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Innovative Sources for Multilateral Climate Finance

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A COP 24 Seminar co-hosted by the PCCB and ecbi


Introduction

From its inception, in 2005, the ecbi has been based on the understanding that enhancing the capacity of the multilateral climate change regime to produce ambitious outcomes requires significant building and enhancement of trust between negotiators. Over the past five years, the ecbi Director has consistently argued that the well-being of the Financial Mechanism of the UNFCCC/Paris Agreement is key in generating such trust.[i] This is why the PCCB (Paris Committee on Capacity Building) and ecbi joined forces to organize a joint Seminar at COP 24 in Katowice to showcase ideas aimed at generating innovative additional contributions to the funds of the Financial Mechanism to enhance their longer-term viability.

This Seminar took place, with the financial support of the World Bank, on 8 December in the PCCB COP 24 Capacity-building Hub. The event was opened by Marzena Chodor, PCCB Co-chair, and Tomasz Chruszczow, Polish Special Envoy for Climate Change and UNFCCC Climate Champion. Following a number of showcase presentations, there was a panel discussion with representatives from civil society, sub-national governments, and multilateral financial institutions and funds (all of the contributions are to be made available as on-demand webcasts on the PCCB website). Daniele Violetti, UNFCCC Director, Finance, Technology & Capacity building, gave the closing address of the Seminar.

Kelley Kizzier, Sean Kidney, Julie-Anne Richards, Benito Müller, Eric Theroux (Deputy Assistant Minister, Fight against Climate Change, Quebec), Liane Schalatek (Associate Director, Heinrich Böll Foundation North America), Mirza Shawkat Ali (Adaptation Fund Board member, Bangladesh), Yunus Arikan (Head of Global Policy and Advocacy, Global Services, ICLEI), Mark Sadler (Practice Manager, Climate Funds Management, World Bank).
 

Presentations

For the purposes of the Seminar, ‘multilateral climate finance’ was interpreted in terms of the Financial Mechanism of the Paris Agreement – that is the Green Climate Fund, the Adaptation Fund, and the Least Developed Countries and Special Climate Change funds, operated by the Global Environment Facility. ‘Innovative’, in turn, was used to refer to sources other than the traditional budgetary government contributions, be they on an ad hoc (‘voluntary’) or a multi-year replenishment basis. Sources were divided into ‘top-down’ or ‘bottom-up’, depending on government involvement (individually or collectively, and at whatever level, i.e. multilateral, national, sub-national):

  • The International Air Passenger Adaptation Levy (IAPAL): top-down (multilateral);
  • The Climate Damages Tax: top-down (multilateral);
  • The International Maritime Fuel Carbon Tax: top-down (multilateral);
  • The Western Climate Fund: top-down/bottom-up (sub-national);
  • The Corporate Air Passenger Solidarity Programme: bottom-up.

The presentations can be downloaded from the ecbi website.

The International Air Passenger Adaptation Levy (IAPAL)

The first top-down innovative source established for multilateral climate finance was the share of proceeds of the Clean Development Mechanism which was intended to be the main source of income for the Adaptation Fund. In 2006, a Working Paper by Benito Müller and Cameron Hepburn[ii] put forward the idea of a solidarity levy on international air passengers for the benefit the Adaptation Fund. Two years later this was taken up by the UNFCCC Group of Least Developed Countries and submitted as a proposal at COP 14 (Poznan, Poland) to establish an International Air Passenger Adaptation Levy (IAPAL) for consideration under the Bali Action Plan.

The Proposal

Achala Abeysinghe, Senior Strategic Adviser to the LDC Group and Head of the ecbi Training and Support Programme, presented the LDC Group IAPAL proposal. Following the very successful example of the French ‘Leading Group’ solidarity levy to combat HIV/AIDS, the Group proposed an adaptation solidarity levy on international air passengers to provide more adequate funding for adaptation activities in the poorest and most vulnerable countries and communities.

The levy, collected by airlines at the point of ticket sale, was earmarked for the Kyoto Protocol Adaptation Fund. It was to be universal in the sense of covering all international air travel. Being international and dependent only on the evolution of air travel demand, the funds raised would truly be new and additional, as well as significantly more predictable than traditional funding mechanisms.

The proposed levy would have no significant impact on passenger numbers – its value representing less than a tenth of the expected annual growth rate – and hence minimal to no negative impact on tourism-dependent economies. In contrast, it would have significant positive impacts on the development of the poorest and most vulnerable countries and communities, by avoiding climate change impacts through the deployment of timely and adequate adaptation measures funded using the revenue raised by the levy.

  • Responsibility for implementation. Airlines would collect the levy from their passengers at the point of sale and transfer it to a dedicated account of the Adaptation Fund. The airlines are compensated for reasonable administrative costs incurred in the course of collection.
  • Revenue. In line with the French levy, the LDC Group proposal involved a small passenger charge for international flights (USD6 per economy and USD62 per business/first class trip); it was estimated that this charge would raise between USD8 billion and USD10 billion annually in the first five years of operation, and considerably more in the longer term. By its very nature, this revenue is not only new and additional to the traditional flows of bilateral funding for adaptation, but also predictable due the stability of the airline sector.
  • Justice considerations. According to the LDC proposal, the proposed levy conforms to the idea of Common but Differentiated Responsibilities and Respective Capabilities (CBDR/RC) with respect to: (i) the personal responsibilities of passengers due to the international emissions produced and (ii) their capability revealed by the ability to fly internationally.[iii]

To reflect CBDR/RC at the national level, the revenue raised in developing countries could be retained by them for their own adaptation activities, with only the revenue from developed countries going to the Adaptation Fund.

The Climate Damages Tax (CDT)

Julie-Anne Richards (Adviser, Climate Damages Tax Coalition) gave a preview of a report on The Climate Damages Tax (CDT), which she co-authored and launched at COP 24 two days after the Seminar. The chief purpose of the proposed CDT is to raise resources to pay for what has become known in the multilateral climate change regime as ‘Loss & Damage’ (L&D). The first time the UNFCCC negotiation texts referred to “unavoidable loss and damage from the adverse impact of climate change” was in 2008 (see “Loss and damage due to climate change An overview of the UNFCCC negotiations”). But it was in 2013, at COP 19, that the issue was fully acknowledged through the establishment of the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts (WIM) “to address loss and damage associated with impacts of climate change, including extreme events and slow onset events, in developing countries that are particularly vulnerable to the adverse effects of climate change”. Even though the WIM was given the mandate to enhance L&D finance, there have hitherto been practically no resources been allocated for that purpose. This was one of the main reasons for launching the Climate Damages Tax campaign in April 2018.

The Proposal

The Climate Damages Tax (CDT) is a charge on the extraction of each tonne of coal, barrel of oil, or cubic litre of gas, calculated at a consistent global rate based on how much climate pollution (CO2e) is embedded within the fossil fuel.

  • Responsibility for implementation. The CDT proposal is to set up a solidarity facility for loss and damage, managed by the GCF. Working with existing systems of payment, fossil fuel companies will pay an extra amount on the volume they extract to the solidarity facility. International law and precedents embodying the Polluter Pays principle (such as the International Oil Pollution Compensation Fund) serve as a working example of similar facilities.
  • Revenue. The proposal recommends that the CDT is introduced in 2021 at a low initial rate of USD5 per tonne of CO2e, increasing by USD5 per tonne each year until 2030 to USD50 a tonne, with the expectation that it is increased at the rate of USD10 per tonne annually after that to reach USD250 a tonne by 2050. The increasing rate of tax will keep CDT revenue for loss and damage at roughly USD300 billion a year over this period.
  • Justice considerations. The CDT would raise funds for an international loss and damage solidarity facility, and also raise revenue to support a just transition from fossil fuels to renewable energy. This would help low-income communities and workers shift to carbon-free jobs, energy, and transport, via a share of the CDT remitted back to the country where the oil, coal, or gas was extracted. The share remitted to the country of extraction varies between 50 per cent for rich countries, and 100 per cent for low-income countries, with a sliding scale between the two ensuring that rich countries take the responsibility for funding loss and damage.

The International Maritime Fuel Carbon Tax

Kelley Kizzier (Independent Consultant) presented an IMF Working Paper she co-authored on “Carbon Taxation for International Maritime Fuels”.

The purpose of the paper is to promote dialogue about the possibility of a carbon tax as a key element of a GHG mitigation strategy for international maritime transport, in the context of the April 2018 International Maritime Organization (IMO) pledge to cut emissions by 50 per cent by 2050, relative to the 2008 level. The paper discusses the case for the tax over alternative mitigation instruments, together with options for practical design issues; it also presents estimates of the impacts of carbon taxation and other instruments.

