As seen at COP26, developed countries are opposed to discussions on long-term finance, while developing countries want talks to continue
At COP26 in Glasgow, discussions on long-term finance (LTF) were particularly sticky and had to be carried over to ministerial consultations during week two. COP President Alok Sharma appointed Yasmine Fouad, minister of environment for Egypt, and Per Bolund, minister for environment and climate for Sweden to oversee discussions on finance, particularly LTF.
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 climate needs of developing countries. Thirteen years later, this goal remains unmet.
A September, 2021 report by ODI, a global think-tank with a focus on injustice and inequality highlighted how only 3 countries—Germany, Norway and Sweden—have been paying their fair share of the annual $100 billion goal out of a list of 23 developed countries responsible for providing international climate finance.
At Glasgow, the divisions were clear—developing countries wanted a continuation of discussions on LTF and developed countries were opposed to it.
In the end, developing countries managed to eke out a win with a final decision to continue discussions on LTF till 2027; a mandate for the Standing Committee on Finance (SCF) to work on the definition of climate finance (CarbonCopy has previously highlighted issues that have raised owing to the lack of a clear definition); and a request to the SCF to prepare a report on progress towards achieving the $100 billion goal.
Until now, there was no process under the United Nations Framework Convention on Climate Change (UNFCCC) to measure the progress of the $100 billion goal. The Organisation for Economic Co-operation and Development (OECD) brings out assessments of the $100 billion a year mobilisation target periodically. “However, there needs to be an in-house UNFCCC assessment of whether the $100 billion a year by 2020 has been reached, which has been a key demand of developing countries. Relying on just the OECD assessment is akin to providers assessing their own contributions, like a company carrying out its own audit, and this does not make sense. There needs to be transparency and accountability in the process,” said Indrajit Bose, senior researcher with Third World Network.
The key COP26 decisions on finance were a direct result of a combined push by developing country sub-groups. The agenda was spearheaded by the Africa Group, the Arab Group and the Like-Minded Developing Countries and supported by the Argentina, Brazil and Uruguay (ABU) group. This was then aided by a consultative approach adopted by the COP26 Presidency.
But there was scope for more. The African Group wanted “more mandates on Article 2.1c [of the Paris Agreement] as we see this as the space to talk about financing the Just Transitions that are important for extractive resources-dependent countries in Africa and also to others like India and Indonesia,” said Richard Sherman, lead negotiator for the African Group of Nations at COP26.
Relegate LTF to Paris Agreement
At COP25 in Madrid, two key issues came up with respect to LTF: the continuation of the agenda item beyond 2020 and whether these discussions ought to be held under the UNFCCC or the Paris Agreement.
And while COP26 resulted in an agreement on the continuation of LTF discussions, the push to move LTF discussions to the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA) remains. More specifically, the aim of developed countries was to terminate the LTF process under the COP and continue deliberation under the CMA focussing on Article 9.5 of the Paris Agreement. This section of the agreement mandates developed countries to submit information every 2 years on climate finance and broadly, deals with transparency and reporting frameworks. This would mean that the COP would not have any platform to address the broader long-term finance issues and that these discussions would now be limited to the CMA with a much narrower mandate.
Zaheer Fakir who was one of the lead coordinators for the African Group of Negotiators on Climate Change (AGN) at COP26 said that developed countries are engaged in “a systematic effort” to make the Paris Agreement the main multilateral blueprint to define the global response to climate change, rather than it being under the 1992 UNFCCC Convention and having an aim of enhancing the implementation of the Convention. In fact, Article 2.1 of the Paris Agreement explicitly states the agreement aims to strengthen the global response to climate change via “enhancing the implementation of the Convention, including its objective.”
For instance, consider how at COP26, developed countries wanted to expand the donor list for climate finance to include certain emerging economies like China. “Under the Convention and its Paris Agreement, this is not open to discussion. It is amply clear that developed countries are legally mandated to provide financing to developing countries,” Bose said.
Bose explained that since the Paris Agreement saw the light of the day, developed countries have been affording “second-class treatment to the Convention.” LTF is a key example since the developed countries did not want to discuss it under the Convention. The reason is simple, Bose said. “They have not fulfilled their commitments under the Convention and don’t want to be held accountable.”
And so, this push to relegate would “redefine” the current order by moving away from the Rio era, its principles and ensuing obligations of developed countries, Fakir cautioned.
The LTF decisions out of COP26 were “a compromise because all we have is a series of procedural next steps,” said Sherman. And so, a lot depends on how these steps are taken at upcoming COPs and particularly during ministerial meetings at COP27 in Egypt. Ministerial meetings are the prerogative of the country holding the Presidency. Developing countries hope that Egypt designs the format and content of COP27 to focus and build on key COP26 outcomes, especially those related to finance.
“The Needs Report, in our view, should be the basis [for the finance agenda] going forward,” Sherman said. “Needs Report” refers to the Report on the Determination of the Needs of Developing Country Parties prepared by the SCF which stated that developing countries need $5.8 to $5.9 trillion up until 2030 to fund less than half the climate actions listed in Nationally Determined Contributions. “This is the mandate under Article 11.3 (d) of the Convention and the arrangement agreed between the COP and the GCF and the COP and the GEF,” he added. Article 11.3 (d) calls for the determination of necessary funding “in a predictable and identifiable manner” and “the conditions under which that amount shall be periodically reviewed.”
There are also questions regarding fulfillment of the new mandates, i.e. work on definition and progress report on $100 billion, the SCF has with respect to finance. Mandates to the SCF are one thing but, Sherman added, “it depends on whether the SCF can agree on them, make submissions and present comprehensive documents to COP27 so we can make further progress on substantive COP26 outcomes.”