The ‘WTF’ factor in climate negotiations

At Katowice, Poland, where some 28,000 negotiators, observers, civil society members and journalists from around 200 countries of the world had foregathered for yet another round of talks about how the deuce to fight climate change, many participants were observed wearing a badge with an arresting legend: WTF.

Look closely and you’d find a telling message under the three letters: Where’s The Finance? In a way, the WTF badge sums up the quintessence of the current phase of climate negotiations.

For two weeks, negotiators battled it out in the southern Polish city — which stands bang in a coal mining district — to arrive at a set of rules that would operationalise the 2015 Paris Agreement.

On December 15, a full day after the deadline for the talks, they did arrive at a rulebook. The Paris Agreement is a broad collection of ideals. The biggest of them is the acceptance by everybody of the ‘well below 2 degree Celsius’ target for limiting global temperature rise. Under the overarching target, the Agreement set out broad themes for various elements needed for meeting the target — such as finance, transparency in reporting, technology flows, capacity building and periodic status reviews.

A rulebook was necessary to increase the granularity of the Paris Agreement. This was achieved to a large extent at the COP24, or the 24th Conference of Parties to the UN Framework Convention on Climate Change. However, one crucial aspect has remained unsatisfactory: Finance.

The dissatisfaction is over both what the rulebook says on finance, as well as what it does not say. Broadly, under Article 9 of the Paris Agreement, which is on finance, there are two paragraphs that are deemed to be critical. First is paragraph 5, which calls for developed countries to clearly indicate how much funds they would make available for climate action projects in the developing countries. On this, the rulebook is fairly comprehensive — it leaves the developed countries no room to flinch.

The second is paragraph 7, under which developed countries are required to disclose how much funds they mobilised in the past two years. Many experts have commented that the rules on this are sloppy.

Brandon Wu of the NGO, ActionAid International, who is an expert on climate talks, notes that ‘climate finance’ ought to be grants or grant-equivalent of non-grant instruments flowing from the developed to the developing countries — like foreign aid. This is a recognised principle because the rich countries got rich in the first place by taking a high-carbon path for growth and causing the greenhouse gas problem, and the countries that are most affected by the climate change are those who were the least responsible for it.

Grey zone

Under the Paris Rulebook, countries are allowed to count all sorts of non-grant instruments, including commercial loans, as ‘climate finance’, says Wu. The developed countries are asked to report the grant-equivalence of these instruments only on voluntary basis.

What this means is, a country like the US could give a commercial loan that is to be repaid with interest to a climate action project in a poor country and call it ‘climate finance’. Worse, there are no proper rules for accounting when the loans are repaid. The US, then, will have given nothing out of its pocket and yet be able to make it appear as though it has mobilised climate finance. At the other end, it would only increase the poor country’s indebtedness.

What the rulebook is silent on finance is equally, if not more, significant. Many believe it ought to have been more prescriptive, made sure the developed countries pay up. Instead, it “strongly urges (emphasis original) developed country parties to scale up their level of financial support” so as to “jointly mobilise $ 100 billion annually by 2020”. Incidentally, that $100 billion, instead of being moneys transferred from the rich countries to the vulnerable, could be made up of commercial loans, increasing the indebtedness of the countries. A loan given to a solar project could be called climate finance, meaning there would be no additional resource mobilisation for climate action. Worse, the COP24 rulebook clearly says that all finance flows do not (emphasis added) have to achieve “explicitly beneficial climate outcomes,” but it is enough they “reduce the likelihood of negative climate outcomes.”

Thus, a World Bank commercial loan to a railway project is ‘climate finance’, because the railway line would take vehicles off the roads. While the supposition is not untrue, financing of such projects would have happened anyway, and not necessarily because of the rulebook.

Similarly, on the Adaptation Fund, there are only mentions of it but no concrete measures to cause inflows into it. Adaptation finance is critical for developing countries because of the need to do something to cope with the climate effects already on — such as deepening and linking up village ponds.

The urgency required for climate action was highlighted by the recent “1.5 degree C” report of the Intergovernmental Panel on Climate Change (IPCC), which dwelt on the need to limit global temperature rise to 1.5 degrees over pre-industrial levels.

Without immediate action, even the strongest rules will not get us anywhere, notes Jennifer Morgan, Executive Director, Greenpeace International.

There would be little action without finance. The developing South needs financial aid from the rest of the world to work towards more adaptive and resilient climatic conditions, says Sanjay Vashist, Director, Climate Action Network South Asia.

But finance is not forthcoming. That is why some people chose to highlight the problem by wearing a badge that said ‘WTF’.

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