The Proposal

  • Responsibility for implementation. Maritime carbon taxes could be collected domestically (through extending administrative capacity for domestic fuel taxes), but the more immediately relevant option (given delegation of GHG mitigation strategy to the IMO) would be an international collection from ship operators (based on required reporting of their fuel consumption). This could be achieved through the establishment of an IMO-administered fund, following the precedent of the International Oil Pollution Compensation (IOPC) Funds, established and overseen by the IMO. Operators could pay the tax on either an annual or individual route basis, with denial of port access, or ship arrest, for non-compliant operators being the potential enforcement mechanisms. Under current practice, IMO members are mandated to enforce the IMO convention — the tax could be paid to the fund, but any non-payment would be enforced by states.
  • Revenue. A tax rising to USD75 per tonne of CO2 in 2030 (USD240 per tonne of bunker fuel), and to USD150 per tonne in 2040, is estimated to raise revenues of about USD75 billion in 2030 and USD150 billion in 2040, while increasing shipping costs by 0.075 per cent of global GDP in 2030.
  • Justice considerations. Compensation mechanisms to reconcile the principle of CBDR/RC and the global application of the maritime carbon tax (preferred due to the high mobility of the tax base and the undesirability of introducing trade distortions), could be achieved by remitting the carbon tax revenues to the GCF.

The Western Climate Fund

Benito Müller

In December 2015 at COP21 in Paris, Quebec’s Premier Couillard announced that CAD6 million of the revenue from Quebec’s auctions of emission allowances under the Western Climate Initiative (WCI) – the joint cap and trade scheme of Quebec and California – were to be contributed to the Least Developed Countries Fund (LDCF) of the UNFCCC/Paris Agreement. At the announcement, former US Vice President Al Gore expressed “deep gratitude, admiration and congratulations” for Quebec’s initiative, which illustrates how the wealthy regions of the world can reach out in partnership to the least developed countries, enabling them to participate fully in solving the global climate crisis.

The Proposal

Benito Müller, ecbi Director, introduced a proposal to build on this example by establishing a Western Climate Fund (WCF) to receive contributions for the multilateral funds of the Paris Agreement from states and provinces in or around the WCI. The trans-national character of this ‘catchment area’ is important, as it would guarantee that the Fund is not perceived as competing with national support, but as being genuinely complementary to it. In order to assure predictability, the Fund’s primary income is intended to come through innovative sources, in particular from shares of proceeds of carbon price instruments, such as emission trading schemes or carbon taxation, namely:

  1. an earmarked share of cap and trade auction revenue (as in the case of Germany’s Climate and Energy Fund[iv]);
  2. an earmarked share of emission allowances to be monetized by an intermediary (as in the case of the share of CDM proceeds monetized by the Adaptation Fund, or the “Allowance Allocation to Electrical Distribution Utilities on Behalf of Ratepayers” under the California Cap and Trade Programme);
  3. an earmarked share of a carbon tax.

By participating in this initiative, sub-nationals can contribute to the support needed by the globally poorest and most vulnerable to enable them to combat global climate change while reducing poverty. This is not just a moral imperative. Without such support, this fight cannot be won.

  • Responsibility for implementation. This depends on the sub-national circumstances, and the source modality. Shares of government revenue would most likely be collected by the relevant government, while the monetization of shares of emission allowances might best be outsourced to a not-for-profit entity.
  • Revenue. 2 per cent share of (expected) 2018 auction revenue: Quebec USD10 million; California USD125 million.
  • Justice considerations. In sub-national contexts, ‘climate justice’ is often focused exclusively on domestic issues. The fact that, in the context of climate change, it is in the interest of everyone to acknowledge that justice knows no jurisdictional boundaries, will have to be explained to the domestic constituencies.

The Corporate Air Passenger Solidarity Programme

The Proposal

The ecbi Director also presented the Corporate Air Passenger Solidarity (CAPS) Programme, launched in 2017 as part of the “Oxford Crowdfunding for Adaptation Initiative”. The aim of the Programme is to encourage corporate entities to contribute 1 per cent of their annual air travel expenses to the Adaptation Fund of the Paris Agreement, in social solidarity with the plight of the globally poorest communities which are most vulnerable to the adverse impacts of climate change. With the financial support of the Luxemburg government, the Programme aims to establish a web-based platform for a ‘CAPS Partnership’ to be used in a campaign to market the idea of contributing ‘Corporate Passenger Solidarity Donations’ to the Adaptation Fund.

Müller argued that, in the context of socially responsible (corporate) air travel, the narrative on ‘climate neutrality’ needs to be augmented. It can no longer only be a matter of carbon neutrality, that is of purchasing voluntary carbon offset credits to mitigate ones flight emissions – particularly given that, as of 2020, the industry will have its own emissions reductions program. ‘Climate neutrality’, he maintained, must also address the need to support the most vulnerable in dealing with the adverse impact of climate change. In short, Müller suggested, the narrative in question has to be re-defined as:

Climate Neutrality = Carbon Neutrality (mitigation) + Impact Solidarity (adaptation),

with CAPS contribution to the Adaptation Fund as an effective and efficient solution to providing the latter.

  • Responsibility for implementation. The CAPS Programme, with the support of the Adaptation Fund.
  • Revenue. A contribution of 1 per cent of corporate air travel expenses – which corresponds roughly to the cost of offsetting – by 1 per cent of corporate travellers would amount to over USD100 million per year, and match the Adaptation Fund’s current annual income.
  • Justice considerations. Voluntary contributions.

Conclusions

There is an abundance of possible innovative sources for multilateral climate finance, each with different characteristics regarding potential scale, predictability, and political feasibility.

Unsurprisingly, multilateral top-down sources – namely global taxes, levies, or ‘shares of proceeds’ – have a much larger revenue potential than sub-national or bottom-up sources. As earmarked revenue streams, they would also generally be more predictable than traditional budgetary contributions.[v] The ‘only’ drawback, as witnessed by the fate of the LDC Group IAPAL proposal, is that in the past they did not command sufficient political buy-in to materialize.[vi]

Sub-national sources, such as the ones presented at the PCCB/ecbi Seminar, have a much smaller revenue potential – which is why they should probably be directed at the smaller funds of the Financial Mechanism, to enable them to serve as multilateral ‘retail outlets’, with the GCF as the ‘wholesale’ fund (see “On the Virtues of Strategic Divisions of Labour”). Their advantage is that they depend less on political will because fewer, if any (as in the case of the CAPS programme), governments are involved.

The one thing that all of these innovative options have in common is that, in providing support to the Financial Mechanism of the Paris Agreement, they help build trust among the Parties of the Paris Agreement. Trust – albeit intangible – is the key ingredient in enhancing the Agreement’s overall ambition.


[i] See, for example, B. Müller, ‘The Time is Ripe! Support from US sub-nationals for the Least Developed Countries Fund of the Paris Agreement’, Oxford Climate Policy, June 2017.

[ii] ‘IATAL — an outline proposal for an International Air Travel Adaptation Levy’, Benito Müller and Cameron Hepburn, Oxford Institute for Energy Studies Paper EV36, October 2006.

[iii] Indeed, given the international character of the activities in question and of the resulting emissions, the only equitable way to deal with the non-national responsibilities for these activities is at the personal level, which – given the price levels of international flights – also respects the idea of respective personal capabilities.

[iv] ‘Two Unconventional Options to Enhance Multilateral Climate Finance Shares of Proceeds and Crowdfunding’, Benito Müller et al., ecbi.

[v] For more on this, see “To Earmark or Not to Earmark?” or “Finance for the Paris Climate Compact

[vi] The one exception is, of course, the ‘share of proceeds’ of the CDM, and subsequently of the Art. 6.4 mechanism of the Paris Agreement. It is still extraordinary that this concept was adopted, and it stands to reason that this only happened because it was not called a ‘tax’ or ‘levy’ but was presented as a charge to cover the administrative costs of the scheme.

Addressing the finance gap in sub-national contributions to the fight against climate change

By Anju Sharma

Nationalism and globalism are the polarising -isms of our times, replacing (according to bestselling author Yuval Noah Harari) even the traditional political divide of conservatism vs. liberalism. With nationalism on the rise again, innovative solutions have become necessary to address global existential challenges that no country can address on its own.

How, for instance, do we tackle a global existential threat like climate change in a world of rising nationalism? Multilateralism, in the form of the Paris Agreement, delivered only national determination as countries bunkered down and refuted any top-down, global determination of responsibility. But even this “global-lite” version of multilateralism was rejected by staunch nationalists in the US.

In response, globalists have rallied to offer sub-national action as an alternative. The Global Climate Action Summit (GCAS), which just took place in San Francisco, was a celebration of pledges from sub-national entities – cities, states, businesses, and individuals – to act against climate change. The Summit gathered an impressive list of commitments, from ambitious targets for carbon neutrality, to the use of green bondsand pension funds to build more climate resilient infrastructure and invest in renewable energy.

Although the pledges will not entirely make up the 28% reduction by 2025 (from 2005 levels) promised by the US under the Paris Agreement (which was already inadequate to meet the overall goal of the Paris Agreement to keep temperature rise within safe levels), they are important steps in engaging sub-national entities directly in the global fight against climate change.

A sub-national call to arms is not, however, a substitute for multilateral negotiations. As was evident at GCAS, such voluntary action may not heed the delicate balance of priorities that is necessary and can be achieved in a multilateral setting where all countries are formally represented.

For instance, the vast majority of ambitious announcements made at GCAS relate mainly to mitigation action – including target setting, and the US$ 4 billion pledged for mitigation by philanthropies. In the absence of adequate representation of the world’s most vulnerable, it is easy to forget that in addition to the “mitigation gap,” there is an adaptation gap, and a climate finance gap. This is recognised in the Paris Agreement, which includes a hard-won balance between adaptation and mitigation; and an emphasis on the importance of adequate finance for both mitigation and adaptation.

