A recent report from the OECD claiming $62 billion has have been mobilised as climate finance in 2014-15 against the developed countries’ commitments of annual $100 billion by 2020 has caused a storm at the UN climate change negotiations in Bonn. Developing countries, including India, have collectively questioned the veracity of the contents, suggesting creative accounting and green-washing of existing global fund flows to paint a more rosy rather a real picture. They have also questioned the timing and purpose of the report weeks ahead of the Paris agreement
In contrast, the US special envoy on climate change, Todd Stern has said the report has likely underestimated the fund flow as it has not accounted for fresh commitment of funds, which would take climate finance to nearly $80 billion.
The report and the heavy fire it has attracted from the 134 developing countries under the G77+China umbrella has a context – the report could work to alter the nature of the Paris climate change agreement. In 2010 the developed countries had committed to mobilising $100 billion annually by 2020 as a start towards their legal obligations under the UN Framework Convention on Climate Change (UNFCCC).
Developing countries want the core Paris agreement to contain a clear road-map for delivering these funds and to enhancing them over time. The rich countries have steadfastly opposed such a road map or more clarity on their financial commitments being delineated in the actual agreement, referred to as the core Paris agreement – which would be legally binding. Instead they prefer a political announcement on climate finance at Paris that would not be legally binding or questioned against provisions of the climate change convention.
The report was commissioned by Peru and France (host for the upcoming negotiations) to the OECD and a US-based think tank Climate Policy Initiative. The release of the report showing rich nations living up to their promise stands to alter global public perception and suggest that a hard binding commitment from developed countries on climate finance roadmap may not be necessary considering they are doing well already.
South Africa’s chief negotiator at Bonn, Nozipho Joyce Mxakato- Diseko, speaking on behalf of the G77+China group said, “ I am not able to comment on or judge the report because we don’t know the veracity, credibility and the methodology of the report or who was consulted. Developing countries were not. It has no status in the UN negotiations. It was not commissioned under the mandate of the UNFCCC.”
Diseko takes on the report for its political implications. There are others who have criticised it for contents as well. India’s climate finance negotiator at Bonn and senior advisor in the finance ministry, Rajasree Ray, said, “The OECD calculations include non-concessional loans and existing overseas development assistance provided to developing countries. How can these be regarded as climate finance flows when the climate convention clearly states the flows are to be new and additional?” She questioned the report publicly when it was released at Bonn on Thursday.
She added, “The most fundamental assessment should have been that the total flows (of climate finance) provided by the developed countries should be matched to the total flows received by the developing countries. The report is silent on this.”
Mariama Williams, climate finance researcher at the Geneva-based think tank, South Centre said, “ The OECD report’s accounting approach and methodological framework capture the full value of the multilateral development bank loans, co-finance-led private finance and export credits as well.”
She warns that much of the data behind the summarised report would only be revealed by developed countries to the UN convention in January 2016 so there is no way to go through it with a fine tooth comb. By then the Paris deal would have been sealed. She analysed the report going by earlier practices of developed countries, the multilateral banks and the limited information given in the report.
“One is not questioning the OECD’s work but the definition of what is climate finance is to be decided within the convention and finance commitments made in the core of the Paris agreement. Developed countries have blocked progress on that and then we have this report. Its timing is suspect,” she added.
William said there were attempts by the French hosts informally asking some developing countries to introduce the report in to the UN negotiations as a formal document for consideration but the idea was rebuffed. This could not be independently verified by Business Standard .
The report notes that a large share of the rise in funds over from 2013-14 to 14-15 came about with a substantial increase in outflows from multilateral banks. The average estimate for 2013-14 comprises $40.7 billion of public finance (71% of the total), $1.6 billion of finance associated with export credits (3%), and an estimated US $ 14.7 billion of mobilised private finance per year (26%).
The report does note that the figures are preliminary and open to improvement in data collection. But when the numbers are touted in public debates and statements such as those of Stern these caveats are bound to be ignored.
A similar controversy over climate funds had arisen when developed countries claimed they had fulfilled their obligations towards a Fast Start climate fund of US $ 30 billion over 2010-12. A study by Oxfam International had concluded that only 33 per cent of those funds appeared to be new money and only 24 per cent of public finance was additional to existing aid promises.
Several other developing country climate finance experts at Bonn that Business Standard spoke with said they were troubled by the methodology used. Like William, two of them particularly mentioned inclusion of the full value of loans and non-segregation of the grant element. “Countries such as France and US use ODA coupled with loans. If one was to just account for repayment of loans by developing countries these numbers would get substantially lowered,” one said. “There is a clear smell of green-washing and creative accounting in it. Besides correcting the public perception we don’t need to tackle it more as it does not feed in to the formal negotiations,” he added.
But, as they all pointed out the UNFCCC does not as yet provide a clear operational definition at the moment and negotiations to get there have been hampered. Diseko noted, “We developing countries need multilateral rules of law. Otherwise we are left to the charities or whims and fancies of individual countries depending on their circumstances.”
Developed countries including US now want emerging economies such as India and China to also provide global climate finance in future based on their capacities. Diseko comments on that proposal, “Countries did not decide to revise the convention. If we had at Durban (in 2012 when it was agreed by all to have an agreement under the convention by 2015) it would be different. And, who shall define the yard-stick for capacity? Some suggest circumstances have changed since the time of the convention. We are not on the Security Council with a veto. I guess circumstances have not changed that much.” She promises that G77+China countries will address the report and climate finance issues publicly on Friday in Bonn before this round of negotiations close.