry, and biodiversity.

However, alternatives to a ‘Kyoto 2’ so far haven’t been good enough to meet the climate challenge. Emission reduction pledges made by individual countries following Copenhagen only account for 60% of the reductions needed to have a medium chance of keeping global temperature rise below 2 degrees, the target agreed by governments at the Cancun negotiations.

Figueres is optimistic about achieving progress if negotiations continue in a spirit of flexibility and, crucially, compromise. It is too early to tell whether governments will have the political boldness needed to implement a ‘Kyoto 2’, and so we must wait with increasingly nervous anticipation for the next round of talks in Bonn this June.

Author: Sabrina Chesterman

Hillary Clinton announces US support for a large Climate Change Fund (Image by: Andy Revkin)

As the high level plenary rolls on, countries are disaggregated in their commitments, divided in their sovereign requirements and the bottom line remains, the COP still is no closer to a firm climate agreement.

An agreement needs to be founded in confidence and credibility, a momentous task considering over 100 different states need to be aligned.  Developing countries are fiercely protecting their national sovereignty, developed nations cannot agree on exact funding packages, tensions heighten and frustrations build as each world leader steps to the stage to present their national case and advocate for a solution to climate change, which all agree must be done at Copenhagen.

Gordon Brown called it the task of statesmanship for politics to overcome the obstacles. As the hours tick away, and statesman, presidents and prime minister advocate for an equitable outcome, do we start losing hope that endless talks and speeches prepared and written, perhaps weeks before Copenhagen and tweaked before delivery is not the most constructive use of time? One hopes as statesmen advocate their key messages on the plenary stage, senior negotiators are putting the texts into a workable and politically acceptable agreement behind closes doors.

In the continual roll call of world leaders at the high level plenary, a few developing countries have established their arguments with eloquence and established a useful commentary.  It is clear there is a mutual understanding of the common but differentiated responsibility with regards to existing emissions. Some leaders have not distinguished along the Annex I (developed) and Annex II (developing) country basis, as is done under the Kyoto Protocol.  Instead, as Hilary Clinton referred to, ‘major economies’ need to commit to funding and emissions cuts to their greatest extent.

As contract groups convene behind closed doors, developing countries remain firm in the support for Kyoto. As Yvo de Boer, Executive Secretary of the UNFCCC, rightly pointed out in his press conference, why wouldn’t developing countries advocate for a continuation of Kyoto, it’s the only framework that currently exists which compels developed countries who have ratified the protocol, to make emissions cuts?

Hilary Clinton affirmed the United States was prepared to join others to help raise 100 billion dollars a year by 2020. However, the reluctance of China to make firm statements this afternoon has made the chances of a unanimous pact appear unlikely. President of Guyana, Bharrat Jagdeo, highlighted the fundamental need for China to engage in final decisions. He used their example of innovation, in allowing millions of Chinese people to shift from a poverty status. Jagdeo challenged China as an indispensible actor to make sure Copenhagen doesn’t become the gravest failure of democratic statesmanship.

The week has been hampered by discussions focusing on procedure rather than substance and leaders know decisions made in the next 24 hours will mean they will be blessed or blamed for generations to come.

Author: Jennifer Helgeson

Protesters demand respect for indigeneous rights in REDD negotiations (Image by: Matthew McDermott)

Since the beginning of the Copenhagen negotiations, the Reducing Emissions from Deforestation and Degradation (REDD) mechanism has been seen as one of the most likely to reach agreement.  However, the nuances of the mechanism have caused concern over the rights of indigenous peoples and overall financing, among other issues.  In the first week of the Copenhagen negotiations these concerns caused an outcry for more stringent targets and foci for the REDD+ structure (for more on this, click here.)

The second week of negotiations has been plagued by contentious negotiations, halted meetings and walkouts.  Political pressure to come to an agreement in the next three days has increased with the arrival of over 110 heads of State at the Bella Center.  Amid the chaos of the negotiation process there have been some positive moves, especially with regards to provisions under a REDD+ mechanism.

Cara Peace, Tropical Forest Group’s Assistant Director for Policy, states that, “REDD is one of the few areas where significant progress has been made in Copenhagen.”  Two critical elements of REDD+ have come closer to consensus between parties in the last couple days.  Firstly, forests and those residing within forests need “early action” language to fast track financing to save forests immediately as possible.  Secondly, to move forward, national forest reference levels and timelines need be decided.  Both these issues have been addressed in late night meetings.

Once the text forces decisions on reference forest emission levels, it is suspected that generating conservation funding for tropical forests will become easier.  But this presents a difficult circle of distrust in the negotiations.  ”It’s hardly surprising that developing countries won’t commit to global targets for deforestation when rich countries haven’t yet provided the necessary financing for REDD,” said Nathaniel Dyer of Rainforest Foundation, UK.  So, which comes first to break a potential halt in the negotiations; developing county targets or financing promises?

To this point there has been an increased focus on involving private sector investment and input within the REDD+ institutional set-up.  But private sector investments require “signaling” that REDD+ will be viable, and that starts with development of binding targets.  Additionally, private finance seems to spur on heightened concerns by nations and those residing in forests that safeguards against false solutions that are non-additional and allow for leakage must be taken.

The Tropical Forest Group also reports that there has been some progression in the language used to specify indigenous people’s rights.  Though, key safeguards to protect indigenous people’s rights and limitations to forest conversion to plantations were moved from the operative section of the text to a non-binding preamble text.  But the text now makes explicit reference to protection of natural forests for the first time.

The length of the REDD+ framework continues to expand and contract, but at least there is movement and progress amongst otherwise halting negotiations in Copenhagen.  But will political pressures and the time crunch be too much for developing a strong REDD+?  Two more days….