While a multilateral setting is essential to give equal voice to all, sub-national entities can still take a cue from the global negotiations and strive for more balance in their pledged action. A GCAS affiliate event on “Funding Climate Justice: Advancing Sub-National Action on Multilateral Climate Finance”, organised by Oxford Climate Policy (OCP), 350 Seattle, and Cool Effect on 14 September pointed to ways in which sub-national entities can contribute to the neglected area of climate finance – in particular to climate finance for adaptation, which is unlikely to attract private sector contributions.

As OCP Director Benito Müller pointed out while introducing the event, the multilateral negotiations are currently fraught with distrust – in particular, the discussions on climate finance. Sub-national entities can help dissipate the distrust by contributing finance that can be relied upon and is delivered through channels trusted by developing countries, such as the multilateral funds that serve the Paris Agreement.

Alex Lenferna, 350 Seattle, said California Governor Jerry Brown’s claim that the pledges made during GCAS would meet the US commitments under the Paris Agreement are not quite accurate. The commitments made for climate finance, critical for increased ambition in developing countries, have not yet been met. As one of the wealthiest countries in the world, and the country with high responsibility for climate change, he called on the US to contribute its fair share.

Three concrete ways in which sub-national finance could be raised were then presented at the event: individual contributions through crowdsourcing; individual contributions of tax refunds; and a “share of proceeds” from sub-national emissions trading.

Jodi Manning, Cool Effect, described a proposal for a crowdsourcing initiative, #STILLIN, that will allow individuals to pledge US$ 1 or more toward funding the gap caused by the current administration’s exit from the Paris Agreement. Contributions will be directed toward mechanisms such as the Adaptation Fund, she said, with an emphasis on supporting projects that directly help people most effected by climate change.

Massachusetts State Senator Mike Barrett then described a Bill he has authored, calling for a  Massachusetts-UN Least Developed Countries Fund (MLDCF) to be established under Massachusetts state law.  Describing the idea as “disarmingly simple”, Senator Barrett said the bill proposes to add a new “check-off” option to the six options involving other good causes that are already included on Massachusetts state income tax forms for the convenience of taxpayers who wish to make donations over and above their income tax obligations. He felt the idea had a good chance of going viral and travelling across state borders, as all 42 US states with a state income tax provide options for contributions on their income tax forms; and many US citizens would like to push back on the home-grown populism advocated by President Trump. The MLDCF would be legally constituted to receive other gifts, grants, and donations to the Fund as well, and all contributions would then be relayed to the UNFCCC’s Least Developed Countries (LDC) Fund.

Müller introduced the Western Climate Fund, a regional instrument proposed by OCP in collaboration with the Chair of the LDC Group, to collect “share of proceeds” from carbon policy instruments such as the sale of emission trading permits, or carbon tax revenue. He described efforts by OCP to bring on board the Canadian Provinces and US States of the Western Climate Initiative, with the aim of collecting funding for the multilateral funds serving the Paris Agreement. Québec, one of the states participating in the WCI, had already contributed Cdn$6 million to the LDC Fund during the Paris Climate Conference, Müller said, and efforts are underway to make this a more regular contribution on the basis of a fixed share of proceeds from trading, and from more states and cities. This could provide up to US$ 96-125 million annually, he estimated.

The three initiatives described at the meeting are “innovative sources” of climate finance. The idea of resorting to innovative solutions to fund sustainable development is at least as old as the Brundtland Commission report. Given the urgent threat that climate change poses, and the high estimates of finance needed to address this challenge, it is an idea whose time has come.

In the panel discussion that followed, facilitated by Achala Abeysinghe from the International Institute for Environment and Development, LDC Chair Gebru Jember explained why climate funds should be channelled through the financial mechanism of the UNFCCC, saying this will increase the chances of all countries accessing the funds (not only “donor darlings”); allow greater national determination of priorities; and enable the funds to be democratically governed by all countries, to ensure easier access. Tosi Mpanu-Mpanu, Board Member of the Green Climate Fund and former LDC Chair, agreed, saying certainty with international climate finance will allow developing countries to make their Paris Agreement contributions more ambitious.

Perhaps, then, sub-nationals can play a vital role in building a bridge between nationalism and globalism. But, as Heather Coleman from Oxfam America concluded at the meeting, addressing climate change will not only need divestment from fossil rules, but also investment, particularly in minimising climate impacts on poor and vulnerable populations.

 

 

Climate leadership in a historical perspective and lessons for the implementation of the Paris Agreement: reflections by a former negotiator.

Contact Group on Adverse Effects at COP 6 (The Hague) Co-Chairs Mohammed Reza Salamat (Iran) and Bo Kjellen (Sweden) seated with Yusef Nassef (Secretariat). 15 November 2000. Photo © IISD 2000

by Ambassador Bo Kjellen

In the climate negotiations, the issue of leadership has been of central importance from the very beginning. It has mainly been raised in terms of national (or EU) efforts to influence other countries (or groups of countries) with the aim of moving the negotiations forward and creating conditions for a satisfactory outcome.  Of course, in all negotiations Parties try to defend their own interests; but negotiations on sustainable development have a special character: in many ways, and particularly in the long term, all parties are in the same boat.

As far as the EU is concerned, there is no doubt that the Union’s long-time commitment to support the Climate Convention has given it a leading position, particularly after the US 2001 decision not to ratify the Kyoto Protocol. In fact, the EU stance on climate change has been an important part of its display of “soft power” in international affairs. However, the present tensions within the EU and the Brexit negotiations limit the authority of the Union and reduce its capacity to act as a leader.

This is particularly unfortunate in view of the need for leadership on the Paris Agreement Work Programme.  I recall that in March 2017 Benito Müller and myself published a Strategy Note dealing with the need for EU leadership through strategic collaboration with China and with other countries like India or Argentina. We also suggested two additions to the EU “tool kit” in the form of joint targets and option of coordination through a special envoy.

EU has tried to strengthen cooperation with China and Canada, and a couple of meetings have been held with these countries over the last years. Furthermore G 77 countries have met in various settings, the most recent one being the Johannesburg Declaration of the BRICS which underlines their countries’ commitment to implement the 2030 Agenda for Sustainable Development and the Paris Agreement. The Talanoa Dialogue is another element in the preparation for Katowice, and there will of course be other preparatory meetings. But the crucial question of decisive leadership like the one of France in preparing the Paris COP 2015, and the China/US strong cooperation at the time, all that remains very uncertain. I do hope that the ecbi Oxford meetings will promote positive ideas on the work to be undertaken over the next few months.

In addition, and based on my own experience, I believe that we need to underline that climate leadership is not only linked to positions of nations. Over the years, negotiations on sustainable development have benefited from the leadership of another character, namely the important actions of Secretariats and Chairpersons, beginning with the strong leadership in Rio 1992 of Maurice Strong as Secretary-General   and Tommy Koh as Chairman of the UNCED Conference; and that of Jean Ripert as Chairman of the Negotiating Committee on Climate change, and the strong support of Michael Zammit Cutajar as Executive Secretary.

Looking back at the twenty-eight years I have been involved in the climate negotiations, beginning in 1990 as Chief Negotiator of Sweden in the decade up to 2001, then as an adviser to the Swedish delegation for a number of years, and finally as a retired but active observer of events. I feel there is a structural pattern which links science with politics, nations with individuals, failure with success; and ultimately a common feeling of responsibility for the real long term – 2100 and beyond.

The links between science and politics were established at the very beginning with the First Assessment Report of IPCC appearing four months ahead of the beginning of the negotiations of the Convention in early 1991. The presentation of the report by IPCC Chairman Bert Bolin of Sweden had a deep impact on the negotiators, and Bolin’s regular appearances over his ten years as IPCC Chairman made him one of the leaders in the process. Nevertheless, the negotiation of UNFCCC was several times on the brink of collapse, most seriously a few weeks before the Rio Conference: pessimism was deep, as we were facing a draft full of brackets; but Chairman Ripert  was finally given a mandate to present a completely new text without brackets: he did so and also led the negotiation to a successful conclusion.

This was the first of a series of cycles of pessimism, followed by progress and success through strong leadership. The first came at COP 1 in Berlin in 1995: I chaired the negotiations for the Berlin Mandate, designed to set the stage for the Kyoto Protocol. At the level of officials, we managed reasonably well, but some crucial and decisive issues were beyond our reach and pessimism was growing. But in a final night of negotiations at ministerial level the Chair, a then rather unknown young German Minister of Environment showed her skills and turned the Conference into success. Her name was Angela Merkel. And two years later the resourceful Chair, Raoul Estrada of Argentina through strong leadership managed to reach agreement on the Kyoto Protocol.

However, the struggle for entry into force of the Protocol opened a new cycle of pessimism when the US in 2001 decided not to ratify the protocol, only a couple of months after a disastrous COP in the Hague, when Dutch Chairman, Environment Minister Jan Pronk, failed to get agreement on anything. However, the incoming EU Presidencies of Sweden and Belgium managed to solve the immediate crisis, and Pronk successfully chaired a resumed COP in Geneva in the summer of 2001, confirmed in the regular COP in Marrakech in late 2001.

