TWN Info Service on Climate Change (Oct23/02)
19 October 2023
Third World Network

UNFCCC’s Standing Committee on Finance discusses finance issues for COP 28

Kathmandu/New Delhi, 19 Oct (Prerna Bomzan/Radhika Chatterjee): The UNFCCC’s Standing Committee on Finance (SCF) adopted three key reports at its 32^nd meeting held on 26-28 Sep in Geneva, in relation to synthesis of views on ways to achieve Article 2.1c of the Paris Agreement (PA), including options and guidelines for implementation; clustering types of climate finance definitions and on the doubling of adaptation finance.

The three reports will be presented for consideration at the upcoming UNFCCC’s 28^th meeting of the Conference of the Parties (COP28) and the 5^th meeting of the Parties to the PA (CMA5) to be held from 30 Nov to 12 Dec in Dubai, UAE.

The executive summary of each of the three technical reports, after being discussed in break-out groups, was eventually adopted at the plenary with each paragraph negotiated, revealing political flashpoints of both developing and developed countries. Besides SCF members, inputs were open to and considered from Party observers as well as from civil society constituencies, however, the final decision-making was restricted to only SCF members in line with the rules of procedure.

The three-day intensive meeting co-chaired by Zaheer Fakir (South Africa) and Gertraud Wollansky (Austria) was geared towards delivering on all its mandates to the COP28/CMA5, and it also agreed on: the draft guidance to the operating entities of the UNFCCC’s Financial Mechanism – the Green Climate Fund (GCF) and the Global Environment Facility (GEF) – to the COP; the themes of the next SCF Forums to be held in 2024 and 2025; the self-assessment report of the SCF to the second review of the functions of the SCF; and the dates and venues of future meetings.

In relation to the draft guidance to the GCF and the GEF, under the co-facilitation of Ivan Zambrana Flores (Bolivia) and Gertraud Wollansky (Austria), the two guidances were eventually adopted to be taken to COP28/CMA5 as “synthesised submissions” and with the caveat that the SCF prepared the synthesis  “based on merging of elements identified by the co-facilitators as common elements among the submissions, with a view to facilitate negotiations. The merged paragraphs do not reflect a consensus of the SCF”.

As regards themes of the next SCF Forums, in 2024, it was decided on “Accelerating climate action and resilience through gender-responsive finance” and in 2025, on “Accelerating climate action and resilience through financing for sustainable food systems and agriculture”.

The three future meetings in 2024 were decided as follows: SCF 33 (26-28 February, Bonn); SCF 34 (29-31 May, Bonn); SCF 35 (4-6 September, Tanzania).

Report on synthesis of views on ways to achieve Article 2.1(c) of the PA, including options for approaches and guidelines for implementation

The report, co-facilitated by Chandni Raina (India) and Kevin Adams (United States), comprises a synthesis of information submitted by Parties and non-Party stakeholders in response to the request by CMA4 to the SCF to continue its work regarding ways to achieve Article 2.1(c) of the PA, including options for approaches and guidelines for implementation. A total of 39 submissions were received in 2022 and 2023, both from Parties/Party groupings as well as from non-Party stakeholders.

The report states that besides building on the synthesis of views conducted in 2022, the work in 2023 has also been undertaken in parallel and complementary manner with the Sharm el-Sheikh dialogue. The dialogue was launched last year at COP27, comprising two mandated workshops in 2023, to exchange views on and enhance understanding of the scope of Article 2.1(c) and its complementarity with Article 9 of the PA related to provision and mobilisation of finance by developed countries to developing countries.

In relation to challenges and limitations in synthesising views, the report states that it “attributes numerically the views expressed by Parties and Party groupings. However, further quantitative disaggregation or weighting of views expressed by the number of Parties is not applied due to the possibility of multiple Party grouping affiliation and the possibility for individual and Party submissions by Parties”. The numerical taxonomy thus applied is qualified by “all”, “almost all”, “most”, “many”, “some” and “one”.

This shortcoming was specifically pointed out by Party observer Mohammad Ayoub (Saudi Arabia) who urged for some kind of quantification in weighting in order to ensure a balanced representation of views, given that the voice of the Arab Group of 22 members was “silenced” in the methodology used, depriving of “appropriate weight and balance of interpretations”, citing one of the examples where the “22 members” view that Article 2.1(c) cannot be separated from means of implementation, however in terms of weighting it would be considered as “1”. Co-facilitator Adams (United States) responded that it was a challenge to pull out the numbers and the methodology used was the “best available practice”.

