Bonn 2023: Divisions over finance stall mid-year climate meetings
Eurodad's Leia Achampong, Senior Policy and Advocacy Officer working on climate finance, analyses the Bonn Climate Change Conference.
The annual UNFCCC Bonn mid-year climate meetings - known colloquially as the intersessionals or SBs - took place in the first two weeks of June. While there were not many official finance discussions at the SBs, the topic proved to be a flash point across multiple discussions (this overview does not cover them all) and was a sticking point from the start. This analysis covers the finance elements under a fight about whether mitigation should be on the agenda; post-2025 climate finance; the Paris Agreement’s ambition and progress tracker; finance to address loss and damage; and adaptation. However, finance was also discussed under transparency, the just transition work programme, gender and more…
Diverging priorities and views
What started out as a meeting to set the agenda for the SBs turned political quickly. The EU wanted to include mitigation as an agenda item, which was opposed by countries that wanted an urgent item on increasing public financial support, so global south countries can implement vitaly needed mitigation measures. To get around this impasse, a provisional agenda was agreed and consultations began on mitigation. Ultimately, countries agreed to remove it from the agenda and discussions were captured in an informal SB Chairs note. The adopted agenda can be found here.
The fact is that such agenda fights may become more common and will stall progress in other areas if there is no attempt to address the shortfalls in climate finance.
The path to setting a new global climate finance goal
The main finance piece at the SBs was the Sixth Technical Expert Dialogue (TED-6) on the New Collective Quantified Goal (NCQG) - also known as the post-2025 climate finance goal. Ahead of the SBs, a synthesis of inputs to the public consultation on TED-6 was published, which highlighted the multitude of issues that still need to be discussed ahead of the goal being agreed at COP29 in 2024. Two more TEDs will take place this year. Details on the Seventh TED have already been published, and there will be a High-Level Ministerial Dialogue on the NCQG at COP28.
Countries must use these technical and political opportunities to set a new goal that ensures the global south has the financial means to achieve the goals of the Paris Agreement.
A common thread across global south interventions was for the NCQG to reflect countries’ Common But Differentiated Responsibility (CBDR) and to cover loss and damage, in addition to mitigation and adaptation. Central to this are their demands for the global north to honour their obligations, take the lead and provide public climate finance that addresses the needs and priorities of the global south, without increasing indebtedness. Furthermore, the debate on whether climate finance is about ‘investments’ or about ‘support’ has been a continuous undercurrent in the NCQG discussions.
While there was a strong collective push from global north countries for the NCQG to not only cover climate finance that supports the global south, but to also reflect on the broader concept of sustainable finance, as relates to Article 2.1c of the Paris Agreement, there were different views on what this meant during the SB. Some thought that the Article’s inclusion in the NCQG should be about shifting all finance away from fossil fuels, while others thought its inclusion offered an opportunity to prioritise private finance. Global south countries were generally opposed to these efforts, and thought it would be more prudent to wait for the outcomes of the Sharm el-Sheikh dialogue on Article 2.1c - the first workshop of which will take place in July -, where it is expected that a common understanding of the Article will be agreed.
The disquiet around Article 2.1.c and expanding the contributors base
The current, annual global US$100 billion goal has never been achieved and the global south’s increased vulnerability to climate change impacts their ability to access concessional finance. A lot of trust has been lost as a result of these barriers to finance, which is why the NCQG process is a crucial space for rebuilding it. It is also why the global south is adamant that the NCQG prioritises Article 9 of the Paris Agreement on climate finance to support the global south’s implementation of urgently needed climate measures.
Conversely, countries in the global north want to include Article 2.1.c of the Paris Agreement on sustainable finance streams related to aligning financial flows with low greenhouse gas emissions and climate-resilient development, in the NCQG. Its inclusion allows global north countries to draw the private sector, Multilateral Development Banks (MDBs), and other International Financial Institutions (IFIs) into discussions on the NCQG. This has two implications. The first being that it brings these stakeholders under the auspices of the UNFCCC (to an extent), which is guided by the principles of CBDR and polluters pay. Second, it creates the space for the private sector and these institutions to argue that aligning themselves with the Paris Agreement requires global north countries to de-risk loan investments in the global south, and provide other favourable conditions and incentives.
