- Introduction
- This section provides an overview of the various provisions contained in the Paris Agreement and relevant decisions which form the mandate for the collection and synthesis of information contained in this report.
- In decision 19/CMA.1, paragraph 23 (d), the CMA requested the secretariat, under the guidance of the co-facilitators, to prepare for the technical assessment a synthesis report on the information identified in its paragraph 36(d). In paragraph 36(d), the CMA decided that the sources of input for the global stocktake will consider information at a collective level on the finance flows, including the information referred to in Article 2, paragraph 1(c), of the Paris Agreement, and means of implementation and support and mobilization and
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provision of support, including the information referred to in the Paris Agreement, in Article 9, paragraphs 4 and 6, Article 10, paragraph 6, Article 11, paragraph 3, and Article 13, in particular paragraphs 9 and 10. This should include information from the latest BA of the SCF.
- Article 9, paragraph 4 of the Paris Agreement sets out that the provision of scaled-up financial resources should aim to achieve a balance between adaptation and mitigation, taking into account country-driven strategies, and the priorities and needs of developing country Parties, especially those that are particularly vulnerable to the adverse effects of climate change and have significant capacity constraints, such as the LDCs and SIDS, considering the need for public and grant-based resources for adaptation.
- Article 9, paragraph 6 of the Paris Agreement provides that the global stocktake referred to in its Article 14 shall take into account the relevant information provided by developed country Parties and/or Agreement bodies on efforts related to climate finance.
- Article 2, paragraph 1(c) of the Paris Agreement provides that, in enhancing the implementation of the Convention, including its objective, the Agreement aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by making finance flows consistent with a pathway towards low GHG emissions and climate-resilient development.
- Article 10, paragraph 6 of the Paris Agreement stipulates that support, including financial support, shall be provided to developing country Parties for the implementation of this Article, including for strengthening cooperative action on technology development and transfer at different stages of the technology cycle, with a view to achieving a balance between support for mitigation and adaptation. It further states that the global stocktake referred to in Article 14 shall take into account available information on efforts related to support on technology development and transfer for developing country Parties.
- Article 11, paragraph 3 of the Paris Agreement states that all Parties should cooperate to enhance the capacity of developing country Parties to implement this Agreement, and that developed country Parties should enhance support for capacity-building actions in developing country Parties.
- Article 11, paragraph 4 of the Paris Agreement stipulates that all Parties enhancing the capacity of developing country Parties to implement this Agreement, including through regional, bilateral and multilateral approaches, shall regularly communicate on these actions or measures on capacity-building. Developing country Parties should regularly communicate progress made on implementing capacity-building plans, policies, actions or measures to implement this Agreement. In terms of reporting requirements for Parties under the Paris Agreement, Article 13, paragraph 9 sets out that developed country Parties shall, and other Parties that provide support should, provide information on financial, technology transfer and capacity-building support provided to developing country Parties under Articles 9, 10 and
11. Article 13, paragraph 10 states that developing country Parties should provide information on financial, technology transfer and capacity-building support needed and received under Articles 9, 10 and 11.
- In line with Article 9, paragraph 7 of the Paris Agreement, developed country Parties shall provide transparent and consistent information on support for developing country Parties provided and mobilized through public interventions biennially in accordance with the modalities, procedures and guidelines to be adopted by CMA 1, as stipulated in Article 13, paragraph 13. Other Parties are encouraged to do so.
- This report aims to provide information to support the assessment of the progress made in achieving the purpose of the Paris Agreement and its long-term goals, including with regard to the issue of support. The detailed provisions identified in decision 19/CMA.1, paragraphs 23 (d) and 36 (d) having been outlined in the introduction above; the elements contained the Paris Agreement relevant for finance, technology, and capacity-building are outlined below.
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- Elements under the Paris Agreement related to finance, technology and capacity- building
- This section provides an overview of the relevant provisions contained in the Paris Agreement and relevant decisions taken by the COP pertaining to finance, technology and capacity-building.
- As outlined above, Article 2, paragraph 1(c) of the Paris Agreement states that, in enhancing the implementation of the Convention, including its objective, the Agreement aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by making finance flows consistent with a pathway towards low GHG emissions and climate-resilient development.
- Article 9 contains provisions pertaining to the following:
- Paragraph 1 provides that developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention;
- Other Parties are encouraged to provide or continue to provide such support voluntarily, as per Article 9, paragraph 2;
- Paragraph 3 states that, as part of a global effort, developed country Parties should continue to take the lead in mobilizing climate finance from a wide variety of sources, instruments and channels, noting the significant role of public funds, through a variety of actions, including supporting country-driven strategies, and taking into account the needs and priorities of developing country Parties. Such mobilization of climate finance should represent a progression beyond previous efforts;
- Paragraph 4 states that the provision of scaled-up financial resources should aim to achieve a balance between adaptation and mitigation, taking into account country- driven strategies, and the priorities and needs of developing country Parties, especially those that are particularly vulnerable to the adverse effects of climate change and have significant capacity constraints, such as the LDCs and SIDS, considering the need for public and grant- based resources for adaptation;
- In line with paragraph 5, developed country Parties shall biennially communicate indicative quantitative and qualitative information related to paragraphs 1 and 3 of the Article, as applicable, including, as available, projected levels of public financial resources to be provided to developing country Parties. Other Parties providing resources are encouraged to communicate biennially such information on a voluntary basis.
