Fast start, slow finish on Canadian climate finance

The 19th Session of the Conference of Parties (CoP) to the United Nations Framework Convention on Climate Change (UNFCCC), is set to start next Monday.

For twelve days, thousands of governments, international institutions and civil society organizations will be meeting in Warsaw, Poland, to – as the Executive Secretary to the UNFCCC notes – “consolidate responses to climate change and to showcase the many ambitious adaptation and mitigation initiatives being implemented around the world.”

While Warsaw isn’t necessarily seeking to achieve any big landmark milestones on the road towards a global UNFCCC– except of course coming closer to an agreement – it does come at the conclusion of the “Fast Start Climate Finance” period, agreed under the 2009 Copenhagen Accord.

The Accord included a commitment by industrial countries, like Canada, to “provide new and additional resources […] approaching USD$30 billion for the period 2010-2012 with balanced allocation between adaptation and mitigation,” and with priority for adaptation funding to least developed countries. Such fast-start finance (FSF) represents an important financial and political commitment by industrial countries towards the process, as well as some lessons about how future longer-term finance might roll out.

Protecting Our Common Future - An Assessment of Canada's Fast Start Climate Finance

Last week, the Canadian Coalition for Climate Change and Development (C4D) released an excellent independent assessment of Canada’s financing commitments under the Accord – looking at whether it was new and additional money; whether Canada met its fair share; the balance between loans and grants, and mitigation and adaptation.

[For those with time on their hands, there is also a longer report, and two excellent annexes highlighting all Canadian initiatives financed under FSF, as well as a detailed breakdown of the numbers.]

So how does Canada fare? There are two positives, two (potential) negatives, and, well, one big gaping hole.

On additionality: “Virtually all of the funds allocated to fast-start financing were new resources above what Canada had spent on climate-related financing pre-2010. Canada’s $1.2 billion was “additional” to budgeted international assistance at the beginning of each fiscal year. However, it should also be noted that the Government flat-lined overall international assistance in 2011 and then cut it each year from 2012 to 2014, which raises valid concerns that climate financing came at the expense of other aid.”

And on whether Canada’s gave its fair share: “Technically, Canada contributed its “fair share” of the US$30 billion global commitment to fast-start financing by providing 4%, or $1.2 billion, of the total. This amount is based on Canada’s Gross National Income (GNI) in relation to the total gross GNI of OECD donor countries.”

That’s the good news. On the two other questions, namely the balance between loans and grants and adaptation and mitigation, the findings were mixed.

On loans: “Fully 74% of Canada’s $1.2 billion was allocated for loans, primarily for private sector mitigation projects [and through] trust funds in the World Bank’s International Finance Corporation (IFC) and […] the Inter-American Development Bank (IADB) and Asian Development Bank (ADB). These loans are counted as part of Canada’s Official Development Assistance (ODA), which will be adjusted downwards as the loans are repaid.”

This type of loan financing is something the Canadian government hasn’t done since 1986. In fact, Canada has one of the highest loan ratios in its fast start financing portfolio of any other donor – the EU has 38% loans, the US 37%, and Australia, the Netherlands and Norway only provide grants.

Why is this problematic? Because the authors expect that, “more than Cdn$615 million will be returned to Canada over the life of the loan programs, reducing the value of Canada’s total fast-start finance by more than 50%.”

Furthermore, financing for adaptation accounted for only 18% of FSF – falling well below other donors like Switzerland (71%), Australia (52%), and the European Union (42%) – a far stretch from the “balanced allocation” between adaptation and mitigation called for by the Copenhagen Accord, and interpreted by many to be a 50/50 split.

Not surprisingly, the report recommends Canada build on its initial FSF commitments and announce a new set of pledges for 2013-2015 equivalent to its annual $400 million FSF program; this should include a longer term schedule for the 2020 plan of $100 billion globally per year. This should of course include a 50/50 balance between adaptation and mitigation, and an ongoing commitment towards grants for adaptation and a shift away from loans (or at least putting future loan payments into revolving funds).

So what next?

Here comes the big gaping hole.  Rather than build on this initial FSF experience and lessons learned, it seems likely that there will be no long term financing commitments from Canada in the near future. Perhaps given our stance on Kyoto, I shouldn’t be surprised. We’ve already thrown away our political commitment to this process, and now with it, our financial commitment.

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