The Kyoto Protocol was now “ratifiable”, but the rules for entry into force were compromised by the US exit. A new cycle of pessimism opened, but in 2004, Russia finally decided to ratify, and the Protocol entered into force in February 2005. However, the delay in entry into force would have repercussions that played a role in the next cycle of pessimism connected with the Copenhagen COP in 2009.

Expectations were high that autumn for a decision on a Second Commitment period for the Kyoto   Protocol, especially since a summit at the very highest level would be held in connection with the COP with all the top leaders of the world invited. But the detailed preparations failed and pessimism grew as the Copenhagen COP unfolded. The bad organization of the summit at the end of the Conference seemed to confirm the failure, and the political document agreed – known as the Copenhagen Accord – was not well received. However, as we all know, Mexican and South African engagement and leadership in preparing the COPs in Cancún (2010) and Durban (2011) together with a growing understanding of the potential of the Copenhagen Accord changed the atmosphere and paved the way for the adoption of the Paris Agreement in 2015. A new cycle of optimism was then established by an efficient French Chairmanship with Foreign Minister Laurent Fabius and Ambassador Laurence Tubiana in the lead. The rapid ratification process and the early entry into force of the Agreement were then welcomed by all.

The optimism is still there but worries exist in the preparation of the entry into force of the new regime in 2020, in particular the Paris Agreement Work Programme. The next few months will be crucial, and therefore the discussions in Oxford this month are so important. As noted in the beginning of this paper the overall global prospects are not favourable, and the APA meeting in May left many questions open. The resumed meeting of subsidiary bodies in Bangkok September 3-8 and the continued Talanoa Dialogue will show whether the Paris enthusiasm is still there to enable constructive results in Katowice in December. No doubt the IPCC report on the 1,5 degree target will also have an impact in this connection.

My conclusion is that the implementation of the Paris Agreement may still be part of a positive cycle. However, the relative weakness of leadership on the side of the traditional big actors has to be compensated by strong support from business, finance and climate NGO’s. No doubt this year’s extreme weather conditions and all the disasters linked to them have had an impact on public opinion globally. But how much will this influence the negotiations? The Bangkok meeting is also an opportunity for the skillful and hard-working APA Co-chairs Jo Tyndall and Sarah Baasha to provide strong and constructive leadership and open the way for success at the moment of truth in Katowice in December. If this would happen it could open the way for a positive preparatory process for the Paris Agreement by 2020.

Let me return to a more long-term aspect of leadership, as the crucial implementation of the PA will develop in the period up to 2030 and beyond. It is a question of great political significance as the pattern of leadership and commitment will be facing and operating the new concept of NDC:s, which will bring national and international policymaking closer to each other. The management of a system of internationally binding procedural rules with commitments for action which are not binding internationally will require new thinking, new practices, and new flexibility. Perhaps the experience of OECD, which has been operating a system of this kind, could be helpful.

GCF Board: In need of a cultural revolution!

Introduction

Anyone following climate finance who was not at the recent 20th meeting of the Green Climate Fund (B.20) can be forgiven for being taken aback to read: “Board meeting turns ‘toxic’ as UN climate fund runs low“ and “UN climate fund chief resigns for personal reasons while board meeting collapses“. What happened?

Ostensibly, the seed for the collapse was sown in the run-up to the meeting when some members felt that, contrary to their interpretation of due process, they were not sufficiently consulted by their constituency Co-Chair when the draft agenda for the meeting was put together. This, in conjunction with the fact that the constituency in question was unable to nominate a candidate from their ranks when their Co-Chair was unable to attend the meeting, led to an awkward late opening of the meeting followed by an unedifying agenda fight lasting until the end of day 2 (of a 4-day meeting!).

However, that is not all there is to it. This blog looks more closely at the issues that lie behind the collapse of B.20 and suggest a few things that might help to improve the Board culture, not least because I believe the time is now finally ripe to do something about it. Why? Given the dramatic failure of B.20, maybe there is a willingness by the Board to look into how a repeat performance can be avoided. So, in short, the purpose of this blog is to support the cultural revolution that is required for the GCF to do its job properly, not to say to survive.

The GCF, as it has evolved, has a couple of general governance problems that need to be addressed. To explain, consider the standard best practice corporate governance model, which distinguishes between three governance tiers: the executive, led by a CEO, the board of (non-executive) directors, and the company membership/shareholders. Each of these tiers has different functions. According to the G20/OECD Principles of Corporate Governance, the first responsibility of board members is that they “should be informed and act ethically and in good faith, with due diligence and care, in the best interest of the company and the shareholders.”

The first problem I have in mind is systemic, that is it is shared by many, if not most multilateral funds with a GCF-type governance structure: not only are all board members (representatives of) ‘shareholders’, but (of) shareholders with widely different, indeed in some cases, mutually incompatible interests. The only way in which Board members can serve the best interest of the ‘company’ is if they put the company interest first and their shareholder interest second. If this is not done, then everyone loses, as was painfully obvious at B.20 and was clearly not in the interest of the organization.

The second problem is more specific to the GCF governance culture as it has emerged over the years, namely the Board having developed a culture of ‘micro-management’, taking on tasks that in a mature organisation should be left to the executives.

What to do? In light of the antagonistic, or as one member called it “toxic nature of the last Board meeting, it is not self-evident what could realistically be done to effect the required change in Board culture away from bi-polar negotiations to collective primary responsibility for the wellbeing of the Fund. So, the following suggestions are at best ‘baby-steps’, hopefully in the right direction.

Remedy One. Adopt the “2 Co-Chairs – 1 Board” (2-1) Model

In the course of the rather drawn-out opening of the meeting, Ayman Shasly (member of the Board from Saudi Arabia) made an intervention that sums up very nicely one of the key remedies I have in mind, namely that the two Co-Chairs are chairing the whole Board and not just a ‘constituency’. It would be good, in Shasly’s words, “if the two Co-Chairs were to treat us all as one constituency and not two constituencies [and] communicate equally, symmetrically, in unified communications to all Board members and alternate Board members.  [The two Co-Chairs should use] one mailing list, to really demonstrate to the international community that this Board is one Board and is not divided over two constituencies. … I truly believe this is a good practice that we should establish under your leadership.”

To be fair, a similar sentiment was already included in the “Co-Chairs’ joint vision for 2018”, sent to GCF Board members and alternates in April 2018, which was “to strengthen the role of the Secretariat, to build bridges among Constituencies to strengthen the Board’s ability to operate as ONE BOARD [sic.] and to increase knowledge sharing between the secretariat and the Board.”

Shasly was rightly highlighting the fact that, according to the Rules of Procedure, the Co-Chairs are elected by the whole Board as Co-Chairs of the whole Board and not of some sub-set or other. Indeed, according to these Rules, the Co-Chairs, “in carrying out their function as Co-Chair, … shall be guided by the best interests of the Fund.”  The only ‘constituencies’ for the Co-Chairs should be the Board as a whole and the Fund. To serve in this capacity, the Co-Chairs should be supported by a single joint team of advisers and they should not involve themselves in ‘constituency’ matters. Thus, should some members of the Board feel the need to coordinate among themselves, then they should do that by themselves, without involving the Co-Chairs and their support team.

In the same vein, the Board should look very carefully at what they can and cannot expect from the Co-Chairs, particularly in between meetings. Take the expectation that Board members should be consulted in the process of drafting meeting agendas. According to the Rules of Procedure, “the Secretariat will, with the approval of the Co-Chairs, prepare and distribute the provisional agenda for each meeting.” There is no mention about a Board member consultation.

The problem is that there has been a tendency among some of the previous Co-Chairs to involve themselves and the Board in micro-managing the Secretariat, which derived from a distrust by some Board members in the ability of the Secretariat to provide what they wanted without their direct supervision. However, it is clear that this sort of micro-management is not sustainable in the long run, which may also have been the reason why in their 2018 joint vision, the Co-Chairs stated that “we will increasingly rely on quality assurance systems inside the Secretariat, limiting Co-Chairs role in the preparation of Board meetings. In principle guidance will be provided as regards to modalities and structures for the yearly Board meetings including the daily organization of work as well as on documents and draft decisions with the Secretariat making the ultimate decision to release documents unless there are particular reasons to deviate from that principle.”

Micro-management by the Board may have been necessary while the Fund was being set-up. But the Fund is now grown up, and its executives need to be allowed to do the job they are, according to best practice, meant to. If the Board feels they are not doing their job properly, then the solution is for the Board to make sure they do, and not to take on the work themselves.

Remedy Two. Reduce ‘Airtime Inequ(al)ity’

The division between a ‘developing country-’ and a ‘developed country constituency’ derives from the multilateral climate change negotiations, but that does not mean that the adversarial culture is inevitable. After all, the Board of the UN Adaptation Fund (AF) is similarly structured, and it has managed to build a genuinely collegiate culture. So, what is the difference?

