The Glasgow outcome on climate finance reaffirms parties’ commitments to their obligations under the UN Framework Convention on Climate Change and the Paris Agreement, but greater ambition is required in order to achieve the goal of limiting the increase in global average temperature to 1.5°C.
Climate finance was a key focus at the 26th meeting of the Conference of Parties (COP26) to the United Nations Framework Convention on Climate Change (UNFCCC or ‘the Convention’), held in Glasgow in November 2021. The key outcomes with respect to climate finance are found in the Glasgow Climate Pactand the COP decision on long-term climate finance, and summarised below. The Glasgow outcome on climate finance reaffirmed parties’ commitments to their obligations under the convention and the Paris Agreement.
The Glasgow Climate Pact noted ‘with concern’ the increasing needs of developing countries due to the impacts of climate change and higher levels of indebtedness as a result of the COVID-19 pandemic (para 23). The Pact emphasised the need to ‘mobilize climate finance from all sources’ in order to achieve the goals of the Paris Agreement, including increasing support for developing countries beyond USD 100 billion per year (para 25). It noted with ‘deep regret’ that the goal of developed country parties to mobilise jointly USD 100 billion per year by 2020 — which was agreed at COP11 in 2010 as part of the Cancún Agreements — had not been achieved (para 26). The Pact also called on developed country parties to ‘fully deliver on the USD 100 billion goal urgently and through to 2025’ (para 27) and for multilateral development banks and other financial institutions to increase investments in climate action (para 28).
The COP decision on long-term climate finance also noted with ‘serious concern’ the shortfall with respect to the USD 100 billion per year goal (para 4) and urged developed countries to continue to ‘scale up’ climate finance to achieve the goal (para 5). Noting that some developed country parties had doubled the provision of finance for adaptation, the decision requested that other developed countries significantly increase their efforts in that area with the aim of achieving a balance in finance for mitigation and adaptation (para 9). Parties also agreed to convene high-level ministerial dialogues on climate finance in 2022, 2024 and 2026 (para 20), and that continued discussions on long-term climate finance would conclude in 2027 (para 18). In addition, developed countries, led by Canada and Germany, adopted guiding principles and a Climate Finance Delivery Plan to achieve the goal of mobilising USD 100 billion by 2025.
What is climate finance?
While climate finance is not defined formally in the Convention or the Paris Agreement, the UNFCCC website describes climate finance as the transnational, national and local financial resources — drawn from public, private and alternative sources — which support mitigation and adaptation actions to address climate change. Mitigation refers to efforts to decrease emissions released into the atmosphere and to reduce the concentration of carbon dioxide (CO2) by enhancing sinks, such as forests. Adaptation concerns the adjustments in economic, social or ecological systems which are necessary in response to the impacts of climate change.
The mobilisation and delivery of finance is necessary to support the achievement of the objectives of the Paris Agreement, which are stated in Article 2 as strengthening the ‘global response to the threat of climate change’, including by:
- ‘[h]olding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels’;
- ‘[i]ncreasing the ability to adapt to the adverse impacts of climate change’; and
- ‘[m]aking finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development’.
What are the obligations of UNFCCC parties to provide climate finance?
The principle of common but differentiated responsibilities (CBDR) — which differentiates between the obligations of developed and developing country parties under the Convention — underpins key obligations in the climate regime, including the obligation to provide finance. The concept of CBDR is referenced in Principle 7 of the Rio Declaration, which — along with the UNFCCC and the Convention on Biological Diversity — was adopted at the 1992 Earth Summit:
States shall cooperate in a spirit of global partnership to conserve, protect and restore the health and integrity of the Earth’s ecosystem. In view of the different contributions to global environmental degradation, States have common but differentiated responsibilities. The developed countries acknowledge the responsibility that they bear in the international pursuit of sustainable development in view of the pressures their societies place on the global environment and of the technologies and financial resources they command.
The principle is referenced in Article 3(1) of the UNFCCC, which states that the parties ‘should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities [CBDR-RC]’. Article 3(1) also provides that developed country parties ‘should take the lead in combating climate change and the adverse effects thereof’. The principle is also reflected in Article 4 on commitments, including in relation to the provision of finance by developed country parties to developing country parties, and Article 12 on reporting requirements.