- Decision 1/CP.21, paragraph 53 states that, in accordance with Article 9, paragraph 3 of the Paris Agreement, developed countries intend to continue their existing collective mobilization goal through 2025 in the context of meaningful mitigation actions and transparency on implementation. Furthermore, it was decided that, prior to 2025 the CMA shall set a new collective quantified goal from a floor of USD 100 billion per year, taking into account the needs and priorities of developing countries. At CMA 3, Parties decided to initiate the deliberations on setting a new collective quantified goal, with a view to concluding the deliberations by setting the new collective quantified goal in 2024.12
- The Paris Agreement includes provisions that call for transparent and consistent information on financial support (in the context of Article 9 on finance) as part of the enhanced transparency framework (established in Article 13 on transparency), which will build on and enhance the existing arrangements under the Convention. Furthermore, Article 13 stipulates that the purpose of the framework for transparency of support is to provide clarity on support provided and received by relevant individual Parties and, to the extent possible, to provide a full overview of financial support provided in order to inform the global stocktake.
12 Decision 9/CMA.3, paras 1 and 22.
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- Article 10, paragraph 1 of the Paris Agreement states that Parties share a long-term vision on the importance of fully realizing technology development and transfer in order to improve resilience to climate change and to reduce GHG emissions.
- Article 10 of the Paris Agreement further contains the following provisions on technology development and transfer:
- Paragraph 2 states that Parties, noting the importance of technology for the implementation of mitigation and adaptation actions under this Agreement and recognizing existing technology deployment and dissemination efforts, shall strengthen cooperative action on technology development and transfer;
- Paragraph 5 states that accelerating, encouraging and enabling innovation is critical for an effective, long-term global response to climate change and promoting economic growth and sustainable development. Such effort shall be, as appropriate, supported, including by the Technology Mechanism and, through financial means, by the Financial Mechanism of the Convention, for collaborative approaches to research and development, and facilitating access to technology, in particular for early stages of the technology cycle, to developing country Parties;
- Paragraph 6 states that support, including financial support, shall be provided to developing country Parties for the implementation of this Article, including for strengthening cooperative action on technology development and transfer at different stages of the technology cycle, with a view to achieving a balance between support for mitigation and adaptation.
- Article 11, paragraph 1 stipulates that capacity-building under this Agreement should enhance the capacity and ability of developing country Parties, in particular countries with the least capacity, such as the LDCs, and those that are particularly vulnerable to the adverse effects of climate change, such as SIDS, to take effective climate change action, including, inter alia, to implement adaptation and mitigation actions, and should facilitate technology development, dissemination and deployment, access to climate finance, relevant aspects of education, training and public awareness, and the transparent, timely and accurate communication of information.
- Article 11, paragraph 2 notes that capacity-building should be country-driven, based on and responsive to national needs, and foster country ownership of Parties, in particular, for developing country Parties, including at the national, subnational and local levels. Capacity-building should be guided by lessons learned, including those from capacity- building activities under the Convention, and should be an effective, iterative process that is participatory, cross-cutting and gender-responsive.
- Article 11, paragraph 3 states that all Parties should cooperate to enhance the capacity of developing country Parties to implement this Agreement and that developed country Parties should enhance support for capacity-building actions in developing country Parties.
- Article 11, paragraph 4 offers provisions on reporting on progress on capacity- building under the Agreement, stating that all Parties enhancing the capacity of developing country Parties to implement this Agreement, including through regional, bilateral and multilateral approaches, shall regularly communicate on these actions or measures on capacity-building. Developing country Parties should regularly communicate progress made on implementing capacity-building plans, policies, actions or measures to implement this Agreement.
