A Matter of Principle(s) - A Normative Framework for a Global Compact on Public Climate Finance


A Matter of Principle(s) - A Normative Framework for a Global Compact on Public Climate Finance

Globe and pile of money
How can public climate change finance be used wisely?
Picture: Fotis Bobolas. Lizenz: Creative Commons BY-SA 2.0. Original: Flickr.

November 19, 2010
By Liane Schalatek
Die Zusammenfassung der Studie existiert auch auf Deutsch.

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By Liane Schalatek

The anthropogenic origin of global climate change causing greenhouse gas (GHG) emissions today should no longer be disputed. Climate change’s adverse effect on people can also no longer be ignored. Those who are most adversely affected are disproportionally found among societies’ most marginalized and disenfranchised – women, children, indigenous peoples, the poor, the elderly or handicapped. They also remain largely excluded from participation and decision-making in the global governance regimes and international institutions, such as the UN Framework Convention on Climate Change (UNFCCC) or multilateral development banks (MDBs), which will determine their future livelihood and survival in a rapidly warming world. This is particularly true for global climate change financing. While the last few years have seen the emergence of new financing structures and mechanisms for adaptation and mitigation, a comprehensive global climate finance architecture that collects, allocates and disburses financial resources in an equitable, effective and efficient manner is still elusive.

This paper starts out with a look at the status quo of public climate change finance post-Copenhagen. It then proposes the use of existing core principles and tools of international environmental law and human rights as the fundamental conceptual guide and compass for charting policy responses to climate change that are rooted in the concept of justice and fairness, especially with respect to evaluating the financial architecture necessary to fund sustainable and efficient climate interventions globally. The application of core democratic values, such as transparency and accountability, as well as participation in decision-making are discussed as cross-cutting issues for climate change finance, irrespective of the various stages of the funding cycle. Climate change financing can be effective, efficient and equitable, only when policy coherence – both with respect to the institutions involved in channeling money flows as well as in the use of funding for concrete mitigation and adaptation measures – is observed. Finally, the paper will discuss those rules, norms and principles in greater detail that apply more specifically to the mobilization, administration and governance as well as allocation and disbursement of public climate change funds within a climate justice framework. A series of compliance checks will be performed to suggest which implementation steps must be taken to move toward this goal. The paper will then look at how current dedicated climate-funding initiatives are measuring up and propose some recommendations for the way forward.

Elements of a Normative Framework for Public Climate Finance

Climate finance decisions are not made within a normative vacuum. An impressive body of conventions, binding treaties, regulations and principles exists that codifies normative frameworks for both international environmental law and universal and unalienable human rights as obligations by which all bilateral and multilateral actors in global public climate change finance are already customarily bound. Individual countries have been signatories to the majority of these legal instruments and thus are bound in their own bilateral funding capacity. Multilateral organizations serving as channels for climate finance are likewise not exempt from those rules, as they apply to their membership, namely sovereign states. However, currently, developed countries pursue climate policy and the funding needed for climate actions as if comprehensive legal frameworks related to environmental protection and universal declarations of human rights, basic notions of justice and fairness, and the core principles of a democratic state were not applicable. Yet, they are. Public climate finance is not a principles-free zone of international and national climate policies. Treating it as such leads to the political incoherence that plagues many of today’s political actions for climate-aware development.

International Human Rights Obligations and the Need for Policy Coherence

It is human choices that influence both the pace of climate change and the policy responses to it. A human rights-based approach to climate change sets the ethical and legally binding obligation to put people first. It reminds us that climate change is about human suffering and misery, not an abstract scientific-technological phenomenon. Almost all states worldwide have formally subscribed to both the UNFCCC and UN human rights treaties and should therefore implement their legal obligations in a coherent manner. “Do no harm,” namely ensuring that climate intervention does not make matters worse, even if only unintentionally, should be the yardstick against which all climate-funding decisions should be judged. Some climate finance investments have, at best, a dubious benefit for the climate and will harm sustainable development objectives as well as violate human rights in the developing countries where they are made. Public funding for climate change should avoid such investments.

Principles Relevant for the Mobilization of Public Climate Change Finance

A number of important principles, such as those of the Rio Declaration, elaborated under international environmental law should guide the mobilization of public climate finance viewed through the lens of climate justice and human rights. Most fundamentally, the Convention has laid out that its parties need to take climate actions, including on finance, on “the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities” (UNFCCC, Art. 2). The Bali Action Plan from 2008 likewise stipulates that funding must be adequate, predictable, sustainable as well as new and additional (Bali Action Plan, Art. 1(e)(i)).

