It’s UNFCCC interim meetings time in Bonn this week and next (May 8-18). High on the agenda is the next phase of creating the “rulebook” for implementing the Paris agreement. The stakes on this are discussed in a useful article by the WRI’s Paula Caballero, reprinted with permission below. These introductory remarks address what agreeing the rulebook might mean for financing Paris.
As Caballero says, “Robust, coherent rules and processes are needed to make implementation of the Paris Agreement effective, fair and equitable. Parties need to know that climate action efforts will be measured, communicated and counted in ways that create a level playing field and build trust to reinforce the sense of common purpose.”
Agreeing the rulebook without making any linkage to finance is a major missed opportunity.
What still seems to be missing, though, 18 months after Paris, is any linkage of all this to finance. I’m no expert on interpreting UN agendas, so I may have overlooked sessions called something else, but looking through the 10 days or so of meetings I saw only two that were overtly linked to money for NDCs. With many calling for COP23 to be the “COP of investment”, that seems a gloomy indicator that yet another year is passing without the UNFCCC addressing the critical need to engage capital markets in the Paris process.
Because agreeing the rulebook without making that linkage is a major missed opportunity.
Standardisation is the key
Cleaning up and standardising the NDCs creates a chance to develop what we have been calling a “standard categorisation”of climate actions (both adaptation and mitigation) that financiers could then use to understand aggregation opportunities. (“Aggregation” is the bundling of similar projects together to create more sizeable and therefore more viable financing opportunities). Standardisation is key to this – no financial market has ever progressed to scale without it, and nor will the climate finance market.
For example, a fund focussed on wind power will not just finance any old wind power. It will have a strategy for its investments that’s focussed on particular project sizes and technologies and locations. This is because developing sector expertise is one of the things that is vital to the success of such investment vehicles (as we reported, for example, in our piece on the UK Green Investment Bank).
A standard categorisation of projects linked to the NDCs – and built for financiers not scientists or negotiators – would dramatically increase the ease of translating these NDCs into financeable investment pipelines, including across countries, as that would be a part of successful aggregation.
Such a categorisation would be relatively quick, cheap and straightforward to produce – the DFIs already have most of one for mitigation projects. But it would need to have some official recognition as the standard and that is where someone – UN, World Bank, wherever – needs to step forward.
Right now the expectation of such bodies appears to be that understanding of the investment opportunities latent in the NDCs by the international capital markets will occur by means of some miraculous virgin birth. It won’t. If you want an international market for shoes, for example, you need to agree on shoe sizes. If you want an international market in NDCs, you need some commonly agreed way for those markets to analyse the projects in those those NDCs.
This linkage must become a part of the agenda at COP23.
Setting the rules of the game at Bonn climate change talks
What’s true for sports is true for tackling climate change: to make things happen, you have to agree on the rules of the game.
Climate negotiators gathering in Bonn from May 8-18 will be working to do just that by writing a “rulebook” so that the vision of the Paris Agreement on climate change can be translated into action. The collective will to implement the global climate pact is clear: it entered into force years before anyone expected. The logical next step is to agree to the rules and processes that will underpin it.
The timeline is critical. Clarity on what the playing field looks like – to paraphrase a wise Argentine saying – is decisive. Bonn negotiators must set the stage now for countries to make stronger, clearer climate commitments by 2020.
Agreeing on the rules of the game by the end of 2018 is essential for the long-term increase in ambition – what we at WRI think of as the “Arc of Ambition” – that countries need so they can make smart, evidenced-based policy decisions that foster sustainable growth and combat poverty today and in the future. Climate change makes these goals harder to achieve. Unchecked climate change will make it impossible.
Robust, coherent rules and processes are needed to make implementation of the Paris Agreement effective, fair and equitable. Parties need to know that climate action efforts will be measured, communicated and counted in ways that create a level playing field and build trust to reinforce the sense of common purpose. This is an essential ingredient to encourage Paris Agreement countries as well as non-state actors to advance climate action at the scale and with the urgency required. Strong market signals will also be crucial to spur private sector innovation and investment in a lower-carbon global economy.
Since this historic agreement is already in force, those tasked with implementing national climate action plans will urgently need to complete the rulebook by the end of 2018. Under the Paris Agreement, countries must progressively increase their commitments to climate action at a pace and scale that avoids irreversible tipping points. Incremental changes won’t do it. We need deep, systemic transformation.
Current national climate commitments — known as Nationally Determined Contributions or NDCs – will push global mean temperature to 2.6 to 3.7 degrees C (4.7 to 6.7 degrees F) above pre-industrial levels, far beyond the 2 degrees C (3.6 degrees F) or optimally 1.5 degrees C (2.7 degrees F) required to head off the worst effects of a changing climate. Without more ambitious goals, we will move into uncharted danger zones where scientific projections point to an increasingly uninhabitable planet.
Not simple – but essential
As a former climate negotiator, I know how complicated these negotiations can be. Different tracks are going to move at different speeds, and it will be essential for negotiators to have a good sense of the overall mapping and to trust the co-chairs to orchestrate progress. Areas where substantive progress is within reach should advance more rapidly, creating space for longer engagement around issues that require more time. This also plays to the advantage of smaller delegations with less capacity.
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Transparency, accountability and the “global stocktake” are areas where negotiators in Bonn can make significant strides. For example, the discussions in Bonn will need to determine how the global stocktake will be conducted, who will be involved, how to collect relevant information, how to make collective progress, how to link to other processes under the Paris Agreement and how the stocktake can inform future national climate commitments.
Parties need to know that climate action efforts will be measured, communicated and counted in ways that create a level playing field and build trust to reinforce the sense of common purpose.
Geopolitically, the playing field today is even more complex. Sweeping political changes in the United States and elsewhere could make these negotiations more challenging. There is a risk that the collective political will to deliver a robust transparency and accountability framework may be weakened. However, we’re clearly traveling in the right direction: for the last three years, global carbon emissions have stayed flat as the global economy has grown. This is called decoupling and it shatters the myth that tackling climate change is an impediment to economic growth.
On the contrary, what we are increasingly seeing is that it is precisely climate change that is already wreaking havoc with hard-won development gains. On the other hand, we are also seeing that the transition to a low-carbon economy generates new opportunities for profit and for jobs. One data point tells the story: the fastest growing U.S. job category in 2017 is wind-turbine service technician.
This is what negotiators need to know as they enter the Bonn conference center later this month. Progress on transparency, accountability and the global stocktake process will ensure that what we signed up to in Paris is delivered in ways that are fair, equitable efficient and effective.
We’re headed the right way, but the question remains: how fast will we advance? The present and future wellbeing of our people depends on how we answer that question.