Readiness for climate finance
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It is likely that the UN Climate Conference of the Parties 18 (COP 18) in Doha, Qatar later this year will have a strong focus on financial resources for climate change in developing countries — how much, from where and how they should flow — all of which is labeled as “climate finance”.
Getting parties to answer these questions by may provide momentum to move forward other parts of the negotiations. This proved to be the case during the latest UN conference on climate change, which closed last week in Bangkok, in which climate finance for the period of 2013-2020 was at the core of the negotiations.
Although the conversation on this topic has been going on for a while, there are some new developments set to converge at the COP 18 in December: The US$30 billion pledge made by developed countries in Copenhagen three years ago (“fast start finance”) elapses without any clear succession plan for the following years on the horizon; the Green Climate Fund will have held by that time two board meetings with potentially advanced discussions on internal arrangements, putting the fund some steps closer to being ready to receive funding; and the co-chairs of the work program on long-term finance, created back in Durban in 2011, will deliver their final conclusions and recommendations on alternative international financial sources that could represent a new and additional influx of money for developing countries.
Underlying all of these factors is an ongoing discussion about financial needs and access mechanisms for developing countries on one hand, while at the same time looking at developed countries’ willingness to pay on the other hand. It is clear that one cannot happen without the other.
On the former, The Nature Conservancy recently released policy paper entitled Climate Finance Readiness: Lessons Learned in Developing Countries, which included among other countries, efforts being carried out by the government of Indonesia.
Climate finance readiness is about helping recipient countries improve their capacity to absorb financial resources.
The paper aims to shed light for both developed and developing countries on elements that would help enhance the efficiency and transparency of climate finance mechanisms and the subsequent implementation efforts in order to make sure that funding gets to the right people to drive positive transformational change.
The paper refers to the processes at regional, national and local levels through which developing countries get “ready” to access, allocate, distribute, and make use of financial resources for climate change action, as well as the monitoring and reporting of its use and results.
Readiness initiatives may then include capacity development and pilot activities to undertake the following: Strengthen capacity and expertise to enhance cross-sectoral planning and coordination for the allocation of resources for climate change action; Enhance existing or create new financial vehicles, fiscal approaches, procedures and instruments to ensure resources are effectively and transparently managed; Identify mechanisms for coordination of international financial flows, as well as for structured donor engagement.
Overall, the idea is that recipient countries build up their respective internal financial infrastructure in order to act as full participants in emerging international climate financing arrangements. Climate finance readiness is about helping recipient countries improve their capacity to absorb financial resources (i.e. “absorptive capacity”) and ensure that these countries have the mechanisms in place to access international financial resources for climate change directly by national financial intermediaries rather than only through international/multilateral financial intermediaries (i.e. “direct access”).
Importantly, these efforts have translated into across-the-board efforts at the national and subnational levels to integrate climate change strategies into national development planning.
In the case of Indonesia, the National Council for Climate Change’s role along with the increasingly active engagement of the Finance Ministry, through its Policy Center for Climate Change and Multilateral Financing, National Development Planning Board the Forestry Ministry and the Presidential Working Unit for Supervision and Management of Development (UKP4), is proving to be crucial for an effective coordination to mainstream climate change into the nation’s development priorities, including reaching Indonesia’s greenhouse gases reduction target.
In sum, the paper tries to capture the reality of Indonesia’s and other developing countries’ efforts to create new institutions and/or organize their existing institutions to deal with the challenges posed by climate change causes and impacts, and to integrate climate change into development planning processes and deal with an increasing number of actors, projects and financial flows.
Following that analysis, we have reflected on lessons learned from those processes and argue that an in-country process should include five key components to be considered by governments, in consultation with national stakeholders.
They are planning process, national climate change strategy, functions of a financial architecture, form of a financial architecture, and the financial mechanism and vehicles/windows.
We hope that these findings and recommendations also stimulate a discussion and sharing of lessons between and among donor and recipient countries and are used in the broader process of building an international financial architecture.
Moreover, we hope that progress on this central question of how to finance developing country measures to mitigate and adapt to climate change efficiently and transparently will provide a foundation of partnership and commitment to move some of the other key issues on the negotiating table forward.
Jorge Gastelumendi is senior advisor on international climate policy for The Nature Conservancy in Washington, DC and Budi Kuncoro is director of external affairs for The Nature Conservancy in Indonesia