Climate Finance in the Paris Outcome: Why Do Today What You Can Put Off Till Tomorrow?

• DOI: http://doi.org/10.1111/reel.12160
• Date: 01 July 2016
• Author: Yulia Yamineva
• Published date: 01 July 2016

Climate Finance in the Paris Outcome: Why Do

Today What You Can Put Off Till Tomorrow?

Yulia Yamineva*

The United Nations meeting in Paris resulting in a new

treaty on climate change has been described as a major

success in multilateral processes to address global

challenges. Prior to the meeting, there were fair con-

cerns as to the fate of the negotiations, not least because

of serious disagreements about climate f‌inancing pro-

vided by developed countries to developing countries.

The negotiations did not resolve these disagreements.

The Paris Agreement simply formalized what was pre-

viously proposed in the Copenhagen Accord and subse-

quent decisions of parties to the United Nations

Framework Convention on Climate Change. On divi-

sive issues, such as a new quantif‌ied goal for mobilizing

funds in the post-2020 period and transparency of cli-

mate f‌inance, parties avoided substantive solutions

and instead established processes for negotiating them

further. Importantly, however, these procedural deci-

sions contain clear goals and deadlines. The successful

adoption of the Paris Agreement is also signif‌icant as a

symbolic milestone signalling to public and private

entities the global consensus on a low-carbon and

climate-resilient future.

INTRODUCTION

Climate f‌inance is a crucial piece of the global climate

policy puzzle. It cuts across all key elements of interna-

tional cooperation, including mitigation, adaptation,

technology and capacity building. To avoid dangerous

anthropogenic climate change, considerable new invest-

ments are needed in the coming decades to f‌inance the

low-carbon transformation of the global economy and

reduce emissions in both developed and developing

countries. Nations also need the money to adapt to the

unavoidable impacts of climate change. This adaptation

f‌inance is particularly critical for the most vulnerable

countries, such as small island developing States (SIDS),

least developedcountries (LDCs) and African countries.

According to the United Nations Framework Conven-

tion on Climate Change (UNFCCC),

1

global climate

f‌inance is estimated to be between US$340 and 650

billion per year.

2

This includes f‌inancial f‌lows from

developed countries to developing countries estimated

in the range of US$40–175 billion annually. Such f‌lows

include US$35–50 billion through public institutions

such as developed country governments, bilateral

f‌inance institutions, multilateral development banks

and multilateral climate funds. A portion of these

annual f‌lows consists of private f‌inance, estimated

between US$5 and 125 billion. It is worth noting that

the f‌inance provided through the operating entities of

the f‌inancial mechanism of the UNFCCC is very modest

compared to the total funding f‌lowing through all chan-

nels: it constitutes only US$0.6 billion a year.

3

Despite signif‌icant funds already being mobilized to

address climate change in developing countries, these fall

far behind the estimated f‌inancing needs for climate

change mitigation and adaptation. The available assess-

ments of f‌inancialneeds

4

vary signif‌icantly due to the use

of different methodologies, and none of them allow for

an accurate estimation of how much f‌inancial support

will actually be required. In 2007, the UNFCCC esti-

mated that additional investment and f‌inancial f‌lows of

around US$177 billion would be necessary in 2030 for

mitigationin non-Annex I countries.

5

For adaptation, the

report estimated additional investment needs of US$28–

67 billion peryear by 2030.

6

Other sources

7

may provide

different numbers but also underscore that the f‌inancing

needs of developing countries to address climate change

amount to hundreds of billionsof US dollars annually.

Prior to Paris, climate f‌inance was widely viewed as a

make-or-break issue that could impact the fate of the

* Corresponding author.

Email: yulia.yamineva@uef.f‌i

1

United Nations Framework Convention on Climate Change (New

York, 9 May 1992; in force 21 March 1994) (‘UNFCCC’).

2

This is for the period of 2010–2012. UNFCCC Standing Committee

on Finance (SCF), 2014 Biennial Assessment and Overview of Cli-

mate Finance Flows Report (UNFCCC, 2014), at 6.

3

Ibid., at 7.

4

For a synthesis of available estimates for mitigation, see S. Olbrisch

et al., ‘Estimates of Incremental Investment for, and Cost of, Mitigation

Measures in Developing Countries’, in: E. Haites (ed.), International

Climate Finance (Routledge, 2013), 32. For adaptation estimates, see

U. Narain, S. Margulis and T. Essam, ‘Estimating Costs of Adaptation

to Climate Change’, in: E. Haites, ibid., 72.

5

UNFCCC, Investment and Financial Flows to Address Climate

Change (October 2007), at 175, table IX-64.

6

Ibid., at paragraph 26 of the executive summary.

7

See n. 4 above. Also, the intended nationally determined contribu-

tions, recently submitted to the UNFCCC, contain information related

to climate f‌inancing needs. See <http://unfccc.int/focus/indc_portal/

items/8766.php>.

ª2016 John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

174

RECIEL 25 (2) 2016. ISSN 2050-0386 DOI: 10.1111/reel.12160

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