Climate finance in an age of uncertainty

Abstract

There was a great deal of uncertainty in the discussions held in Bonn, Germany, 4-14 June in preparation for the UN Framework Convention on Climate Change negotiations later this year in Lima, and in Paris in 2015. This hinged upon what will be contained in the new institutional arrangements for reducing emissions, to be developed in the second commitment period, which replaces the Kyoto Protocol. At the time of writing, it is not yet clear exactly what mechanisms will be put in place. The old architecture favoured market-driven mechanisms, but an ongoing alternative viewpoint that favours non-market-based approaches gained some traction, notably in discussions relating to REDD+. What is not clear is whether this is because developing countries object philosophically to the use of capital markets to stimulate emission reduction through forests, or because the current price of carbon is so low at present. There was also a considerable degree of jockeying for power regarding future funding mechanisms within the next commitment period. The Global Environment Facility has previously played a key role in managing, channelling, and disbursing developed country donor contributions via a multitude of funds, to developing countries. The Green Climate Fund, a product of the Conference of Parties 16 in Cancun (2010), is now likely to be the lead fund for climate action. It is difficult to tell if these developments will contribute anything substantive enough to reduce emissions by the necessary amount required to avoid dangerous human-induced climate change.