A new climate fund with a much larger scale of available funds, thereby able to fund broader programmes and policies in developing countries, would fill an existing institutional gap. Through the provision of direct access and through following guiding principles, such as strong attention to vulnerable or affected groups of societies (such as in adaptation or REDD), it could contribute significantly to the objectives outlined in this analysis. An overarching, institutional approach on climate finance under the UNFCCC could also make a significant difference for overcoming the identified shortcomings, provided there is enough political will. Germany should actively work towards such an improvement of the financial architecture.
In order to enhance the performance of German climate finance, the following recommendations should be pursued:
5. Continue Good Climate Finance Reliability
Given the relatively good reliability of Germany’s past climate finance pledges, it is currently putting this reputation partly at risk, through expanding the ways of “creative accounting” to fulfill the Copenhagen pledge on fast start finance and, thus, reducing its real, additional contribution. It should develop a roadmap of how to raise funds in order to fulfill the 0.7% target by 2015 and to increase in the years after 2015 to roughly 0.3% of the GNI, or ca. € 8 billion, as its fair share of the global climate finance requirement. As previously stated, in the future, any double-pledging must be avoided.
Fast-starting innovative finance instruments unilaterally such as the already agreed use of auctioning revenues and the aviation levy – which is not yet allocated for climate purposes, is imperative. In addition, this can help pave the way for an international agreement on such instruments.
Furthermore, this reputation can be preserved through the continued provision of adaptation finance only in the form of grants, counting only the grant element towards the climate finance pledges (not the full loans), and through an honest and thorough “coding” of projects reported as climate finance.
6. Develop a Joint Coherent and Strategic Approach to Climate Finance
The overall coherence of German climate finance must be improved, whereby deepening the cooperation between the key ministries BMZ, BMU (and also Foreign Office) and developing an overall coherent climate finance strategy are key elements. This does not necessarily imply merging the different existing instruments, but it should provide guidance on how they complement each other in the best way. It is also advised to establish a forum for continuous exchange among ministries, the implementing entities, as well as with non-governmental stakeholders who play a role in climate finance.
7. Strengthen the Prioritization of the Most Vulnerable in Adaptation Finance
With regard to adaptation finance, there is the particular need and the potential to strengthen the prioritization of the most vulnerable in adaptation finance. At least for the fast start finance, the government should identify how much of the adaptation finance has been allocated overall to the group of particularly vulnerable countries as contained in the Copenhagen Accord, and seek to increase their share in particular under the BMU’s International Climate Initiative.[4] Through coordination with other donors, the emergence of “climate finance orphans”, particularly vulnerable countries which fall through the funding grid, must be avoided. Financial support for multilateral funds should be steered where special attention is given to particularly vulnerable parts of the population, such as the Adaptation Fund.
8. Improve Stakeholder Participation
In bilateral programmes, the active engagement of civil society, and in particular vulnerable communities in the design, planning, and implementation of adaptation programmes, should be pursued. Hereby the employment of well-established human rights procedures (e.g., in development co-operation programmes) to include and to empower people should be expanded, and should become at best an obligation in such programmes. The already agreed BMZ action plan on human rights, which refers to the climate change and human rights nexus, provides an important political basis. This should also include support for inclusive, national-level institutional arrangements to guide adaptation policies.
9. Increase the Effectiveness of Climate Finance
While of course there are many good examples for effective and efficient projects implemented through what is titled climate finance, there is an overall need to further increase the effectiveness of climate finance. The following aspects provide important guidelines which should be – and partially are already being – pursued:
- Account for the principles of the Paris Declaration and subsequent process on aid effectiveness, such as country ownership which can be increased, e.g., through allowing direct access in multilateral funds;
- Develop bilateral programmes and initiatives in a way that they also complement multilateral funds as effectively as possible;
- Assist developing countries who progress to broader climate change programmes and comprehensive climate change strategies, including institutional arrangements such as national climate change trust funds, through programme, budget and sectoral aid delivery;
- Invest mitigation finance in a way that it ideally leverages private investments (without counting these private flows towards German climate finance).
10. Prepare Annual Reports on its Delivered Climate Finance to the German Parliament
The responsible ministries should report annually on the state of climate finance in a transparent and comprehensive manner. This should inter alia include exante allocations of climate finance, as well as an ex-post consideration of how climate finance was allocated in the previous year.
