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Climate finance in Paris: a reason to hope?

Thursday, 17 September 2015 11:00 GMT

Venezuelan bolivar banknotes and a U.S. dollar banknote, folded as origami boats, are seen at a fruit and vegetable store in Caracas, July 10, 2015. REUTERS/Marco Bello

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Developed and developing nations may be inching towards a sensible compromise on the thorny issue of climate finance

Following the recent round of preparatory meetings in Bonn, there could be reason to believe that by the end of the year, at the climate change conference in Paris, we should see a deal on climate finance that both developed and developing countries can work with.

It has taken 20 years of negotiations to reach this point, so if any reasonable deal is concluded in December, it will be a significant step forward.

There is much to discuss and decide in Paris. However, finance will be at the heart of any deal agreed, since somewhere, somehow, we have got to decide where the money for tackling climate change will come from. Who will pay? Who will be eligible to receive it? And how much?

Previously, while broad agreement had emerged on the Green Climate Fund being the primary instrument through which to channel at least $100 billion annually from 2020 onwards, significant areas of disagreement remained.

Developed and developing countries diverged fundamentally on many of the basics of a climate finance deal. In particular, the two groups of countries took polar opposite views on key elements of a fund.

Developing countries pushed for all climate finance being additional to existing developing aid. They also opposed developed country positions on counting loans as well as grants towards the $100 billion a year commitment, and including private-sector investment.

While it is unlikely that consensus will emerge on all of these issues, at least two relatively new aspects of negotiations tabled at Bonn offer hope that a sensible deal could emerge in Paris.

  1. Developed countries proposed the creation of an ‘enabling environment’ for climate finance: Developed countries pushed strongly for policy actions by developing governments to overcome existing barriers to access financial resources. With a more conducive environment, countries would also be able to better leverage private-sector investment and finance, further scaling up their funding options.
  1. Developing countries wanted acknowledgement of ‘changing climate scenarios’ as part of the deal: Developing countries also tabled some new thinking at Bonn. Fundamentally, since the world’s understanding of the climate change challenge is changing so rapidly, any agreement signed in 2015 may not able to address the challenges at hand in 2020 (when the $100 billion a year commitment is due to be met). Given this reality, the deal signed in Paris should be subject to review as the actual effects of climate change become clearer, when greater levels of financial support may be required.

Some people believe these additional complications will make complex negotiations in Paris even more challenging. I disagree. The two asks can actually help - as long as they are integrated in a thoughtful manner into the outcome.

First, the pitch for creating an enabling environment could be very useful. If developing countries agree to improve their institutional capacity, as well as associated transparency and accountability mechanisms, climate finance will be more effective. Unlike some of the other elements of climate finance around which positions are polarised, it is more difficult for anyone to argue that this is not critical to the success of any climate finance solution.

Therefore it will be harder for developing countries not to make relevant commitments in this regard, and that can only be good, since it will give everyone greater confidence in the success of future climate finance mechanisms.

Second, since there is greater consensus on the fact that our understanding of the impacts of climate change is evolving fast, and that what we believe now could be very different to the realities of 2020, the developing countries’ pitch for flexibility is also a sensible one.

Agreeing to a more flexible deal could actually be a win-win for both groups. For developed countries, it would increase the likelihood that the deal agreed this year is in line with the funding levels they are able to offer, while for developing countries it would still leave room to renegotiate in the future.

Instead of creating a new set of opposing positions, countries have the opportunity to use these discussions to move towards consensus on a workable, more effective deal. At the same time, they still leave room for adjustment and innovation in the future, as needs change. Amid all the posturing on climate finance, there could yet be reason to hope.

Kashmala Kakakhel is a Pakistan-based consultant working on climate finance with the Women's Environment and Development Organization.