TWN Info Service on Finance and Development (Jun08/07)
30 June 2008
Third World Network

DEVELOPING COUNTRIES' STATEMENTS ON A MULTILATERAL CLIMATE FUND UNDER THE CLIMATE CONVENTION

At the recent UNFCCC climate talks in Bonn on 2-13 June, the G77 and China announced that they are preparing a proposal to establish a multilateral financial mechanism within the Convention on Climate Change, which would be under the authority and governance of the Conference of Parties.  The mechanism will comprise several funds, including on technology, adaptation, etc.

Besides announcing their intention to set up such climate funds within the UNFCCC, the G77 and China also stated (in paragraph 3 of their statement attached) that: "Any funding pledged outside of the UNFCCC shall not be regarded as the fulfilment of commitments by developed countries under Art. 4.3 of the Convention."

This principle seems to have been prompted by the view of several developing countries, expressed during the discussions on finance in Bonn, that the World Bank Climate Investment Funds initiative is inappropriate, since the  funds should be within the UNFCCC and its governance structure.

Under the Convention, developed countries are obliged to transfer financial resources to developing countries to meet the full incremental costs of mitigation and adaptation etc.

The G77 and China statement implies that if funds are put in the World Bank, they do not count as the developed countries' meeting their finance obligations under the Convention.

Under the Bali Action Plan, financing, technology development and transfer, and capacity building by developed countries must be measurable, reportable and verifiable. It is thus more appropriate that financing, including for technology, is undertaken within the Convention.

In the view of TWN, the World Bank should not be the host of the climate funds, and a multilateral mechanism inside the Convention is the best  option, because (1) it is more democratic, and developing countries will have much  better representation and say; (2) the financial mechanism can be linked to the Convention and the on-going negotiations.

Attached for your information are:

1. The official statement of the G77 and China on the finance issue at the meeting

2. A TWN report of the workshop on investment and financial flows during the Bonn meeting

3. A TWN report of the Contact Group on finance during the Bonn meeting.

With best wishes
Martin Khor
Third World Network