Prioritizing particularly vulnerable people and countries in adaptation finance: It is difficult to assess how far German adaptation finance aims at prioritizing particularly vulnerable people within developing countries. The small, but politically significant financial support for the Adaptation Fund under the Kyoto Protocol is positive in this regard, since such a focus is one of the Fund’s strategic priorities. However, the criteria for the BMU’s ICI do not pay explicit attention to a focus on particularly vulnerable people, or a project’s contribution to poverty reduction, apart from a general, but too vague, expected contribution to economic and social benefits.
On the level of vulnerable countries, many of those to be prioritized for fast start finance according to the Copenhagen Accord,[3] are not among the partner countries of the BMZ. Countries like Bangladesh, Senegal or Nepal are thematic partners in renewable energies, but not in adaptation-related issues. Partially, these are covered implicitly through contributions to the World Bank’s PPCR, for example. But there is a risk for some countries to fall through the climate finance grid, whereby coordination with other donors to avoid “climate orphans” is important. At least, a number of Pacific Island countries which are highly vulnerable, are assisted through a recently scaled-up regional programme, although they are not focus countries of development cooperation.
Adaptation resources spent through the BMU’s International Climate Initiative so far do not adequately reflect the Copenhagen Accord’s prioritization (only roughly 30% have been allocated to vulnerable countries, which, however, is also due to a lack of proposed projects).
With regard to country ownership, effectiveness and the emerging requirements to scale-up action on climate change beyond small projects, it becomes apparent that the increasing reservations within the German government towards more macro-level support approaches, such as budget aid, may contradict a trend in the climate debate. Here is a growing consensus, usually expressed by the EU (including Germany) in the UNFCCC negotiations, that financial support must increasingly be oriented towards the development and implementation of programmes, and even national integrated strategies, to tackle climate change in the context of national sustainable development priorities.
Recommendations
Based on the analytical findings in this analysis, a number of policy recommendations will be drawn, recognizing that climate finance in general, and fast-start finance in particular, are emerging as crucial angles for a global climate policy regime. Given this relevance, it seems to be even more important to constantly and systematically consider lessons learned – now and in the years to come. Thus, these recommendations should be seen as a forward-looking contribution to foster German climate finance and to make it coherent with a view to contributing most effectively to those most in need.
1. Establish a Reliable Set of Sources to Raise the Required Funds
Relying on voluntary contributions from developed countries alone will not deliver the adequacy, reliability and predictability of resource flows that will be required to trigger the transformation to low-carbon, climate-resilient economies in developing countries. In order to mobilize US $ 100 billion and more annually of truly new and additional resources by 2020, it is crucial to raise revenues in addition to the existing funding base of national budgets. Germany has already been a pioneer regarding innovative finance instruments, with the use of auctioning revenues from emission trading for climate purposes. More comprehensive, innovative sources, such as levies or emission trading on international maritime transport and aviation, as well as a financial transaction tax, should be implemented as soon as possible. Ideally, a share of these would flow directly into the international climate finance architecture. Building on the report prepared by the Advisory Group on Finance, the German government should actively work toward implementing these instruments, including to jointly seek solutions with developing countries on a fair distribution of the revenues raised.
2. Ensure Transparency and Coherence Regarding the Definition of “New and Additional” and Work towards a Common Definition
First, all developed countries should make transparent how they define “new and additional” for their own contributions. This would provide a starting point to try to overcome the trust gap with developing countries, at least for the future. Furthermore, developed countries should work towards a joint definition for the future. The positive political impacts of these steps, even if it would show that much of the fast start finance is not new and additional, would likely be much higher than claiming what is obviously not true, and would thereby widen the trust gap.
3. Establish Clearer Guidelines for Developed Countries on How to Measure, Report and Verify Climate Finance
Given the insufficient and non-transparent state of the current reporting system, clear guidelines for a MRV finance system need to be developed. Such reporting must come with an independent and transparent analysis, e.g., performed by the UNFCCC secretariat, possibly in cooperation with the OECD DAC.
A mere compilation of figures without transparency on the additionality definition, the channels that the resources go through and the end use, would not add value, and would only provide an opportunity for “budget greenwashing”. In the future, any double-pledging must be avoided. The guidelines must also address the issue of incremental costs, to provide a clearer understanding of the real relationship between the funding delivered and the estimated needs, and in how far developed countries comply with their commitments under the convention.
4. Improve the Overall Coherence and Performance of the Climate Finance Architecture
Improving the overall coherence and performance of the climate finance architecture is one of the key demands of developing countries who are the recipients of climate finance, and who will feel first and foremost the consequences of a failing international climate finance architecture. The current considerations in the UNFCCC process provide options to contribute to this objective.