- Article 11, paragraph 5 provides for institutional arrangements on capacity-building, stating that capacity-building activities shall be enhanced through appropriate institutional arrangements to support the implementation of this Agreement, including the appropriate institutional arrangements established under the Convention that serve this Agreement. It also states that CMA 1 shall consider and adopt a decision on the initial institutional arrangements for capacity-building. Following these provisions, CMA 2 adopted decision 3/CMA.2 on initial institutional arrangements for capacity-building under the Agreement, deciding that
- Article 10 of the Paris Agreement further contains the following provisions on technology development and transfer:
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the PCCB shall serve the Paris Agreement in accordance with the its mandate as defined by the COP.13
- Relationship between Article 2, paragraph 1(c), and Article 9 of the Paris Agreement
- The Paris Agreement does not define a relationship between its Article 2, paragraph 1(c), and Article 9. However, concepts included in Article 2, paragraph 1(c), are referred to in subsequent CMA decisions which relate to Article 9, such as decision 12/CMA.1 on identification of the information to be provided by Parties in accordance with Article 9, paragraph 5, of the Paris Agreement, and decision 14/CMA.1 on setting a new collective quantified goal on finance in accordance with decision 1/CP.21, paragraph 53. Most recently, in decision 9/CMA.3, paragraph 15, Parties decided that the new collective quantified goal aims at contributing to accelerating the achievement of Article 2 of the Paris Agreement of holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change; increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low GHG emissions development in a manner that does not threaten food production; and making finance flows consistent with a pathway towards low GHG emissions and climate-resilient development.
- Some Parties, in their biennial communication pursuant to Article 9, paragraph 5 of the Paris Agreement on indicative quantitative and qualitative information related to paragraphs 1 and 3 of the Article, outlined the ways in which supporting developing countries in meeting the Paris Agreement goals through capacity-building and technical assistance for fiscal and macroeconomic policymaking will help them identify and mobilize domestic resources for climate action and attract international climate finance that can fulfil their investments needs. In this context, it was noted that Article 9 and Article 2, paragraph 1(c), are neither interchangeable nor mutually exclusive but reinforce each other.14
- Few national governments have framed the actions related to making finance flows consistent to low GHG emission and climate-resilient development including the development of taxonomies, disclosure frameworks, fiscal support regimes and exclusion policies, as direct responses to Article 2, paragraph 1(c). Developing countries largely emphasize their ability to access international climate finance in the context of Article 9, as well as directing domestic finance flows to achieving NDC goals.15
- The mapping exercise of the fourth BA showed how actors that are typically involved in climate finance flows under Article 9, such as bilateral agencies, development finance institutions, multilateral climate funds and MDBs, are also adopting measures/activities on aligning with the Paris Agreement and/or being consistent with Article 2, paragraph 1(c). Such efforts also include scaled-up provision and mobilization of climate finance as part of “alignment” efforts.
- Contextual information on the scale of climate finance and investments and means of implementation needed
- The needs identified and articulated by developing country Parties across adaptation communications, BURs, LEDS, NAPs, NAPAs, NCs, NDCs, TAPs and TNAs submitted to the UNFCCC encompass a wide range of financial, technology development and transfer, and capacity-building needs. The level of detail provided varies in terms of the description
13 Decision 1/CP.21, para. 71 and decision 9/CP.25, para. 9.
14 See UNFCCC SCF. 2021b. Fourth (2020) Biennial Assessment and Overview of Climate Finance Flows Technical Report. Bonn: Germany. para. 487. Available at https://unfccc.int/sites/default/files/resource/54307_1%20-%20UNFCCC%20BA%202020%20-%20 Report%20-%20V4.pdf.
15 See UNFCCC SCF. 2021b. Fourth (2020) Biennial Assessment and Overview of Climate Finance Flows Technical Report. Bonn: Germany. para. 488. Available at https://unfccc.int/sites/default/files/resource/54307_1%20-%20UNFCCC%20BA%202020%20-%20 Report%20-%20V4.pdf.
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of needs and their associated costs, if specified. While some Parties express costed needs for adaptation or mitigation purposes, others communicate needs at the activity or sector level.
- The first NDR16 prepared by the SCF provides an overview of qualitative (hereinafter referred to as needs) and quantitative information (hereinafter referred to as costed needs) on the basis of available data and evidence from reports at the national, regional and global level. As such, the first NDR does not constitute an assessment of the needs of developing country Parties: the numbers of reported and costed needs are higher in the reports of some countries than of others. This does not imply that the latter have no or fewer needs; rather, this may be due to the lack of available data, tools and capacity for determining and costing needs.
