Climate finance holds key to Paris deal

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of PLC.

Contributions to the Green Climate Fund have so far been very modest. [Images Money/Flickr]

With international climate discussions heating up ahead of the Paris COP21, European Finance Ministers can now determine key and critical elements to make a successful deal, writes Geneviève Pons-Deladrière.

Geneviève Pons-Deladrière is director of the WWF European Policy Office.

The eyes of Europe will be on the ECOFIN Council taking place on 10 November, hoping that ministers will deliver vital signals on climate finance, and embrace a unified position for the EU negotiators to take to Paris.

Constructing a set of Council conclusions acceptable to all 28 member states is no easy feat, so I would like to highlight key elements that must be in the conclusions, to ensure that Europe’s contribution will be bold and decisive.

Mapping Europe’s share

Climate change is a new and additional challenge faced by all, and felt the most by the poorest and most vulnerable. The EU has regularly confirmed its commitment to provide its fair share of the joint goal of developed countries to secure by 2020 $100 billion per year for climate finance. Now is the time EU finance ministers clearly need to show how the EU will contribute a fair share of around 30% of this amount, including through the use of innovative sources, by way of a credible and transparent roadmap.

Without a doubt, progress is underway and several countries have recently made welcome pledges. However, a recent OECD report on climate finance presented to finance ministers in Lima beginning of October is over-optimistic with its assessment of $61.8 billion already reached by 2014 due to methodological inconsistencies and the inclusion of non-concessional loans. We believe there is still a major financing gap, not least for adaptation for which from 2013 to 2014 only around 16% ($8 billion) has been spent.

UNEP’s figures for the level of adaptation finance required amount to $150 billion per year by 2030. There is a real need for the EU to not only acknowledge current gaps in adaptation finance, but to also commit to scaling-up and ensuring a balanced approach between mitigation and adaptation. The issue of loss and damage should be treated distinctly from adaptation, and the Paris Agreement should establish a separate and robust international mechanism to address it.

Inclusion of the private sector

The EU is particularly keen to leverage further finance from the private sector through the use of public funds. Private finance will of course be critical to reach the trillions of dollars in investments that will be required. Also, private sector finance must be in addition to and not replace public finance. Investments should be guided by strong sustainability standards, which the Paris Agreement must encompass.

The inclusion of private sector finance within the debate means a certain increase to financial support for mitigation and not for adaptation, because private sector investments demand profit generation and expect a return on investment which adaptation actions generally will not provide. Thus, public finance and EU public finance should ensure a balanced approach is taken between support for adaptation and mitigation – not least because the climate risks already identified in least developed and poorer countries are undermining progress on, and money spent on, poverty reduction and development.  

New finance streams from the ETS and the EIB

We demand that a proportion of the revenues from the EU Emission Trading System (EU ETS) should be transformed into new and additional, predictable support, that creates the foundation for a new support regime for high-quality finance and which is based on the polluter pays’ principle. A mere 10% allocation of revenues set aside for climate action internationally could raise as much as three billion annually from 2020 depending of course on the carbon price. This provides yet another reason to set the bar higher.

We need to focus as well on global investment flows. European investment flows must be aligned with the UNFCCC’s goal of limiting global warming below 2°C.

WWF goes one step further, and is aiming for a 1.5 °C goal and asks the European Investment Bank (EIB) is aligned with it. The recent EIB climate strategy though, published in September 2015, fails to include bold commitments ensuring an alignment even to the 2°C goal, arguing they have other competing priorities. The EIB is indeed supporting many high carbon gas projects (pipelines, storage, liquefied natural gas plants), road and motorways projects, airports, and the car industry. We demand that the EIB gradually raises its climate action target from 25% of its annual portfolio today to 50% by 2030.

Europe needs to put its own house in order and commit to its share while setting the parameters for transparency and urge all Parties to support the inclusion of strict, clear and transparent Monitoring, Reporting, and Verification (MRV) framework within the Paris Agreement. All parties need to commit to climate finance for adaptation, and climate resilience, as well as finance for mitigation.

It is my sincere hope that the European finance ministers use the opportunity to demonstrate European leadership and re-write the messages on climate finance, sending the signals that will contribute to the adoption and implementation of what I hope is an ambitious agreement in Paris.