Fever is rising for Copenhagen, as delegates and key global players in the climate field descend on the Danish capital in readiness for the official opening of the 15th Conference of the Parties on Monday. Expectations have rollercoastered in the last few weeks, with negative sentiment peaking when it was plausible Obama would not attend and the key emitters, namely the USA, China and India were yet to stipulate plans regarding emissions reductions.

The recent email scandal from the Climate Research Unit based at the University of East Anglia and James Hansen, NASA’s head of the Goddard Institute for Space Studies in New York, vehemently stressing the talks ‘must fail’ will add further dent to expectations.  However pledges for emissions cuts, announced by the USA and China and the anticipation that India’s Environment Minister Jairam Ramesh will today announce cuts in carbon intensity by 24 percent in 2020, bring hope. The cumulative result of these pledges is a positive signal that the COP could deliver a tangible structure for an agreement by the closing on December 19th.

One of the most contentious issues likely to dominate the discussions is the standoff between developing and developed countries, referred to as Annex 1 under the existing Kyoto Agreement. The key emerging emitters from the developing world, China, India, Brazil and South Africa have remained firm that developed countries must provide finance and technology to help developing nations fight global warming. This was further reaffirmed this week in Copenhagen, when the key negotiators from these four countries indicated after a preparatory meeting that they would represent a “different position” compared to a separate outline for the global climate talks by Denmark.

After a recent meeting in Beijing it also emerged that this group at Copenhagen will formally ask “developed countries to assume responsibility for emissions reduction targets in the second commitment period (from 2013)”. As Kim Carstensen, head of WWF’s Global Climate Initiative, further advocated “the developed world needs to have deeper emissions cuts, more new money on the table and much more willingness to share the technologies for low carbon development”. Developed nations are however adamant that this group of big emerging economies must also commit to mandatory emissions cuts.

Arguing aside, the fact remains that the world must cut its emissions, by around 80% of 1990 levels by 2050 if any form of climate stabilization is to be achieved.  Nonetheless discussions are likely to stumble and potentially get deadlocked over the issue of historical responsibility. This issue of ‘burden sharing’ is hugely sensitive as it ultimately involves responsibility to give money, billions of dollars of it, needed for low carbon investment and in adaptation funding, especially in key areas vulnerable to the onslaught of climate change.

Developing countries will not vacillate over the need for comprehensive adaptation funding, and will not compromise on the need for this to be in addition to official development assistance (ODA). The EU’s negotiators recent written blunder, referring that they “cannot accept reference to ‘additional to’, and ‘separate from’ ODA targets” could gravely undermine discussions on this issue.

In addition to the issue of funding, developing countries will be pressing for a firm agreement on Reduced Emissions from Degradation and Deforestation (REDD), where large swathes of land covered by forests of high biodiversity have the potential to earn countries money by keeping forests standing. However, as with many negotiations at Copenhagen, issues need to be ironed out with regards to the details.  A major hurdle for REDD is corruption and mismanagement in the forestry industry in developing countries. For example this costs Indonesia, which has one of the highest deforestation rates, two billion US dollars a year, equivalent to its entire health budget as a Human Rights Watch report released on Tuesday indicated. Many feel the negotiations surrounding REDD are fundamental if Copenhagen is to achieve anything, and will be hoping there is not a ‘no deal’ on this.

I will be traveling to Copenhagen for the second week of deliberations to cover issues related to developing countries.

The second two-week round of UN-led climate talks, held in Bonn, met with some critical feedback, though there were notable highlights in the dialogue.  One such highlight was the pitch four of the world’s largest air carriers made for a worldwide emissions limit for all airlines as part of the deal to be reached in Copenhagen this December.

The Aviation Global Deal Group (AGD), which includes British Airways, Cathay Pacific, Air France/KLM and Virgin Atlantic, presented what they deem an “ambitious, equitable, and effective” regime of emission caps for all airlines.  This proposal is an effort to include the industry in a climate treaty that 192 nations aim to agree upon this December.  The UN estimates that airlines account for about 3 % of global emissions.  The airline industry has not been subject to GHG regulations up to this point.

Executive secretary of the UN’s climate-change agency, Yvo de Boer, does admit that “it’s very hard to say if aviation will be included” in a final agreement in Copenhagen.  Regardless, airlines are expected to be included in EU regulations in 2012.  The USA has also proposed future legislation on airline CO2 output.  The AGD specifically discussed capping carriers’ GHG output based on annual fuel purchases.  Companies overshooting their target would have to buy permits from those emitting less than their allocation.  Revenue from auctioned permits would go towards helping developing countries adapt to climate change and developing cleaner air travel technology.

Yet, the Bonn talks were described as yielding little true consensus. France’s climate ambassador, Brice Lalonde, said that compared to previous sessions, in Bonn “the attitudes were more constructive, but the level of ambition was lower.”  His specific criticism was that it is now commonly accepted knowledge that global emissions have to be halved by 2050 (compared with 1990 levels), implying an 80 % reduction by industrialized countries. It is also generally agreed that the emissions levels in developing countries must start falling by 2025 at the very least.   But in Lalonde’s opinion, “no one is signing up” – in which statement he is also rather critical of the EU’s involvement.

The driving issues, such as who should cut their emissions and how soon, as well as the question of technology transfer to poor countries, require specific road mapping exercises – for example the proposal by the AGD.  Just last month in a major meeting in Paris (reported in a previous Climatico article), representatives from France and Germany were ardent in their call for flexibility in the mechanisms by which climate change mitigation occurs, so long as it does indeed occur.  Perhaps it will be industry partnerships of multi-national firms that ultimately pushes – or flies—  climate change negotiations over this precarious negotiation standstill?