The AF Board has, from the outset, had the 2-1 model of chairing in the form of a single Chair and a Vice Chair (rotating between developed and developing country members), and it has over time given up the practice of constituency meetings.[1] It has also, and I believe not unrelated to this, avoided to emulate the practice of UNFCCC plenary sessions, where each constituency has a spokesperson who is expected to make the intervention on behalf of the constituency, with other constituency members only meant to intervene in order to support the Chair’s statement.  Unfortunately, the airtime patterns at B.20 reveal the sort of “airtime oligarchy” that one could expect in UN plenary sessions with a few members being given three to six times the average air time, and others well below average, if any at all. Fig. 1 represents the share of total webcast airtime of individual members at B.20[2] and Fig. 2 represents the percentage deviations relative to the average webcast speaking time[3].[4]

This is not appropriate for a Board of equal members and, as witnessed in the reception of the B.20 deliberations outside the Board room, can lead to the perception of deliberate time wasting, with the effect that there was no time left to deal with actual project proposals and accreditations. It is not easy to see how this could be remedied short of introducing some measure to ‘incentivize’ the oligarchs to give up some of their disproportionate airtime usage (maybe through an effective guillotine on the time to be used in individual interventions[5]).

Remedy Three. Introduce Activities & Accreditation Days at Board meetings

There is a very simply tool  for avoiding the unacceptable situation of procedural wrangling eating into the time for deliberating activity (project/programme) proposals and accreditation requests. All it takes is to set aside a specific time period, say a day (or two) in the meeting for that purpose, in the way in which there are days set aside for constituency and committee meetings. As it happens, something similar was also envisaged in the Co-Chairs 2018 joint vision, as an “Advisory Day” to provide “an opportunity for advisors to discuss policy items and funding proposals with the Secretariat prior to the actual Board meeting with the purpose to increase knowledge on technical aspects of policies, as well as to identify and informally address possible concerns in order to streamline the decision making at the Board. A specific time slot will be dedicated for interactions with CSOs, private sector representatives and accredited entities.”

Although this would have been a step in the right direction – ultimately wasn’t to be because of push-back from some Board members – it wouldn’t have been exactly what I have in mind here. The days for discussing activity proposals and accreditation requests proposed here are not for advisers alone. They are meant to be for the discussion of these matters by Board members. Advisory Days as envisioned by the current Co-Chairs might still be useful as a preparatory exercise, but the Activities & Accreditation Days proposed here are intended to be the main locus of Board deliberations on these important issues. Having such days set aside outside the order of the agenda[6] would ensure not only that the Board can actually perform one of its key duties: the scrutiny of proposals put before it for adoption. It would also enable the proponents of activities and the accreditation candidates to attend just these days, and not have to follow the remaining Board deliberations, which some of them may regard as not really worth their time. Having sat with the observers during B.20, it was absolutely clear that the Board cannot allow a similar fiasco to happen again without terminal reputational damage to the Fund.

[1] Except for the selection of candidates for Board Chairs and Vice-Chairs.

[2] In order not to unhelpfully point fingers at this point in time, I have decided not to identify either individuals or constituencies.

[3] Note that the sum of the bars is a measure of (airtime) inequality.

[4] I would like to thank Emmanuel Taiwo who was at B.20 with me and kindly offered to go through the web casts and list the durations of interventions.

[5] This still does not mean that airtime could not be hogged through repeated requests for the floor, but it might help to trim the airwaves from unnecessary rambling.

[6] I am fully aware that taking the deliberations on project and accreditation proposals outside of the sequencing of the meeting agenda might not be palatable to those who would like to use negotiation-style issue linkages to get ‘the other side’ to adopt what they want. Although I do not think that such ‘issue-linkages’ are in the interest of the Fund, the concerns of those who would want to continue to use them could be accommodated by including the actual formal decisions (not the deliberations) as part of the sequencing of the meeting agenda.

 

We need Geo-engineering . . . of Consumer Aspirations!

A little while ago, I attended an event exploring the consequences of severe warming on physical and human systems at Oxford University Martin School, which was  predicated on the need for “substantial changes in policy, production methods and consumption”.

Achim Steiner, then Director of the Martin School, spoke in his opening address about the need for a new ‘I-narrative’, where all of us need to ask ourselves what we can do individually to combat climate change – echoing, in a fashion, President Kennedy’s famous “ask not what your country can do for you, ask what you can do for your country”.

However, the first question in the subsequent Q&A was not about this new narrative, but about the role of ‘geo-engineering’, that is to say “methods that aim to deliberately alter the climate system to counter climate change”[IPCC AR5 SPM], such as solar radiation management  and carbon dioxide removal.

While I have been rather sceptical about this type of physical intervention, the juxtaposition of the question with Steiner’s I-narrative made me think that perhaps we do need geo-engineering – only of a different kind: We need, as it were, geo-engineering of consumption, or to be more precise, of consumer aspirations and desires.

The idea that consumer behaviour needs to change is nothing new in the climate change arena. It is, after all, exactly what carbon price signals and regulations are meant to do, and there is no doubt that introducing a carbon price (reducing a carbon subsidy) generally does have an effect, as do simple prohibitions (banning incandescent light bulbs, drugs). But we need not go back to the 1920s to find examples that the effect may not be on demand, but on politics, namely to force a repeal of the measure in question. Using cost disincentives or prohibiting something altogether to change consumer behaviour are punitive tools that can backfire, particularly if they are seen to be disproportionate, unreasonable, or unfair. If, as recently reported, we would need a ‘sky-high carbon tax … to avoid climate catastrophe‘ then I fear we will be doomed if we put all our eggs in the carbon pricing basket.

What we need is to complement the punitive push with an aspirational pull on consumer behaviour in the right direction. Take the case of smoking. Smoking-rates in the UK have more than halved since the 1970. I am not in possession of the facts as to how much of this change in consumer behaviour was due to punitive push (excise taxes, smoking bans) as opposed to aspirational pull (education, advertising). Based on purely anecdotal evidence (my personal experience) smoking in my youth was ‘cool’ while my children see it as positively ‘uncool’ (one of the reasons that made me quit).

I do not know how exactly this change of consumer attitude came about, but it stands to reason that marketing and education must have been part of the equation. I am also convinced that marketing/public relations and education can be used to influence consumer aspirations with regard to more sustainable lifestyles. They must be used much more prominently to complement punitive tools if we are to avoid the climate catastrophe.  In short, we need to ask ourselves …

…the billion-Euro question:

CCS plant, Boundary Dam, Canada


What is more effective in our fight of climate change, investing a billion into carbon capture and storage plant, or investing it in education and marketing?

 

Tania and Anisha Müller, Graduation, University College London

I have a hunch that the answer might be the latter, and I’m not alone in this. Just a couple of days ago, I met a UK parliamentarian and described this idea. He was intrigued, asking if any studies have been carried out on this. Unfortunately, I had to admit, I did not know, but I promised to try and find out. Hence this post.

Dear reader, if you have any relevant information, please let me know!

A Day in Agadir — sub-national contributions to multilateral climate finance

by Benito Müller

Backdrop

A few weeks ago, during a seminar here in Oxford, Antigua and Barbuda’s climate envoy told me about the considerable increase in hurricane frequency and impact she had experienced in her own life-time and the urgent need to make her country more resilient. Two days after her return home, the island of Barbuda was razed to the ground and made uninhabitable by hurricane Irma. It is difficult to conceive of an event that better illustrates the urgency for vulnerable countries to become more resilient to climate change related adverse impacts, in particular as they are predicted to continue increasing in frequency and severity due to climate change. This, and the fact that most of the particularly vulnerable countries are among the poorest in the world, yet bear a burden disproportionately high compared to the responsibility for having caused the problem, make it imperative that the more affluent (and responsible) provide financial support for them to become more resilient to the adverse impacts of climate change.

The Oxford Climate Policy ecbi Workshop

A workshop convened by OCP on behalf of the European Capacity Building Initiative (ecbi) at the recent subnational Climate Summit in Agadir, Morocco, highlighted the emerging role of sub-national contributions to multilateral climate finance. The aim was to create awareness and buy-in among sub-national actors (governments, corporations, individuals) of the nascent initiatives of sub-national contributions to multilateral climate funds, in particular the UN Least Developed Countries Fund (LDCF) and Adaptation Fund.

In his opening address, Ambassador Aziz Mekouar, Chief Negotiator for the Moroccan Presidency of the UN climate negotiations, highlighted the urgency in the context of the recent devastation caused in the Caribbean. He also pointed out the importance of multilateral climate funds by stressing that they “have a proven track record and are perceived by several countries a strong indicator of trust between parties (sic!). Alternative finance, such as sub-national contributions to multilateral climate finance can provide a very valuable complement to overall financial flows linked to the climate, in particular when it comes to the needs of developing countries.”

The theme of the disproportionate North-South ‘trust intensity’ – that is developing country trust gained or lost per dollar contributed or reneged on – of these multilateral funds in the context of the international climate change negotiations that led to the Paris Agreement was taken up in my presentation on CSR Crowdfunding for the Adaptation Fund. I also argued that small multilateral funds are key to the functioning at scale of the overall multilateral financial mechanism in an essential division of labour (see reference [10] below): The Green Climate Fund (GCF), intended to be the main multilateral climate finance channel, will not function at the intended scale unless it becomes a ‘wholesaler’, outsourcing the funding of micro-activities through programmatic access [3] to in-country intermediaries (‘Enhanced Direct Access’[9]), or through multilateral specialised niche retail funds such as the LDCF and the Adaptation Fund. It makes absolutely no sense to abolish (‘rationalise’) these small multilateral funds if they have to be re-invented to enable the GCF to work at scale.