CBDR-RC was also a key element of the 1997 Kyoto Protocol to the UNFCCC, under which Annex 1 parties to the convention agreed to limit and reduce greenhouse gases (GHG) emissions on the basis of agreed individual targets, with some flexibility afforded to parties with economies in transition. The Annex 1 parties include the industrialised countries which were members of the Organisation for Economic Cooperation and Development (OECD) in 1992 and countries with economies in transition, including the Russian Federation, the Baltic States, and several Central and Eastern European states. Developing country parties are not subject to targets or timeframes to reduce emissions under the Kyoto Protocol.
The principle of CBDR-RC is also incorporated into the Paris Agreement, although with the qualification of ‘in the light of different national circumstances’. In accordance with the principle of CBDR-RC, Article 9 of the Paris Agreement establishes legally-binding obligations for developed country parties to provide finance. It states that developed country parties shall provide financial resources to assist developing countries with mitigation and adaptation, and encourages other parties to provide such support voluntarily. Article 9 also provides that: developed country parties ‘should continue to take the lead in mobilizing climate finance’; this ‘should represent a progression beyond previous efforts’; there should be a balance between mitigation and adaptation; and ‘the priorities and needs of developing country Parties, especially those that are particularly vulnerable…such as the least developed countries and small island developing States’ should be taken into account. Article 9 also establishes a biennial reporting mechanism, which is mandatory for developed country parties and voluntary for other parties. The Paris Agreement decision provides further guidance on finance, as does the so-called Paris Rulebook. In particular, the rulebook includes detailed provisions on the communication of information on the provision and mobilisation of finance.
How much is needed?
Since the conclusion of the Paris Agreement, global climate finance transfers have increased. For example, according to a recent report by the UNFCCC Standing Committee on Finance, global climate finance flows were 16 per cent higher in 2017-18 than they were in 2015-16, with an annual average of USD 775 billion. While these financial transfers appear to surpass the Glasgow goal of USD 100 billion per year, they are significantly lower than what is required to meet the Paris Agreement temperature goal of 1.5°/2.0°C. The Intergovernmental Panel on Climate Change (IPCC) estimates that climate policies consistent with a 1.5°C temperature goal would require energy system supply-side investment levels of between USD 1.6 and 3.8 trillion per year over the period 2016-2050. In addition, while global investment in adaptation increased from USD 22 billion in 2015-16 to USD 30 billion in 2017-18, this represents significantly less than what is required. For example, the Global Center for Adaptation estimates between USD 140 and 300 billion per year by 2030 is required to meet the needs of developing countries.
What should be done?
As highlighted in the Climate Finance Delivery Plan, it is necessary to scale-up the mobilisation and delivery of climate finance from developed to developing countries. Finance for adaptation should also be increased, with priority being given to the poorest and most vulnerable countries, and barriers to access to finance addressed. In addition, contributions to the UNFCCC’s and the Paris Agreement’s financial mechanisms, such as the Green Climate Fund, should be increased, and efforts made to enhance the effectiveness of finance provided by multilateral development banks and the private sector. Finally, all parties to the Paris Agreement should seek to increase the level of ambition of their nationally determined contributions (NDCs), which set out their intentions to reduce national emissions and adapt to the impacts of climate change.
While the Glasgow outcome represented a positive step in terms of addressing climate change globally, the package of agreed actions is insufficient to achieve the goals of the Paris Agreement. Greater ambition on the part of all parties to the convention and the Paris Agreement is required if there is to be any chance of limiting the increase in global average temperature to 1.5°C.
Dr Ruth Adler is a PhD candidate with the Faculty of Law at the University of Tasmania. Ruth is a former senior career officer of the Australian Department of Foreign Affairs and Trade (DFAT). Ruth served as Australian Ambassador to Ireland (2013-2016) and Australian High Commissioner to Brunei Darussalam (2006-2009), with earlier postings as Deputy Head of Mission at the Australian Embassy, Mexico City (1998-2000) and Second Secretary at the Australian Embassy, Manila (1991-1994). Ruth holds a PhD in Latin American history and politics.
Suggested citation: Ruth Adler, ‘The Glasgow Climate Change Conference: What Next for Climate Finance?’ on ILA Reporter (6 January 2022) <https://ilareporter.org.au/2022/01/the-glasgow-climate-change-conference-what-next-for-climate-finance-ruth-adler/>