TWN Info Service on Climate Change (Oct12/04)
12 October 2012
Third World Network

Climate: Meeting of Standing Committee on finance ends with lively exchange

Geneva, 12 October (Marjorie Williams) -The second meeting of the Standing Committee on Finance (SC) of the United Nations Framework Convention on Climate Change, (UNFCCC) ended with a lively exchange of views among members on several issues including its role and functions.

The meeting took place in Cape Town, South Africa, October 4-6, 2012. The three day meeting was co-chaired by Diane Black Layne (Antigua & Barbuda) and Stefan Schwager (Switzerland).

It discussed crucial built-in agenda items, such as the modalities of work for the SC, its work programme for 2012 and 2013-2015 and key elements of its mandates, (such as the strategy for the forum for communication and continued exchange of information among bodies and entities dealing with climate change finance in order to promote linkages and coherence; expert input into the fifth review of the financial mechanism, and providing guidance and recommendations to the Conference of the Parties (COP) for the operating entities of the financial mechanism).

(The Global Environment Facility [GEF] and the Green Climate Fund [GCF] have been designated as operating entities of the financial mechanism of the Convention.)

The SC was established by COP 16 (in Cancun) to assist the COP in exercising its functions with respect to the financial mechanism of the Convention in terms of improving coherence and coordination in the delivery of climate change finance, rationalization of the financial mechanism, mobilization of financial resources and measurement, reporting and verification (MRV) of support provided to developing country Parties.

At COP 17 in Durban, the functions and activities of the Standing Committee was agreed to as well as its composition and working modalities.

At its first meeting in Bangkok (6-8 September 2012), the SC elected the two co-chairs, discussed its modalities of work, its scope and functions and began preparation of the work programme for 2012 and 2013-2013 for presentation to COP18 (Doha 2012).

The Bangkok meeting initiated discussions on the mandated work programme and the organization of a forum for the communication and continued exchange of information among bodies and entities dealing with climate change finance.

While the second SC meeting (which was attended by eighteen of the twenty members of the Committee) was able to advance on the items on its agenda, it did not conclude on all of the agenda items with work remaining to be finalized inter-sessionally via email.

One issue of controversy among members of the SC was the matter of the guidance to be given to the GCF and the potential of the SC to participate in or initiate the development of arrangements between the COP and the Fund. This discussion led to an inconclusive outcome.

While all committee members seemed to agree that ultimately, the SC will, in carrying out its function of assisting the COP in relation to the financial mechanism, have to include the GCF in the guidance process, Annex 1 country members (developed countries) maintained that with regard to the preparations of the arrangement between the GCF and the COP, the Board of the GCF was an independent entity with legal personality and would not be dictated by the COP.

Most of the Non-annex 1 members (developing countries) of the SC viewed this matter (of the arrangements between the COP and the GCF) as being quite pertinent to the work of the Committee and that the SC should be proactive on this front. Annex 1 Parties were of the view that the Board of the GCF, given its legal personality, was the body that should initiate and draft the terms of its engagement with the COP.

There was almost a two hour discussion on this matter on the last day of the meeting.

Several members of the SC from Non Annex I countries pointed that it was the developing countries who fought for the GCF to have legal personality against the persistent objections of key developed countries who are on the SC. They added that the legal personality status was to ensure the full and effective operationalization of the GCF, in particular, to enable it to have the direct access modalities for developing countries as well as to avoid many of the problems that developing countries and the COP had experienced with the GEF.

These members also pointed out that the legal personality of the GCF was not meant to be used as a political weapon to distance the GCF from the COP, as was now being asserted by a key Annex 1 member of the SC.

From the point of view of several Non-annex 1 members of the SC, having legal personality for the GCF was a huge victory and it was not intended for creating “political autonomy by isolating the GCF from the COP”, but to provide the GCF with “operational autonomy so it could effectively promote the delivery of climate finance to developing countries.”