The problem is that the LDCF and the Adaptation Fund, despite their proven track record, have not managed to attract the level of predictable funding that would enable them to fulfil their potential. The Adaptation Fund was designed to receive innovative finance from the market-based Clean Development Mechanism of the Kyoto Protocol, but that source has dried up because of a lack of market demand. It is now essentially dependent on voluntary contributions from national budgets, which poses a predictability problem [11]. Yet there is room for a different form of innovative sourcing of contributions: the Adaptation Fund has a crowdfunding instrument, that is a ‘donate’ button on its website through which is can receive credit card donations. The idea of ‘CSR crowdfunding’ [6] in this context is simply for corporations to donate one-percent of their air travel budget in recognition of the associated climate concerns. If ten percent of those corporates that already acknowledge these concerns by buying carbon offsets would switch to these CSR contributions, the Adaptation Fund would receive an estimated $120 million annually [7], which is more than its current voluntary contributions from national budgets.

Philip Gass of the Canadian International Institute for Sustainable Development (IISD) introduced the state of Canadian sub-national contributions to multilateral finance. In Paris at COP 21, the idea of sub-national contributions to multilateral climate funds (see [11]) had a first breakthrough with the announcement of a CAD 6 million contribution to the LDCF by the Province of Quebec [8], as part of an overall CAD 25 million commitment made to climate change support for developing countries.

Canadian provinces have considerable legal leeway to contribute to international climate finance. The federal government in Candada is also very supportive on such contributions over and above the national pledge (I believe it is indeed very important that any sub-national contributions are treated as additional to the national obligations and not as substitute).[i] Gass emphasised a number of reasons why sub-nationals should be interested in contributing to multilateral climate finance. Apart from the obvious moral imperative of showing solidarity with the plight of the poorest and most vulnerable by contributing to adaptation funding, and the resulting reputational gains, he highlighted the potential cost-effectiveness of mitigation activities in developing countries, and last but not least to secure ‘a seat at the table’, in particular in deliberations on how sub-national emission trading schemes could work together with the mechanism introduced in Article 6 of the Paris Agreement.  He concluded that while there are some challenges, they can be overcome, particularly by using new and innovative finance sources, such as a small share of proceeds of trading scheme auctions or carbon taxes that would be seen as ‘new’ revenues and not reallocations of existing public spending. This might indeed be helpful, particularly in the forthcoming discussions on the compatibility of sub-national schemes with the Article 6 mechanism, which itself has earmarked a share of proceeds “to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.”  Finally, the policy backdrop in Canada to all of this is the Federal Government’s Pan-Canadian Framework on Clean Growth and Climate Change, which will see carbon pricing rates roughly doubly over the next five years, opening up additional revenue streams for international investment.

Massachusetts State Senator Mike Barrett, in his presentation, showcased a piece of Legislation enabling donations from U.S. taxpayers in the state of Massachusetts to the LDCF, as filed by him in the State Senate in March 2017 (MA Senate Bill No. 2056). The Bill makes use of the fact that the majority of states (41), including Massachusetts, allow tax payers to earmark (‘check-off’) a share of their tax refund on their personal income tax form as contribution to certain state programmes. It would create a Massachusetts UN Least Developed Countries Fund (MLDCF) to be replenished through such a tax refund check-off programme and any other public and private sector contributions for the benefit of the LDCF. Senator Barrett highlighted the ground-braking aspect of the check-off programme proposed in his bill, namely that it would be the first time that American tax payers would be given the option to express solidarity with a global concern in such a scheme.[ii] In essence, the MLDCF is a government-led crowdfunding instrument with a very special type of marketing tool: income tax forms. An important aspect of these schemes, as highlighted in the presentation, is that since tax payers are forced to look at the forms that contain these options, these check-off programmes, in marketing term, amount to a ‘push strategy,’ which given the current information overflow is much more effective that schemes where individuals have to go and actively ‘pull’ (search for) information on good causes to donate to.

Emilie Parry, Oxford Climate Policy and University of Oxford, concluded the event with an evaluation of The potential of sub-national contributions to multilateral finance from California, based on her recent factfinding tour in her home state. In the course of that tour, she consulted senior representatives of Governor Brown’s office and the California Environmental Protection Agency (CalEPA), the chair of the California Air Resources Board, the Mayors of Los Angeles and Santa Monica (California Climate Mayors Network), as well as legislators, private sector representatives and NGOs (in particular from the environmental justice movement). Based on these consultations, she found that there is considerable interest in, and good will towards providing financial support to the multilateral climate funds. The main question raised was how, given the fact that there are legal impediments to the California government spending money outside the state.

The presentation went on to discuss potential options of how the Californian government could facilitate contributions to the multilateral climate funds. Like Massachusetts, California has tax refund check-off programmes, and as the resources collected in this manner are not state income but charitable donations by individuals, the above-mentioned legal impediments should not apply. In any case, it should be relatively straightforward for the government to set up a charitable crowdfunding instrument – a ‘California International Climate Solidarity Fund’ – to collect donations from public and private-sector sources, including individuals, for the benefit of multilateral climate funds. Governor Brown’s September 2018 legacy Global Climate Action Summit in San Francisco would be the ideal space to express solidarity between Californians and the most vulnerable across the globe by launching such a crowdfunding instrument, maybe with some start-up contributions by kindred spirits expressing their solidarity also with the Governor’s vision of California being a climate change model sub-national. Over time, it might be possible to generate some innovative finance, say associated with the California Cap and Trade Programme (CCTP).[iii] Establishing such a crowdfunding solidarity fund at his 2018 Summit would cement Governor Brown’s legacy not only as an environmentalist but also as a humanist, as someone who cares about the poorest and most vulnerable in the world.

The Panel on American sub-national Action

Later the same day, another panel was discussing the mobilization of American stakeholders in the fight against climate change. Matt Rodriguez, California Secretary for Environmental Protection, began by emphasizing the fact that, as a founding member of a number of national climate change initiatives – We are still in the Paris Agreement, and America’s Pledge (meant to “compile and quantify efforts from U.S. states, cities, businesses and other actors to address climate change in alignment with the Paris Agreement”) – California takes greenhouse gas mitigation as seriously as ever irrespective of the pronouncements of the Trump administration on membership of the Paris Agreement. He also highlighted the need international collaboration in this context. Indeed, a week after President Trump announced his intention to withdraw from the Agreement, Governor Brown was in Beijing to sign an agreement to work together with China on “to expand trade between California and China with an emphasis on so-called green technologies that could help address climate change[iv] Secretary Rodriguez, in this context, recalled a slogan that became prominent in the late 20 Century: “Think global, act local!

However, America’s actual pledge extends beyond mitigation. It includes the provision of funding for developing countries not only to reduce their emissions, but also to build resilience to the adverse impact of climate change as a matter of urgency (as mentioned above). Given the growing isolationist tendencies of the current era, progressive forces must also act globally, or in the words of a recent OCP blog, they must  “Think Local, Act Global!” This global action, the blog argues, must go beyond mitigation to include the provision of financial support for the poorest and most vulnerable across the globe.

Concurring with this sentiment, Senator Barrett shared what is happening in Massachusetts, including his innovative and ground-braking legislation proposal. However, if there was still any doubt about the importance of including financial support for multilateral climate finance in sub-national action agendas, it was dissipated by the closing intervention from Liane Schalatek (Heinrich Böll Stiftung North America), who was representing non-governmental stakeholders on the Panel. She focused her intervention exclusively on this, emphasising a range of options, from innovative financial tools such as earmarking a share of proceeds from emission trading auctions or carbon taxes, to crowdfunding. Her intervention made it abundantly clear that “Only in the presence of such support for the Paris finance mechanism can state governors truly make the claim: We Are Still In the Paris Agreement”[1], and that this needs to happen as a matter of urgency.

Further Reading/References 

(reverse chronological order)

Notes

[i] This is of particular importance in the case of the current US ‘national debt’ to the GCF of $2 billion dollar. State and other sub-national contributions (cities, private sector, individuals) to the GCF, while extremely welcome, can be counted as being ‘American contributions’, but not as offsets to the contributions pledged and signed by the national government.

[ii] In 2015, there were a grand total of 410 tax check-off option available to American income tax payers, but all of them concerning domestic beneficiaries, ranging from non-game wildlife preservation to special Olympic programmes.

[iii] One possible way to get around the mentioned legal complications might be to follow the current practice under the CCAP to allocate allowances to utilities with California customers, for them to sell them and distribute the revenue to these customers. In other words, it should be possible to allocate a small share of the annually allocated allowances to an emission trading intermediary, with the mandate to sell them and transfer the revenue to the California International Climate Solidarity Fund.

[iv] “China and California sign deal to work on climate change without Trump”, www.the guardian.com, 7 June 2017.