Regarding de-risking, this means public money is used to balance the perceived risk of the private sector investing in the global south (for example via public-private partnerships or guarantees), and it also means the use of green economic policy conditions, commonly used by MDBs and IFIs. In both instances, this exposes the financial systems of countries in the global south to undue influence by the global north, requiring them to change their domestic policies (financial, economic, climate) in order to fulfil imposed conditions. Ultimately, the push for Article 2.1.c is in part, about countries in the global north seeking ways to share their responsibility to meet climate finance goals with other stakeholders. Instead of trying to expand the climate finance contributors base, global north governments must start meeting their public finance obligations, in order to rebuild trust.
Strengthening climate action
One of the aims of the SBs was to agree a draft outline for a decision on the global stocktake (GST) at COP28. The purpose of the GST is to assess the state of global action and determine whether national implementation of the Paris Agreement is on track towards achieving its long-term global goals, which is why finance is such an important aspect. However, countries couldn’t agree on how to reflect finance. Global north countries wanted the draft outline to reflect on the role of sustainable finance streams related to aligning financial flows with low greenhouse gas emissions and climate-resilient development (Article 2.1.c of the Paris Agreement). However, some global south countries thought that climate finance should be prioritised, which has the aim of supporting their implementation of climate measures (Article 9 of the Paris Agreement).
These differences in priorities resulted in countries agreeing an indicative structure that includes four options for how finance can be reflected, but no common structure. Negotiations on the GST outcome will end at COP28, following a September submission process; an October consultation process; and a series of events during week one of COP28. Amongst other things, the outcomes of the GST are meant to be used by countries to help strengthen their current and future climate measures, so the lack of common ground on finance is troubling.
Finance to address Loss & Damage
Discussions on finance to address loss and damage continued during the SBs. Finance, technology and capacity-building is needed to address Loss and Damage (L&D) impacts already taking place. With this in mind, countries in the global south highlighted the need for a Loss and Damage Fund (LDF) to be a standalone entity that is distinct from a development fund, and that should not be incorporated into existing financing structures. Some countries in the global north continued to highlight the role of innovative sources of finance focused on getting polluters to pay. Outstanding issues include defining what and who is ‘vulnerable’, which has implications for who has access to the Fund, as well as sources of finance used to capitalise the Fund. It is still not clear how discussions taking place under the Glasgow Dialogue on L&D to discuss activities to fund, will feed into the Transitional Committee on funding arrangements and a fund to address Loss and Damage (TC), which will present a set of recommendations at COP28 on the LDF and new funding arrangements on loss and damage.
Scaling-up adaptation finance
During the SBs, countries in the global south continued to stress that without adequate means (finance, technology transfer and capacity building) implementing their National Adaptation Plans (NAPs) would be difficult. Understanding the scale of existing implementation gaps is crucial for determining what measures are needed to plug the gaps. This is why the lack of clarity on the adaptation finance roadmap is so concerning. The UNFCCC Standing Committee on Finance (SCF) report on doubling adaptation finance and evidence on progress towards the $100 billion will be released ahead of COP28. The SCF’s findings are another crucial tool for understanding the gaps, particularly as adaptation measures are still chronically underfunded.
Global north countries urgently need to meet their responsibilities
What is clear is that almost 10 years after the Paris Agreement, the global south still faces a mountain to climb to secure finance to implement it. Countries and communities in the global south need greater clarity on how and when international finance commitments will be met. As such, countries in the global north need to honour their responsibility and achieve their climate finance commitments, and meaningfully engage in discussions on a Loss and Damage Fund. Only then can the global south implement climate measures that meet their specific needs and country circumstances.