Question of ‘who will pay’ loomed large over LTF negotiations at COP27

Developed countries took multiple potshots at the definition of climate finance and their obligations to deliver on it, even attempting to shift the burden to private sources and larger developing countries such as India and China

The technical and political discussions on long-term finance (LTF) elements, including the $100 billion delivery, the New Collective Quantified Goal (NCQG) and Article 2.1(c), remained hot topics at COP27 with several attempts by developed countries, including the EU and the US, to renegotiate the understanding of ‘who will pay’. 

Under the United Nations Framework Convention (UNFCCC) of 1992 and the Paris Agreement, developed countries are obligated to provide resources in terms of climate finance and technology to help developing countries mitigate and adapt to climate change. This is based on the principle of equity, common but differentiated responsibilities and respective capabilities (commonly known as CBDR-RC). 

In an attempt to dilute their historical responsibilities, developed countries at COP27 took multiple shots at the definition and obligations of developed and developing countries and attempted to shift the burden of climate finance to private sources along with asking that large developing countries like India and China to pay. 

Broadly, LTF refers to a decision at COP15 in Copenhagen in 2009 wherein developed countries committed to a goal of jointly mobilising $100 billion per year by 2020 to address the climate needs of developing countries. At later talks, it was decided that developed countries will continue to provide $100 billion per year through 2025. And simultaneously negotiations will ascertain a new number–known as NCQG–by 2024 to replace $100 billion after taking the needs of developing countries into account. 

$100 billion goal: So near, yet so far

Thirteen years later, the $100 billion goal of climate finance still remains unmet. Not only that, there is no mutually agreed definition of what ‘climate finance’ means. In the absence of a definition, countries use their own methodology for the assessment of the goal. The UN’s Standing Committee on Finance (SCF), which has been mandated to work on the definition of climate finance–does not do its own assessment of climate finance flows, CarbonCopy explained. While developing countries demand a clear definition, their developed counterparts are not very keen on it. During the discussions on the definition at COP27, Australia and the UK expressed positions calling for an end to discussions on setting definitional conditions, and to continue with divergent and disparate interpretations. This position was opposed by developing countries for whom a clear definition also sets accountability. The emphasis of developed countries on not clearly defining what is climate finance is helpful to them in the obfuscation of climate finance that they are obligated to provide. 

Developing countries, especially Like-Minded Developing Countries (LMDC), China, and Cook Islands for the Alliance of Small Island States (AOSIS) expressed their frustration over the long-standing calls for a common definition of climate finance, which hinders the tracking of progress of the $100 billion goal and often results in double counting. Most developing country groups called for an annual progress report on the $100 billion goal, which was not supported by the US.

At the high-level ministerial roundtable on LTF at COP27, Oxfam, a global non-profit that has been tracking the delivery of $100 billion highlighted, said that developed countries’ claim of reaching $83.3 billion in 2020, of which 68.3 billion is public finance, should not be taken as face value. Oxfam estimated that the real value, that is climate-specific net assistance, is between $21-24.5 billion–a third of what developed countries are claiming. The 70% of the public finance that developed countries are claiming is in the form of loans, pushing developing countries further into debt. More concerning is the fact that the percentage of non-concessional instruments went up from 30% to 40% of the total. This figure is even higher for multilateral development banks (MDBs). Even the Green Climate Fund (GCF), despite its mandate, is providing 51% of its total climate finance using non-concessional loans.

Many developing countries echoed the sentiments raised by Oxfam, while developed countries maintained that they are on track to mobilising the $100 billion.

On the delivery of this goal, Ecuador for G77 and China expressed several concerns over the critical dilution in language from “developed” countries to “donors” stating that climate finance is a commitment and not a donation by developed countries. There was also opposition by developing countries to the mention of the Climate Finance Delivery Plan, initiated by Germany and Canada in Glasgow at COP 26 for the $100 billion, stating that it is outside of the UNFCCC process.

The US conveyed its unhappiness that there was very little information on the efforts of developed countries to mobilise climate finance and too much focus on the fact that they haven’t mobilised the $100 billion.

During the discussions on reporting on progress on the $100 billion goal, developed countries–such as the UK and Canada–introduced all kinds of concepts that in essence attempt to shift focus onto developing countries, saying that their limited capacity obstructed finance flows. Both countries implied that it was developing countries’ failure to translate their priorities into investment plans and not incentivising the private sector, an African delegate said. 

While another matter of concern for developing countries remains that there is no clear text on continuing the assessment of the goal till 2025.

The final text adopted under the Long-Term Finance agenda item is replete with weak language that provides little clarity on these matters. The text is peppered instead with simple recognition and acknowledgement of the inadequacy of the promised funds and the non-delivery of the same.

What will the new goal be?

NCQG will replace the $100 billion goal. However, in the process of discussing what the number should be, developed countries at COP27 attempted to also renegotiate ‘who will foot the bill’ using Article 2.1(c) of the Paris agreement. 

Article 2.1(c) of the agreement reads, “Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”.

Using their skewed interpretation of such a vaguely worded article, developed countries are trying to use Article 2.1(c) to do away with their obligation to provide finance to developing countries. As per developed countries, Article 2.1(c) is ‘everyone’s goal’ and ‘everyone’s commitment’ and they are using this interpretation to say that the NCQG is also “a collective goal” and “a global effort” and all the funds mobilised using Article 2.1(c) will form the basis for NCQG.

Developed countries are also using words like ‘parties’ and ‘all sources of financing’ to include large developing economies also as donors and push the responsibility on to private sources. The final decision text pertaining to NCQG at COP27 seeks to establish a workplan over 2023, the details of which are to be decided by March 2023, following inputs by parties. The text includes a decision to continue deliberations on the NCQG in November 2024 when parties will take stock of the progress made in the matter and provide further guidance to the work programme toward setting the new goal for long-term finance post 2025.

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