Truly to still be in Paris

US sub-national contributions to the financial mechanism of the Paris Agreement

By Benito Müller,[1] Felipe Floresca,[2] and Emilie Parry[3]

There is a growing realization among US ‘sub-nationals’ – that is states, cities, corporations, counties, universities, grass-root networks, non-profit organizations, individuals (in essence, anyone outside the White House) – that climate change is a serious issue that needs to be tackled, and the withdrawal from the Paris Agreement by the Trump administration is viewed as a reckless act of geo-political vandalism.

The fact is, the Paris Agreement is necessary for us to come to grips with global climate change. Why? We need most, if not all, countries to ratchet up their emission reduction ambitions significantly if we are to get on top of the problem, and this requires international collaboration. Yet that will not be forthcoming if the global climate regime is seen to be blatantly unfair. A solution requires a lot of goodwill and good faith from everyone, and not only with regard to reducing emissions.

The Paris Agreement is not just about emission reductions. It is, as highlighted in a recent Climate Home article (‘US cities and states back Paris deal but ignore climate finance), equally about providing financial support to (particularly vulnerable) developing countries in their fight against climate change and its adverse impacts.

One of the key instruments of the Paris Agreement for this purpose is a number of multilateral funds collectively known as the Agreement’s ‘financial mechanism’. While the sums of money flowing through this mechanism are minuscule in comparison to the amounts that developing countries will have to spend themselves, the mechanism itself is of key importance for the international regime:

  • It serves as a beacon for the developed world – signalling to developing countries that their plight is recognized and appreciated.
  • It symbol character helps to reduce the prevailing sense of injustice which otherwise will scupper all efforts to enhance the worldwide mitigation ambitions that we all need to address climate change successfully.

With this in mind, the question then is how can ‘sub-nationals’ contribute to multilateral climate funding under the Paris Agreement? What can they do to minimize the erosion of global trust instigated by the Trump White House decision to renege on the contributions to the Paris financial mechanism signed up to by the Obama administration[4]?

The most straightforward option, available to all, is the crowdfunding tool of the multilateral Adaptation Fund, collecting credit card contributions  through a web ‘donate’ button.

US state governments could follow the precedent set by the government of the Canadian Province of Quebec which contributed CA$6 million to the UNFCCC Least Developed Countries Fund (LDCF) at the 2015 Paris climate summit. Alternatively, they could establish dedicated state-level ‘international climate solidarity funds’  to collect funding for the Paris financial mechanism. One example of this already underway is the ‘Massachusetts UN Least Developed Countries Fund (MLDCF)’, currently under consideration in the Massachusetts State Senate. This fund would be replenished through an income tax refund check-off programme and by a range of other public and private sector contributions, for the benefit of the LDCF.

In terms of demonstrating individual state efforts, and also to provide some much-needed funding predictability, the best way forward would be to create such state funds for the collection of donations from individual residents, city networks, corporate actors, as well as local and state governments. In the case of state governments, this would ideally be though earmarking a small share of some innovative source of revenue – such as carbon taxes or the proceeds of auctioning emission trading permits. For example, a bill currently under consideration in the California State Senate to modify the existing California Cap and Trade Programme envisages the distribution of emission permit auctioning revenue as ‘climate dividends’ to all residents on a per capita basis. In order to show solidarity with the world’s poorest and most vulnerable communities, California could then, for example, introduce a voluntary climate dividend check-off programme for the benefit of LDCs through the establishment of a California Least Developed Countries Fund, maybe with the additional provision that the climate dividends of the top x per cent of earners are mandatorily checked off in that manner.

Only in the presence of such support for the Paris finance mechanism can state governors truly make the claim: We Are Still In the Paris Agreement!

Notes

[1] Managing Director, Oxford Climate PolicyConvener International Climate Policy Research, Environmental Change Institute, University of Oxford.

[2] Climate Justice Advocate and Senior Consultant, Emerald Cities Collaborative.

[3] Associate Fellow, Oxford Climate Policy.

[4] In the case of the Green Climate Fund alone, this leaves a shortfall of $2 billion against the $3 billion contribution signed off by the previous administration

Massachusetts UN Least Developed Countries Fund

Oxford Climate Policy has for some time been working closely with a number of North American partners in promoting the idea of sub-national contributions to multilateral climate funds (“Finance for the Paris Climate Compact: The role of earmarked (sub-) national contributions“)

In Paris at COP 21 this idea had a first breakthrough with the announcement of a CA$ 6 million contribution to the UNFCCC Least Developed Countries Fund by the Province of Quebec, followed by announcements from the Belgian regional governments and the City of Paris (“In Paris it became ‘chic’ for sub-nationals to provide multilateral support for climate change finance. Now it must become ‘de rigueur’!“).

Moreover, as it is highly unlikely that the present US administration will be contributing to (UN) climate funds (“Hope for the best, prepare for the worst! What next with American climate finance?“), the only solution is to “Think Local, Act Global!

We are therefore extremely pleased to be able to announce another breakthrough, this time in the US, facilitated by our partners at the Institute for Sustainable Energy  of Boston University: On 27 March, State Senator Michael Barrett filed “An Act enabling taxpayer donations to the Least Developed Countries Fund, an initiative of the U.N. Framework Convention on Climate Change” in the Massachusetts Senate.

The Act makes use of the fact that quite a number of states, including Massachusetts, allow tax payers to earmark (“check-off”) a share of their tax refund on their personal income tax form as contribution to certain state programmes. It proposes to create a “Massachusetts UN Least Developed Countries Fund” to be replenished through such a tax refund check-off programme and any other public and private sector contributions) for the benefit of the UNFCCC Least Developed Countries Fund. (Fact sheet)

We hope that other sub-national authorities, particularly in the US, will follow suit in thinking local but acting global to enable the poorest and most vulnerable allies to combat climate change while reducing poverty.

Think Local, Act Global!

State and City Climate Leadership Includes Global Finance

Barbara Kates-Garnick,[1] Peter Fox-Penner[2], and Benito Müller[3]

31 March 2017

By proposing to slash Federal funding to combat climate change, President Trump has declared war on our ability to deal with a very real, existential global problem that cannot be solved by building walls.  As Washington abrogates its leadership both at home and abroad, states and cities must step up on both.  Globally, the poorest and most vulnerable allies must be supported to enable them to combat climate change, while reducing poverty, and the citizens of Massachusetts have an opportunity to step up to the plate.

Well before last November, U.S. cities and states were playing a leading role in reducing carbon pollution and the superstorms and droughts caused by climate change. After a series of actions through which President Trump has greatly weakened America’s international reputation, it is now clear that cities and states must do more, not least in counterbalancing the loss of Federal funding pledged by the Obama administration to help developing countries.

U.S. states have taken the lead in introducing economic tools to reduce their own carbon emissions. New York and California are both part of regional emission trading markets, while Oregon, Massachusetts and Wyoming are considering a carbon tax.

Such leadership in domestic action is essential. But if cities and states are to step up to national leadership, they must begin to think beyond their borders. The climate crisis must be solved through united worldwide efforts.  For the poorest and most vulnerable nations, an essential part of the solution is gaining access to the funding required to cope with the disastrous floods, famines, and losses from climate change.

A state or city may understandably feel that it is doing its part by cutting its own emissions dramatically. Providing funds to someone halfway across the globe to build a flood-resilient agricultural system may seem like a role that cities or states aren’t ready to assume.  In America, as the saying goes, ‘all politics is local’.

But different times and different challenges call for different thinking. The new leaders of American climate action state and local leaders and citizens – must recognise that the (admittedly heroic) cuts in their own emissions don’t fully address this global problem.  Helping the least-developed countries to reduce   emissions and protect themselves from climate impacts is an essential part of the solution. Without funding from the wealthier parts of the world this simply will not happen. The climate crisis will not be solved, and the rising seas and storms will attack America’s coastline, even if American cities themselves emit almost no greenhouse gases.

The good news is that a solution is within reach. As cities and states adopt trading markets for carbon emissions, renewable energy certificates, and many other clean energy financing mechanisms, they could easily dedicate a small (say 2 percent) share of these revenues to international efforts. The province of Quebec has already pledged $5 million to the UN Least Developed Country Fund which provides funding for climate projects in the 51 poorest and most vulnerable countries in the world, with a total of 880 million people.

Here in Massachusetts, Senator Michael Barrett has just introduced a bill that allows citizens to voluntarily contribute a share of their state tax refund as donation to the UN fund. Passing this bill will place the state in a position of global leadership on this crucial issue.

Mechanisms to fund contributions such as this must become an essential part of state and local climate policies. It has been said that if the Paris Conference made it ‘chic’ for sub-nationals to provide multilateral support for climate change finance, now it must become ‘de rigueur’! With the new administration being intent on crippling multilateralism in general and funding for international climate funds, in particular, it is key that the leadership of states in the Trump era also extends to contributing to these now-depleted international channels for funding the poorest and most vulnerable countries struggling with climate change and poverty reduction.

Finally, neither citizens nor leaders should view this as ‘merely’ an ethical (moral issue) problem. It is simply becoming part of the solution.  As the U.S. found with the post-World War II Marshall Plan, international funding pas long-term economic and security dividends. In addition to the ethical dimensions of assisting those in need, healthy and resilient emerging economies will be better and safer allies and trading partners. They are the growth markets for the clean energy technologies that U.S. cities and states will produce for the rest of the century. When solving multi-faceted problems of epic proportions, sometimes it is necessary to ‘think local but act global’.

