INSIDER: Finance Deal at COP 24 Includes Important Breakthroughs, But Delivery Will Be Crucial

The COP 24 climate negotiations in Katowice, Poland delivered mixed results. Finance was an important part of the package agreed upon. Some countries made new financial commitments, but overall pledges fell short of the scale needed to enable truly ambitious action in line with what the latest science is calling for. On a more positive note, negotiators agreed on post-2020 financing rules that improve transparency on both past and future funding, and establish important processes to deliver on the finance goals set three years ago in Paris.

Following the same structure as our preview blog in advance of COP, we examine what was delivered in three areas: the funds, the rules and the goals.

The Funds: Important pledges to key climate funds, but more needed in 2019

After record pledges of $129 million to the Adaptation Fund, countries finally agreed on a transition plan to move the fund from the sunsetting Kyoto Protocol to the rising Paris Agreement. They agreed the fund would receive a share of proceeds from the new carbon market mechanism being developed as part of the Paris Agreement (this was the one part of the rulebook postponed until next year, after countries failed to reach agreement). If this funding mechanism is designed well it would ensure a sustainable source of revenue, in addition to voluntary contributions, so that the fund can continue its vital work providing small-scale adaptation grants to vulnerable countries. However, as a backstop, negotiators agreed that the Adaptation Fund wouldn't sever ties with the Kyoto Protocol completely until the new market mechanism is up and running.

France, Sweden and Switzerland also made pledges to the Least Developed Countries Fund. Looking ahead, 2019 will see the first replenishment of the Green Climate Fund (GCF). Germany and Norway have led the way by confirming that they would double their original 2014 contributions. During the negotiations Russia announced that it would contribute to the GCF for the first time, though it has yet to confirm the amount.

It was disappointing that more countries did not step up with pledges to international climate funds at COP 24. Rich countries need to come forward with ambitious commitments to the GCF to support much-needed climate action in developing countries.

The Rules: Greater transparency on past and future funding, with the ministerial attention needed

While the new rules for reporting climate finance did not answer the long-standing question of what should count towards climate finance goals, developed countries are required to report on their past finance provision in a more granular way than before. This granularity should enable clearer information on the quality of funding, not just the quantity. This will make it easier for stakeholders to analyze funding data and apply their own adjustments based on their perspective of what is valid climate finance.

Under the old rules countries only reported on the broad sector that a project would target. This meant that funding for coal plants and wind farms was both reported under the same "energy" sector label. The new rules create a "subsector" category, which will make it more difficult for countries to mask fossil fuel funding as climate finance. The types of financial instruments countries can report are expanded to include guarantees and insurance, alongside grants, loans and equity. These could still be reported under the old rules, but were classed vaguely as "other," so the new categories enhance transparency about the terms of financing. Contributors are also requested to explain how they are ramping up funding efforts over time. Still, some important provisions remain optional and will require continued scrutiny to ensure countries report finance in a fair and robust way.

Alongside contributor reporting, the rulebook establishes a framework which developing countries can use to report on funding they have received, as well as their future needs. Done well, this can help to encourage further support by showcasing success stories and providing more detail on the types of support that will be most useful.

Developed countries are also required to communicate their projected future finance provision every two years, which can be helpful for developing countries as they plan further climate actions. Negotiators agreed a number of processes, including continuing high-level ministerial dialogues on climate finance (previously set to end in 2020), which provides a space for countries to discuss progress, flag gaps, and identify further action needed on climate financing.

The forward-looking finance communications will feed into the global stocktake, which takes place every five years. Importantly, the rulebook enables the stocktake to look both at progress towards climate finance obligations and at efforts to align all finance flows—public, private, domestic and international—with climate goals. This is critical: without putting a brake on investments in high emissions activities as well as ramping up financing for climate action, we won't be able to achieve the 1.5 degrees goal.

The Goals: Clarity on the process for setting future funding targets

COP 24 saw the official launch of the UNFCCC Standing Committee on Finance's (SCF) third Biennial Assessment of Climate Finance(pdf), which showed progress in the scaling-up of developed countries' climate finance towards the goal of reaching $100 billion a year by 2020.

When governments adopted the Paris Agreement in 2015, they agreed to set a new collective mobilization goal, beyond $100 billion a year, before 2025. In Katowice, negotiators agreed to start work in 2020 on setting this new finance goal. Moreover, they commissioned the SCF to produce a report every four years, to look at developing countries' needs when implementing the Paris Agreement and the overarching UN climate convention. This mandate marks a significant breakthrough in climate negotiations and could inform the ambition of the new finance goal. The SCF must start work next year on the first report, which is due in 2020; how the committee defines the task will be key to ensuring it delivers useful results.

An assessment of support needs was something Bernarditas de Castro Muller, who passed away on the final night of COP after a long illness, had championed for decades. A veteran finance negotiator who was involved in the drafting of the original UN climate convention in 1992, 'Ditas' was a fierce advocate for developing countries, a warm and kind diplomat, who possessed a wicked sense of humor. Negotiators from many countries—including those she frequently sparred with—assembled on the final day of COP 24 to mourn and pay tribute to her. Several suggested naming the new needs work program in the SCF after her. It would be a fitting tribute.