Further in relation to views about “consistency” of financial flows as defined by Article 2.1(c), Mohamed Nasr (Egypt) suggested to include the word “or” to differentiate the different understandings of Parties and terminology used and thus, paragraph 14 of the executive summary was amended as, “All Party groupings and almost all Party submissions expressed views relating to consistency within Article 2, paragraph 1(c), but used different concepts to reflect their respective understanding, including ‘directing’, or ‘aligning’, or ‘orienting’, or ‘shifting’, or ‘attracting’ finance flows towards low GHG emissions and climate resilient development pathways”.

The other issue was whether or not to include the “Box” containing  two options on the first global stocktake (GST) in the executive summary, which was not part of the submissions but was included by the co-facilitators for consideration given that the GST was underway. Option 1 comprised information relevant to Article 2.1(c) as contained in the summary reports of the GST technical dialogues which was preferred by some developing countries while Option 2 comprised key findings from the synthesis report by the GST co-facilitators and was preferred by some developed countries. However, given differing views on the two options as well as the utility of it so as to not prejudge the GST decision in Dubai, the box was eventually removed from the report.

The report compared to its previous zero-order draft iteration was considered a bit more “balanced” in terms of synthesis of views, nonetheless, other key issues of priority to developing countries in the context of Article 2.1(c) implications such as unilateral measures, socio-economic challenges, and primacy of nationally determined contributions (NDCs) to guide individual country pathways were also pushed to be included in the report.

With regard to synthesis of views on ways to achieve Article 2.1(c), the section is structured as follows: scope of Article 2.1(c); relationship of Article 2.1(c) and Article 9 of the PA; policies and approaches at the domestic and international level; transparency on finance flows and approaches, including concerns of greenwashing; views on addressing consistency of finance flows; views on achieving climate-resilient development pathways.

With regard to options for approaches and guidelines for implementation, the section includes overarching considerations and principles in implementation; options for scope and approach to achieving Article 2.1(c); options for focus areas of further work on Article 2.1(c); transparency and reporting modalities; linkages, including the role of the SCF. There’s also a section on options for approaches and guidelines for implementation by non-Party stakeholders.

Report on clustering types of climate finance definitions in use

The report, co-facilitated by Diann Black-Layne (Antigua and Barbuda) and Apollonia Miola (European Union) was mandated by COP27, building on the SCF’s work on definitions of climate finance, and that such clustering of types of definitions “could be considered within and outside of the UNFCCC process, including with a view to updating the Committee’s operational definition of climate finance, as appropriate, and supporting Parties in their national reporting efforts”.

(The current operational definition of climate finance in use: Climate finance aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnearability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts. Developing countries have been calling for a common multilaterally agreed definition of climate finance to address and overcome the problematic aspects of double counting and loan aspects of climate finance in current use)

The report states that its aim is to “provide practical information to support Parties in their national reporting efforts through clustering types of climate finance definitions in use that could be considered within the UNFCCC process. The SCF considers a guidebook-style approach that provides examples of different clusters through practical decision points in developing and applying a self-defined definition of climate finance to be conducive to this aim”.

Zerihun Getu Mekuria (Ethiopia) raised concerns about lack of establishing a link with  the outcome of the previous work which had tried to identify definitions in use and the commonalities and differences and that he didn’t see the required options as such, who was seconded by Richard Muyungi (Tanzania). Raina (India) added that the options do not reflect the submissions, elaborating that the main problem is of various assessments floating around with no trust in those figures. Having clusters address that issue would have brought greater clarity and hence, the definitions doesn’t help in “transparency”, she underlined, further urging to include another option in the context of instruments, that of new and additional finance.

Ayoub (Saudi Arabia) echoed Raina pointing out that his Group pushed for the mandate and the report does not solve the issue of “inconsistency in tracking financial commitments of developed countries”. He underscored that the two key elements of “grant equivalence” and effectiveness of meeting developing countries’ needs to be addressed and solved and additionally the mandate on the enhanced transparency framework (ETF) not reflected – the mandate being not only to update the operational definition but also of national reporting. Nasr (Egypt) also added about different accounting methodologies and the huge variability of numbers and precisely the SCF’s responsibility to move forward on updating the definition which would contribute to the ETF on action and support.

However, developed country members from the US, Belgium, Romania, United Kingdom, Switzerland, EU argued that the report was in good place by fulfilling its mandate and that the updating of the definition could be done in the context of the next 6^th Biennial Assessment report. They nonetheless also pointed out that further work could be carried out to address developing country members’ concerns.

