Tracking climate finance – status quo and way forward
Climate finance is one of the key aspects of the international climate agenda and financial resources are essential for both the implementation and the enhancement of the nationally determined contributions (NDCs). The Paris Agreement reiterates the commitment made by developed countries to ‘provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention’ (article 9.1) while also encouraging other countries to provide financial support on a voluntary basis. Tracking and reporting on climate finance is not only important to build and maintain trust among countries, but also to monitor compliance and progress with regard to climate finance commitments.
However, in the multi-dimensional landscape of climate finance, there is different understanding of what climate finance entails and there is a lack of comprehensive guidance for tracking and transparently reporting (especially domestic) public climate finance flows and private contributions. Different actors, such as national public and private (financial) institutions and bilateral and multilateral development finance institutions, are providing financial resources. But while public financial flows are more easily traceable, private climate finance can be mobilised by various means and flow through different channels, making it difficult to track. Especially for countries with limited capacity and data availability, it is challenging to report on their climate finance streams. Overall, data collection is patchy, and governments have a largely incomplete picture of climate finance flows and the finance received at the country level.
To date, several approaches for quantifying public climate finance have been developed by different institutions and for different purposes, e.g. the OECD Development Assistance Committee’s donor reporting database, the MDB-IDFC’s “Common Principles for Climate Finance Tracking” and the UNDP’s different climate finance tools including “Climate Public Expenditure and Institutional Reviews (CPEIR) and “Climate Budget Tagging”. However, specific reporting guidelines under the UNFCCC remain to be defined.
Provisions for tracking climate finance under the UNFCCC
Under the current UNFCCC framework for measurement, reporting and verification (MRV), climate finance flows are addressed as part of the National Communications (NC) and the developed countries’ Biennial Reports (BRs) or in developing countries’ Biennial Update Reports (BURs). While Annex II countries are required to report the bilateral and multilateral financial resources, capacity-building and technology support provided, non-Annex I countries may communicate their support received on a voluntary basis. The (non-mandatory) reporting of support received includes multiple sources of financial and technical support from the Global Environment Facility (GEF), Annex II Parties and other developed countries as well as from the Green Climate Fund and multilateral institutions for activities relating to climate change. Currently, there are no guidelines on how to report on the support that is needed.
The Enhanced Transparency Framework (ETF) established under the Paris Agreement will strengthen the MRV guidelines as ‘developed country Parties shall, and other Parties that provide support should, provide information on financial, technology transfer and capacity-building support provided to developing country Parties’ (article 13.9). In turn, ‘developing country Parties should provide information on financial, technology transfer and capacity-building support needed and received’ (article 13.10).
The Ad Hoc Working Group on the Paris Agreement (APA) has been tasked with defining the modalities, procedures and guidelines (MPGs) for implementing the ETF during the next Conference of the Parties (COP24), to be held in Katowice in December 2018.
Activities of the Transparency Partnership
The Partnership on Transparency in the Paris Agreement works to promote enhanced transparency regarding the action and support provided and received on both mitigation and adaptation. During its Annual Partnership Retreats, the Partnership invites negotiators and practitioners to discuss some of the most pressing issues around the negotiations and to receive input from specialists in the field. During last year’s Retreat, participants reflected on the different forms climate support can take (financial resources, capacity building, technology transfer) and on its different sources and delivery channels. It was also explained that different stakeholders define, calculate and report on climate support in different ways, – which can lead to significant divergences in the figures. It was therefore concluded that disaggregated reporting would play a very important part in making the approaches used more transparent. At the upcoming Retreat, to be held on 12-17 October in Seoul, Republic of Korea, negotiators and national policy-makers from various countries will continue this exchange on the development of the MPGs, including on tracking the support provided and received.
The Transparency Partnership also bundles and disseminates latest studies and tools on Transparency of Climate Finance through its website, newsletter and Twitter channel. The Partnership’s ongoing Climate Tracking and Transparency webinar series, which is jointly organised with the World Resources Institute’s Tracking and Strengthening Climate Action (TASCA) initiative, offers additional insights. One session specifically addressed ‘Tracking Climate Finance Flows’ and illustrated the theme with the presentation of a relevant example from Colombia. You can find the recording of the webinar as well as information on the other sessions here.