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Analysis: UN climate finance talks lay foundation for Warsaw summit

A series of UN-sponsored climate finance talks concluded today. E3G’s Amal-Lee Amin explains what we have learnt

Developing countries need funding to help develop low carbon energy systems and cope with extreme weather (Pic: Scot Nelson)

By Amal-Lee Amin

More than 120 representatives of Governments, international organisations, civil society and the private sector gathered this week for the UN’s long-term finance wrap-up meeting in Incheon, South Korea.

Hopes were that discussions would generate specific recommendations for Ministers to consider when they meet in Warsaw in November.

Whilst differences clearly remain, there are reasons for optimism that Ministers may converge on elements that would build momentum towards an agreement on long-term finance in 2014.

The most interesting ideas put forward related to:

-Detailed work to define the Pathway towards delivery of the $100bn/year by 2020. Colombia’s suggestion for an iterative and partnership approach to develop future scenarios on climate finance guided in part by developing countries actions is certainly an interesting one;

-Deepening dialogue and enhancing transparency on the effectiveness of climate finance. It is clear much can be learnt from the relative successes as well as the failures in delivering development finance, as well as experiences of Fast Start Finance. New Zealand’s proposal for a Warsaw Platform on climate finance effectiveness could be another attractive proposal for Ministers to consider.

-Identifying a set of options for mobilising scaled-up private sector finance, including leverage of institutional investors, to meet the $trillion challenge. This could be developed in partnership with the private sector, and could be relevant to discussions on design of the Green Climate Fund’s Private Sector Facility.

The backdrop for the LTF wrap-up meeting was set by Christiana Figueres speaking last month in Bonn when she emphasised that the real challenge is to ensure sufficient capital flows to meet the goal of limiting temperature rise to 2 deg C.

Requiring at least $1 trillion dollars investment to de-carbonize the global economy, the Copenhagen commitment for mobilising $100bn per year needs to be considered in terms of its impact on the real economy.

2020 goals

On the thorny issue of how developed countries work together to deliver on their Copenhagen commitment to mobilise $100bn by 2020, many resonated with the proposal by Colombia to draw from national processes of fiscal management.

An international financing pathway could be developed by forward projections of anticipated levels of income and expenditures over a 10 year period.

A partnership and iterative approach to this where developing countries articulate their needs for climate finance based on priorities for climate actions would provide valuable context for the type and levels of finance required internationally.

This could be one way for increasing transparency of climate finance moving forward. This in turn will enable developing countries to increase level of ambition for their actions.

Further work to explore this idea during 2014 would be a practical step towards an international agreement on long-term finance.

Building trust

Discussions on enabling environments for effective deployment of climate finance provided opportunity for countries to share experiences of how climate finance had worked to deliver outcomes.

This highlighted that whilst effectiveness needs to be considered in light of countries specific needs, circumstances and priorities, some common factors tend to underpin successful deployment of climate finance.

Most agreed these factors to include country ownership and leadership in ensuring climate finance is used to align and integrate climate related actions into broader development strategies and plans, the need for strengthening institutional capacity and coordination to enhance absorptive capacity, and for a deep process of stakeholder engagement, including with local private sector actors.

Many noted the parallels with development finance and the value of drawing on decades of experience and what has been learnt on Aid Effectiveness.

New Zealand suggested the potential for building more directly on these lessons through a platform on climate finance effectiveness. This could be a three-way partnership between contributors, recipients and the private sector.

Incentives

The third area of discussion focused on how to mobilise and scale up private sector investment. Most agreed that this needed to focus on enabling environments of both contributor and recipient countries.

Countries shared experiences of the range of policy instruments that are now being used to incentivise the private sector as well as the role of various financial instruments to reduce risks for private sector investment in low carbon and resilient climate finance.

This illustrated how much is already happening in developing countries and the importance for increasing efforts to capture relevant lessons. These will be important for designing an international financial ecosystem that is effective for transformation to a low carbon and resilient economy globally.

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Looking ahead to Warsaw many participants voiced their hopes that the co-chairs report on the LTF extended work programme will present specific options for Ministers to consider when they meet in November.

Distinguishing between technical issues that can be allocated to relevant bodies of the COP or processes outside of the Convention will be important.

It will also be important to set an ambitious timeline for resolving politically difficult issues ahead of COP20.

The UN Secretary General’s Summit in 2014 presents an opportune milestone for Heads of Government to revisit progress towards the $100bn commitment as part of a broader set of efforts to maintain global temperature rises to below 2 deg C.

Amal-Lee Amin is Associate Director of E3G and leads the International Climate Finance team. In 2007 as Head of Strategy on International Climate Change at Defra Amal-Lee led on design of the Climate Investment Funds (CIFs).

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