In the final executive summary adopted, the issue of grant equivalence as well as a “Box 1” on the ETF was included along with an improved table visualisation (Figure 1) of the clustering of the definitions with example options, in response to the concerns.

The next prolonged contentious issue was whether or not to include “Chapter IV” carrying the summary of the SCF’s discussion to update the operational definition which contained two options: Option A, as summary of discussion with three potential options; and Option B, as no chapter in the report but with the SCF agreeing to report on the consideration of the matter in the SCF report to COP28/CMA5.

All developing country members expressed their sharp disagreement with Option B and pointed out that Option A shows to the COP/CMA that the SCF did its work, carrying potential definitions for moving forward thus also reflecting the mandate to “update” given current operational definition of climate finance was adopted before the PA, while Option B does not show any progress or takes back to discussions to start all over again next year.

Following extended deliberations, it was finally decided to go with Option A and its three potential options with amendments proposed by Nasr (Egypt) to reflect measurable aspects of climate finance in the second and third options.

The three options are as follows:

“(a) No update confirming the current definition in use, “Climate finance aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnearability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts”.

(b) Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases, aims at reducing vulnerability of, increasing adaptive capacity of, and mainstreaming and increasing resilience of, human and ecological systems to negative climate impacts and, includes activities that result in measurable action and impact towards the goals of the Paris Agreement and the objective of the Convention.

(c) Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases, aims at reducing vulnerability of, increasing adaptive capacity of, and mainstreaming and increasing resilience of, human and ecological systems to negative climate impacts and includes measurable actions captured in a countries NDCs (nationally determined contributions), Adaptation Communication, National Adaptation Plans, Long Term Strategies or other national plan to implement and achieve the goals of the Paris Agreement and the objective of the Convention.

The SCF highlighted that the sixth BA by the SCF will contain a separate section that compiles the operational definitions of climate finance in use”.

Report on the doubling of adaptation finance

The most intense disagreements that were seen in the SCF’s Geneva meeting occurred over the report on doubling adaptation finance. This doubling of adaptation finance is supposed to occur by 2025. Despite the urgency of time, developed country representatives strongly disagreed to accepting a baseline for calculating the total amount of adaptation finance under this mandate.

Other points of contention centred around who would provide the finance, how much finance would be provided, to whom, the form in which finance would be provided, predictability and adequacy of finance, and the issue of reporting on provided finance. Most of these fault lines came out sharply during the discussion on the recommendation section and executive summary of the report which occurred on the second day of the SCF meeting, held on 27^th September.

The co-facilitators of this report, Mattias Frumerie and Richard Muyungi, invited the SCF members to finalise the draft of the technical report and its executive summary, which will then be presented to CMA5.

Various developing country representatives (Saudi Arabia, Egypt, Ethiopia, Bolivia) stressed the importance of deciding upon a baseline for calculating the amount of adaptation finance to be provided. They argued that without setting a baseline, it would be very difficult to calculate the final amount that was to be arrived at. This was strongly opposed by developed country representatives (Switzerland, EU, USA), who said that deciding a baseline would go beyond the mandate given to the SCF as it was a decision that had to be made politically. Switzerland clearly stated it would not support any reference to having an agreed methodology to account for the delivery of doubled adaptation finance in the report, as it felt that went against the bottom-up approach of the PA. 

The deadlock on this issue was finally resolved on the last day of the SCF meeting when the co-facilitators requested representatives from Egypt, Switzerland, USA, and Bolivia to form a huddle and propose a language that could be included in the recommendation section. The text that was finally agreed on was, given the limitations of methodology in calculating adaptation finance, more work is needed to determine the baseline for the purpose of doubling. 

Another point of contention was the way in which the question of who would provide the finance and to whom was dealt with in the report. There were references to terms like ‘other providers’ and ‘recipient’ countries and ‘geographical classifications’ instead of the terms ‘developed’ and ‘developing’ countries, which is the language of the PA.

Highlighting these discrepancies, developing country members recalled the language used in decision 1/CMA.3 and insisted that the flow of funds was clearly to occur from developed to developing countries. In the end the report relied on the language of PA, but the term ‘climate finance providers’ was also inserted as adaptation finance is supposed to be mobilised from multiple channels.

After various amendments, the report was finally adopted to be presented to CMA5. The discussions at SCF indicate that this report is likely to see more fights between Parties in COP28.