[1] Prof. Kates-Garnick is Professor of Practice at The Fletcher School of Tufts University. Most recently she served as the Undersecretary of Energy for the Commonwealth of Massachusetts, Barbara.Kates_Garnick@tufts.edu.

[2] Prof. Fox Penner is Director of Boston University’s Institute for Sustainable Energy; pfoxp@bu.edu, (202) 256-4577.

[3] Prof. Müller is Convener, International Climate Policy Research at the Environmental Change Institute, University of Oxford; benito.muller@philosophy.ox.ac.uk, +44 7876 566975.

Justice is still critical in the post-Paris world of “nationally determined” climate action

by Anju Sharma[1]

At a public event in Oxford a few weeks ago, one of the main architects of the Paris Agreement indicated just how problematic ethical considerations in solving the world’s climate change crisis are for the “mainstream”. Describing the French Presidency’s strategy in the run-up to the Paris Conference last year, she listed “the need to get out of burden sharing and carbon budgets” as one of their main priorities.

Can we really solve the climate change problem without some notion of fair burden sharing, not only of carbon budgets, but also of impacts?

We may be in a “post-Paris” world now, with “nationally determined” bottom-up “contributions” instead of a top-down determination of actions required by each country on the basis of fair criteria, but does this really mean that we no longer need fair burden sharing?

There are two kinds of “burdens” linked to climate change: the burden of “mitigating” or reducing greenhouse gas emissions; and the burden of dealing with the impacts of climate change – either through “adaptation”, where it is still possible, or by bearing the burden of the “loss and damage” caused by climate change that cannot be adapted to.

Developed countries have been very eager to share the former, the burden of mitigation, as long as it does not involve any calculations to determine which countries are most responsible for greenhouse gas emissions, and the most capable, so should take on the greater burden of mitigation. For years, they made action on their own on mitigation conditional to participation by developing countries. Countries that have neither comparable responsibility for the climate change problem, nor adequate capacity to take on this extra effort on top of their existing development challenges, eventually gave in to the decades of pressure and agreed to take on mitigation efforts under the Paris Agreement. Thus fell one of the two historic “twin taboos” of climate change.

The problem now is that although the Paris Agreement includes mitigation action by all countries, including developing countries, all countries are left to decide their own “nationally determined contributions” (NDCs). It is unlikely that they will shoulder their fair share of the mitigation burden.

Developed countries are not very keen, however, to share the burden of adaptation and loss and damage. They would prefer to leave this topic as muddy as possible, drawing red lines around any consideration of the polluter pays principle, or of liability for climate impacts. The second “Northern taboo” still stands strong. It is a continuing battle to get developed countries to show as much interest in adaptation in developing countries as they do in mitigation, and to get them to even talk about loss and damage. The Paris Agreement may include Articles on both, but read the fine print and it is clear that there is much more tangible progress in the Agreement on mitigation than on adaptation or loss and damage.

Far from bringing adaptation and loss and damage into the limelight, moreover, there is the distinct danger that the Paris Agreement will once again turn the limelight onto mitigation. With the inclusion of the 1.5ºC aspirational target, however “difficult if not impossible to hit”, the focus of the global scientific community already appears to have shifted to mitigation once again. Global attention seems to have returned to where it was in 2002, before the climate conference in New Delhi, when everyone was only talking about mitigation. But unlike in those days, when equity and the principle of “common but differentiated responsibilities” was central to the debate, justice-talk has been removed from polite climate conversation in the post-Paris world.

The post-Paris narrative

Any substantive discussion on justice in the climate context is seen to be seditious in the post-Paris, nationally-determined world. A month after the Paris Agreement was adopted, I participated in an academic conference on climate change in Cambridge. The reaction to my presentation on why the Paris Agreement was unfair to poor countries and communities was decidedly frosty, antagonistic even, and the topic was clearly not as engaging or interesting as a discussion on whether China’s mitigation intentions were honourable.

This tendency to consider burden sharing and equity concerns as peripheral or even dangerous is the subject of a recent editorial in Global Environmental Change, which notes “an established line of argument”, “heard from very influential players in UN negotiation halls, academic journals, and within think-tanks and government ministries”, arguing “that discussions of justice ought to be left out of both academic work and policy discussions because they are conceptually flawed, could “derail the negotiations,” and erode political will”.

Talking about equity, it is alleged, may derail negotiations. But not talking about it can kill the possibility that the outcome of the negotiations will ever be implemented in good faith, with maximum possible ambition, or that countries will continue to engage.

Why is equity still important?

Social entities such as people and governments may not necessarily worry too much about the overall fairness of a situation. But they are almost always concerned if they see themselves as being treated unfairly.

The Paris Agreement deliberately eschews any comparison between countries or even groups of countries. However, such comparisons are a prerequisite for moral and ethical considerations, which are inherently relational. It only allows for aggregate global assessments, therefore rendering any assessment of whether a country is “doing its fair share” or is “free-riding” obsolete.

Moreover, the diverse nature of Nationally Determined Contributions’ (NDCs), including the different time horizons (at least in the first NDCs: five years for some countries, ten for others) makes any such comparisons difficult, if not impossible.

In the absence of information on what others are doing and how this compares to their fair share, countries will tend to assume that the others are only doing the absolute minimum. To avoid taking on an unfair share of the burden, they will do the same. If I think that everyone else will be free-riding, then the only fair way out is for me also to free-ride. This can only result in a “race to the bottom”.

If there is no way in which countries can compare their intended (but not yet finalised) actions, be reassured that the others are carrying a fair share of the burden, and discuss how they would be mutually willing to equitably increase ambition, then ambition beyond the minimal “no-backsliding” provision of the Paris Agreement will be dead.

Worse, if countries feel that they are being treated unfairly under the Agreement, then there is nothing to prevent them from withdrawing their signature. India has already indicated that its participation is conditional to what the country’s government considers fair action by other countries.

Building space for equity in the post-Paris process

The word ‘equity’ finds five mentions in the Paris Agreement: twice in the Preamble; once in Article 2 on the overall goal of the Agreement; once in Article 4 on NDCs; and once in the context of the global stocktake. Mostly, they are references to the general principle. How equity will be operationalised in practice will now have to be discussed as part of the decisions taken post-Paris, starting in Marrakech in a couple of weeks, which will deal with how the provisions of the Agreement are actually implemented.

Negotiators may choose to follow the process adopted for the first lot of “intended” NDCs, tasking countries to themselves explain why their NDCs are fair. This simply means that countries will put forward their own criteria as to why what they are proposing to do should be regarded as fair. But it does not mean that these criteria will only be about the country in question and not involve a comparison with others. The global stocktake provides a space for further consideration of equity, by assessing the fairness of countries’ NDCs, and also by proposing what might be a more “fair” contribution.

There is likely to be strong resistance to this kind of formal process under the global stocktake. But even if there is resistance to a formal equity review under the stocktake, as long as the information is available, such reviews can also be undertaken informally outside of the negotiations, by academic or civil society organisations, for example. For this to take place, the transparency framework will have to be designed in a way that elicits adequate information from countries.

If such a stocktake (or informal review) takes place only after a country has already formally communicated its NDC, then any revision by countries to enhance their ambition to match others is extremely unlikely (although technically possible).

It therefore stands to reason that countries will have a chance to improve the equity and fairness component of their NDCs only if:

  • they are not yet finalised at the national level, and have not undergone whatever final process of endorsement they have to undergo before they are formally communicated. In other words, the NDC is still “indicative”.
  • there is a moment of time, between the “indication” of an NDC and its formal communication, when all countries are aware of the level of fairness and ambition in other NDCs, and are expected to review their NDC before its finalisation, to enhance both fairness and ambition.

The only way to avoid a race to the bottom and ensure the continued support of all countries for the Paris Agreement, in other words, is to create a process where countries are well informed of what others are doing, can assess fairness, and then bargain with each other to create a fair but “upward spiral” of ambition.

Enhancing overall ambition is not just a matter of comparing mitigation or adaptation actions. It is also a matter of providing means of implementation, in particular financial support. In that context, another equity issue will arise: who should be eligible to receive support, who should provide it, and how much would be fair? This will be a controversial question, and answering it will need a lot more finesse than the usual “changing world order” and “increased reliance on domestic and private sources” arguments that emerge when discussions on development and climate finance take place these days.

Delusion, not realism

At the Oxford public event, when questioned on how the implementation of the Agreement could avoid glaring injustices, a panelist summarised this mainstream ‘political realist’ view very succinctly: “we live in a not so fair and not so just world, and the Agreement in Paris reflects our world”. But if we can accept the optimistic view that climate change can lead to better energy systems, and stronger and more resilient development, then why can’t we also accept that it will not at least further exacerbate inequities, to what can only be described as unsustainable levels?

Those who think they can solve the climate change problem without taking equity into consideration are living in a deluded world. They are not political realists, but self-delusionists who, if left to their narrative, will scupper the Paris Agreement, along with any hope of tackling climate change.

[1] Director, Oxford Climate Policy, jusharma@gmail.com