IIGCC BLOG

Climate finance is becoming a visible sticking point at COP21

In the run-up to the COP, many countries worked hard to avoid the Paris event becoming a discussion that is only about climate finance. Some countries outlined their climate finance plans up until 2020, and the OECD released a study showing that the scale of finance flows agreed in Copenhagen (USD 100 bn per year into developing countries by 2020) was close to being realised: developed countries mobilised USD 64 bn from mid-year 2014 to mid-year 2015, not far off the mark.

It’s true that USD 100 bn of climate finance flows will not suffice to address the vast mitigation needs of developing countries. Mobilising private capital will also need to play a huge role in realising the trillions required. But demonstrating that pledges are honoured, and promises kept, is crucial to build the trust required for negotiators to be able to compromise.

Meanwhile, India commissioned a study – using a different methodology – that arrived at a figure for climate finance flows that is dramatically lower than what the OECD has calculated - in part because there is no agreed UN methodology that defines which climate investment flows count as “climate finance“under the convention. This difference proved a key issue in today’s negotiations. Some developing countries are now concerned that they might not get what they were promised. This discussion is taking centre stage in the negotiations.

The climate finance discussion is torturous and far removed from what is required to address the climate challenge and mobilise private capital for developing countries. But it remains a crucial obstacle to a successful Paris agreement. As negotiators grapple with the vexing question whether or not there is any money that is ‘missing’, progress gets slower. Key issues will only be sorted out now once ministers arrive next week. Stay tuned.

Stephanie Pfeifer, CEO of IIGCC led a riveting opening discussion at a key investor side event today opened by Al Gore. See #COP21carbonrisk for a lively relay of some vivid points made at Investing in the Long term: Addressing Carbon Asset risk (co-presented by Carbon Tracker, IIGCC, Ceres and CMIA).

Negotiators roll up their sleeves as discussions move into full working mode; two key risks could persist

Before Heads of State and Government arrived in Paris, negotiations had already started on a technical level and will continue throughout this week. The President of COP 21, French foreign minister Fabius, has now given an important mandate to the two Chairs of the negotiation track for the new Paris agreement: they have been asked to present a new, streamlined text by Sat 05 December. Negotiations will proceed on the basis of the current negotiating text until then.

Two key risks will continue to concern stakeholders and negotiators alike:

(1) Ambition level: The agreement will only be strong enough if a discussion can be promoted about closing the gap to the below 2 degrees objective (current pledges only limit global warming to 2.7 degrees Celsius if fully implemented). Vulnerable countries have already made clear a determination to advocate mitigation rather than merely adaptation/loss and damage. Care will be required to prevent the “firewall” between developing and developed countries from resurfacing.

France’s plan to have Heads of State arrive at the beginning seems to have paid off by painting a clear vision of the Paris agreement. The pressure now turns to the negotiators and ministers to deliver real action and ambition.

(2) Process failure: Despite overwhelming political will negotiations may not conclude on time and an agreement might remain elusive.

The big news of today was that India announced a solar alliance designed to accelerate the deployment of solar technologies in sun-rich countries across the world. This was seen as a key signal that India intends to take a constructive stance in the Paris negotiations.

Paris curtain-raiser: Almost 100% of global emissions covered by national climate plans as more than 130 Heads of State and Government convene.

The Paris summit started with a grand opening: more than 130 Heads of State and Government, including all major leaders, have convened in Paris to kickstart what has been termed one of the most important diplomatic events in history. Prospects look good on the first full day of negotiations: almost 100% of global emissions are now covered by national climate plans (INDCs). Every major country is doing something about climate change, and world leaders compete to outdo each other in driving momentum and stepping up the pressure on negotiators to achieve a meaningful agreement.

But a useful outcome from these talks is far from something in the bag. Success in Paris will require some heavy lifting: it is not certain if all countries will agree to the long-term goal of global climate neutrality over the course of this century – something that a growing number of governments support. It is not certain yet if there will be a review process which will ratchet up ambition levels to close the gap between current contributions and the science in order to set the world back on a 2 degree trajectory. The precise legal form of the agreement, and which elements should be made legally binding, is also still up in the air. Throughout the negotiating text, hundreds of brackets remain that will each have to be discussed, streamlined and compromised upon in small negotiation sessions or referred upwards to the political leadership for agreement.

Nevertheless, while negotiators face a daunting, complex and torturous process, the real world beyond the conference rooms has changed dramatically since Copenhagen. Investors are more engaged than ever before and united in their calls for a strong and meaningful climate agreement. Companies and regional governments are also doing their part. Slowly, but surely, the negotiations are shifting from a tiring discussion about burden-sharing and costs to a positive conversation about investment and opportunity.