The Non-annex 1 country members argued that the GCF is an operating entity of the Convention, and therefore, the GCF must be guided by the COP. They asserted further that the arrangements of the relationship between the GCF and the COP should be from the COP to the Board of the GCF and that SC is empowered to make recommendations regarding the financial mechanism and to provide the COP with assistance on this issue and “not self-select out of the process.”

Ultimately, the Non-annex 1 members in general, wanted the SC to assist the COP over the arrangements between the COP and the GCF and wanted clarity (from the COP) as to at what point the SC can be involved in providing the guidance and in the arrangements between the GCF and the COP between COP 18 and COP 19. Several of them raised the concern that the SC should not been seen as giving assistance to the COP only in relation to the GEF and not the GCF.

There were also tensions around whether elements of the strategy for the forum were mature enough to be included or annexed to the report of the SC to COP 18.

Although the SC was not able to finalize the core items of the work programme, its operational modalities, the forum and the report to the COP, enough elements were discussed and significant advances were made to enable the work to continue through email to finalize the report to COP 18.

Discussions on the work programme, operational modalities, the forum and the inputs for the fifth review of the financial mechanism would continue at the next meeting of the SC which is likely to occur in the first three months of 2013.

Some elements for recommendations to the COP which were being considered by the SC included the following:-

  • Seek approval from the COP for adjustment of the terms of office of committee members to start 1 January 2013 to 2015.
  • Agree that ‘observers’ include observers from Parties and all accredited observers with the UNFCCC, including observers to the operating entities of the financial mechanism and from other funding entities (multilateral, bilateral and regional). It was proposed and discussed that national development banks, especially from developing countries, are to be explicitly included. Efforts should be made to ensure effective participation of financial institutions from developing countries.
  • Re-affirm that the Standing Committee shall reach its conclusions by consensus

Some specifics of the preliminary work to be included in the draft report to the COP under consideration are:

  • The Committee proposes that the name of the SC be changed to the ‘Standing Committee on Finance’ so as to better enable understanding of its purpose.
  • The SC to formally request the Subsidiary Body on Implementation (SBI) to proceed with the review process and guidance to the financial mechanism (which is on the COP agenda). The SC begins guidance from COP 19 onwards. SBI to initiate at its 37th session the review of the financial mechanism in accordance with the (existing) guidelines and any amendments to those guidelines that the SC may develop for approval by the COP. (There was also discussion as to whether the SC is to request the SBI in initiating the review to take into account the decisions of the COP and other developments related to financing under the Convention since the end of the fourth review.)
  • Clarification from the COP on the arrangements and between COP and GCF and guidance for GCF

As regards the ‘forum’ of the SC, the following matters were discussed.

(The SC was mandated to organize a forum for communication and continued exchange of information among bodies and entities dealing with climate change finance in order to promote linkages and coherence by the Durban decision.)

Discussions took place at the meeting about the aim of the forum which is to improve delivery of finance to address the problem of climate change. Members from Non-annex 1 countries emphasized that the forum therefore should go beyond simply raising awareness and information; it should target the mobilization of resources.

It was generally agreed that information is the output of the forum. However, several Non-annex members pointed out that the connection that can be made between practitioners, financers and the potential beneficiary should allow them to have more clear pathways of what to finance, how, how much and to where should be the focus of attention. Ultimately, Non-annex 1 country members argued that the forum should contribute to higher and bigger flows of climate finance and better matching between the demand and the supply of climate finance.

One Non-annex 1 country representative pointed out that developing countries are fatigued with forums. Hence, the forum must address the real challenges and answer difficult questions about climate finance as well as link people and institutions at the national level.

It was discussed that the forum will have multiple modalities, including virtual and physical components; will emphasis diverse involvement and be open to the public. A range of sub themes were discussed that continued from the Bangkok meeting.

As regards the ‘expert input on the review of the financial mechanism’, the meeting discussed the fact the SC can make a difference in a review of the whole architecture of the financial mechanism.

Members of the committee emphasised that the SC’s involvement should aim at improving the quality of the expert reviews of the financial mechanism and that the SC needs to decide on the procedure for how it will engage in this work. They discussed recommending to the COP that after Doha, the role of the actual conduct of the review is given to SC.