  • Transparent and accountable – The MRV of climate finance – namely the measuring of the amounts of public climate finance transferred from developed to developing countries, the reporting of these flows to the global public and the verification of the completeness and accuracy of reported data of climate finance flows from developed to developing country – is crucial to ensure accountability and transparency in finance mobilization. A common reporting format for public climate finance flows is needed, with the goal of separating these from development aid flows.
  • The polluter pays – This principle (Rio Principle 16) relates the level of GHG emissions to the amount the respective country will have to pay for climate action, although it is unclear whether and how to include historical cumulative emissions (the question of an adequate base year). Besides determining the quantity of climate funding, applying the polluter pays principle will define a legal obligation for compensatory finance, different from aid flows.
  • Respective capability – Countries’ contributions to climate finance should be in the form of mandatory assessed payments and should relate to a measure of national wealth more broadly defined as well as the status and trend of national economic and social development. A country’s obligation to pay for climate action should be correlated with a minimum development standard for each of its citizens.
  • New and additional – Climate change imposes new challenges that are distinct from existing development hurdles. Climate funding should thus be additional to existing official development assistance (ODA) commitments and other pre-existing flows from developing countries in order to avoid the diversion of funding for development needs to climate change actions. This is commonly understood to be above and beyond the ODA target of 0.7 percent of gross national income (GNI) set in 1970, a target which has been unfulfilled by most developed countries.
  • Adequate and precautionary – In order to “take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects” (UNFCCC, Art. 3.3.), the level of funding needs to be sufficient to keep a global temperature increase as low as possible. Most current global funding-needs estimates use a top-down approach by tying their costing to a 2-degrees-Celsius temperature increase scenario. A better gauge of adequacy would be through a devolutionary approach that aggregates estimates based on countries’ own climate action plans.
  • Predictable – Currently, climate change financing flows are characterized by the unreliable and unpredictable nature of voluntary contributions. A sustained and sustainable flow of climate finance is needed medium to long-term in multi-year funding cycles (ideally at least 5–10 years) to allow for adequate investment program planning in developing countries or to scale up or maintain existing efforts.

Principles Relevant for the Administration and Governance of Public Climate Funds

Where public funding for climate change is used, national governments and global funding entities (receiving contributions from developed countries) are obligated – as an indisputable tenet of democracy and citizens’ rights – to administer public funds in a way that is both transparent and accountable. Furthermore, accountability suggests that broad stakeholder participation and representation should be ensured in the administration of climate funding on the principle of equity.

  • Transparent and accountable – While relevant for all stages of the climate-funding cycle, transparency and accountability as democratic core principles are most strongly tied to the governance of climate funds. A transparent administration of public climate funding requires publicly available, accurate and timely information on a mechanism’s funding structure; its financial data; the structure of its board; its decision making-process; as well as actual funding decisions made. The principle of accountability demands the existence of a redress mechanism as well as strengthened parliamentary oversight.
  • Under the authority and guidance of the UNFCCC – With the climate financing question inseparable from the realization of global mitigation obligations under the UNFCCC’s Kyoto Protocol and the UNFCCC adaptation action mandate, so should the global oversight of the needed funding for global climate action be entrusted to the authority and guidance of the UNFCCC. The principles of equity and environmental integrity likewise require a broad UNFCCC authority, as each party enjoys an equal vote under the COP, irrespective of a country’s role as either financial beneficiary of or financial contributor to public climate finance.
  • Equitably represented – In a clear break with existing ODA delivery mechanisms and the old, unequal power relationship between donor and recipient countries (which give donor countries a bigger voice in funding decisions), climate funds need to be governed based on equitable representation. This goes beyond a focus on nation states and requires the inclusion of a broad group of stakeholders into fund management and decision-making structures.
  • Public participation in decision-making – In violation of countries’ obligations under the Aarhus Convention, public participation is still insufficient in most public climate finance instruments and usually relegated to often purely perfunctory consultation processes with no influence on the actual practice of funding decisions. A systematic, comprehensive and targeted “bottom-up” inclusion of relevant stakeholder groups is needed.

Principles Relevant for the Disbursement and Delivery of Climate Change Financing

The ongoing discourse on global climate finance is preoccupied with the slow progress of mobilizing climate finance and how it will be governed globally. Less attention has been given to the principles guiding climate finance disbursement. These are, however, crucial, as they will determine the effectiveness and efficiency of the funds used.

  • Transparent and accountable – Safeguards are necessary to ensure that the climate funding disbursed reaches those – countries and the most vulnerable population groups within a recipient country – who need it most. In addition to applying and enforcing existing social and environmental guides to public climate financing channeled through MDBs, developing country recipients will have to also domestically apply robust monitoring, reporting and evaluation standards that are based on solid safeguards.
  • Subsidiary and national/local ownership – In order to guarantee that the disbursement of funding meets actual spending needs in developing countries, funding priorities should not be imposed upon a country or a community from the outside. Rather, funding decisions – in keeping with the concept of subsidiarity as expressed in the Paris Declaration on Aid Effectiveness and the Rio Declaration (Principle 10) – should be made at the lowest appropriate level.
  • Precautionary and timely – The absence of full scientific certainty on necessary adaptation and mitigation action should not be used as a reason to postpone or delay funding for possible climate action now (Rio Principle 15). In the absence of binding, assessed contributions of industrialized countries to pay for climate action, performance indicators are necessary to guarantee that voluntary climate finance pledges are turned into the rapid delivery of funds.
  • Appropriate – Climate funding should not place an extra development burden on the recipient country. Depending on which finance modality is used to disburse climate funds to developing countries – for example grants or loans – recipient countries (many of which are still highly indebted) might be placed in a situation where climate action would come at the expense of its own development priorities or the fulfillment of international human rights’ obligations.
  • (Directly) accessible for the most vulnerable – Access to and the benefits of climate finance should be distributed equitably, thus corresponding to the differing needs and capabilities of countries and regions to deal with the challenges of climate change, as well as the social and economic realities of recipient countries and the people living in these countries.
  • Gender equitable – Women and men, due largely to their gender roles and respective rights (or lack thereof), have differing vulnerabilities to climate change as well as differentiated capabilities to mitigate emissions, adapt to and cope with climate change impacts. These differences need to be taken into account by creating gender-aware climate financing mechanisms and gender-equitable fund disbursement guidelines and criteria. 

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