- COP 26 and CMA 3 noted that NDCs from 153 Parties included 4,274 needs, with 1,782 costed needs identified across 78 NDCs, cumulatively amounting to USD 5.8–5.9 trillion up until 2030, and that, although developing country Parties identified more adaptation needs than mitigation needs, more costs were identified for the latter, which may not imply that mitigation needs are greater but rather that there is a lack of available data, tools and capacity for assessing adaptation needs.17
- In addition to the needs outlined by Parties, various sources of information provide an indication of the overall scale of climate finance and investments and means of implementation needed to achieve the goals of the Paris Agreement, with these ranges being subject to various scenarios and projections (see also paras. IV.A.4(b)120–IV.A.4(b)124 below). For example, in its Special Report Global Warming of 1.5 ºC, the IPCC stated that global model pathways limiting global warming to 1.5 °C are projected to involve the annual average investment needs in the energy system of around 2.4 trillion USD2010 between 2016 and 2035.18 In addition, the World Energy Outlook 2021 of the International Energy Agency suggests that clean energy transition related investment would need to accelerate to around USD 4 trillion annually by 2030 in order to achieve net zero emissions by 2050 globally.19 The contribution of Working Group III to the forthcoming IPCC Sixth Assessment Report will also include a chapter on investment and finance, providing, inter alia, information on scenarios of and needs for investment and financial flows related to mitigation pathways and climate change action at the global and regional levels, and in developing countries.20 Other examples include regional and global reports, which also contain information and data on the needs of developing countries. For the mitigation needs of developing countries, these reports use a mix of climate economic modelling for scenarios of below 2 °C, ranging from USD 2.4 to 4.7 trillion in annual energy-related investment needs globally. For adaptation, costs based on bottom-up national and sector-based studies (ranging from USD 140 to 300 billion annually by 2030) measuring impacts to GDP (for example ranging from USD 289.2 to 440.5 billion up to 2030 in Africa) and the incremental investment needed to upgrade or retrofit infrastructure stock (ranging from USD 11 to 670 billion in annual incremental costs) are most prevalent. Furthermore, reports based on energy–economy models note that developing country regions have the largest investment gaps compared with historical trends to achieving climate scenarios in line with the Paris Agreement, with three- to fourfold increases of investment being required in both renewable energy and energy efficiency across many regions that include developing countries. Further information on the issue of investment needs can be found in the first NDR.
- Financial flows and stocks in GHG-intensive activities remain worryingly high, with fossil fuel investments amounting globally to USD 977 billion in 2017–2018, while fossil fuel subsidies amounted to USD 472 billion in 2018. At the same time, fossil fuel corporate capital expenditure at risk of becoming stranded amounted to USD 50 billion in 2018, while investments with deforestation risks amounted to USD 43.8 billion in 2017–2018, and net
16 Decision 4/CP.24, para. 13 requested the SCF to prepare, every four years, a report on the determination of the needs of developing country Parties related to implementing the Convention and the Paris Agreement, for consideration by the COP, starting at COP 26 and CMA 3. In line with this mandate, the first NDR is available at https://unfccc.int/documents/307595.
17 Decision 10/CMA.3 and 5/CP.26, para. 12.
18 See https://www.ipcc.ch/sr15/chapter/spm/, para. D.5.3.
19 See https://www.iea.org/reports/world-energy-outlook-2021/mobilising-investment-and-finance.
20 See https://www.ipcc.ch/report/sixth-assessment-report-cycle/ and https://www.ipcc.ch/site/assets/uploads/2018/11/AR6_WGIII_outlines_P46.pdf.
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agriculture subsidies amounted to USD 619 billion per year on average for 2017–2019. Fixed assets in sectors linked to fossil fuel systems amounted to USD 32 trillion, real estate assets at risk in 2070 amounted to USD 35 trillion, and stranded assets worth USD 20 trillion are at risk out to 2050. Therefore, and given the scale and speed needed for the transformation to low-emission and climate-resilient development pathways, it is critical to consider climate finance flows within the context of broader finance flows. A sole focus on positive climate finance flows would not be sufficient to meet the overarching objectives of the Paris Agreement. This does not mean, however, that broader finance flows must all have explicit beneficial climate outcomes, but points to the need to integrate climate risks into decision- making and avoid increasing the likelihood of negative climate outcomes.
- Against this background, significant growth in relevant initiatives has been apparent since the Paris Agreement, in particular in coalitions fostering collective commitments on climate action. Activities relevant to Article 2, paragraph 1(c), in many instances, are found in practices, coalitions and initiatives that predate the Paris Agreement itself. While policy and regulatory measures on green finance have been recorded since 1980, there has been a marked increase in such measures since the adoption of the Paris Agreement. More information on this subject matter is contained in the fourth BA and in section III.2 below.
- Methods and information sources
- Approach to and sources of information for the preparation of this report
- The approach taken in this synthesis report considers the relevant aspects and information sources available within and outside the UNFCCC process with regard to finance, technology, and capacity-building, in line with the mandates provided in the relevant provisions for the global stocktake (see section A above).
- Finance
- With regard to the issue of finance, this report draws from available information as reported by Parties in the absence of any agreed tracking framework on either Article 2 paragraph 1(c) or Article 9 of the Paris Agreement. The structure of information provided follows the relevant mandates as outlined in section A above. In line with the mandates outlined in section A, for the finance part of this synthesis report, the following sources of available information were used in the preparation of this report:
- The fourth BA of the SCF;
- The first NDR of the SCF;
- NDCs and related compilation and synthesis reports;
- NC, BR and BUR data and related compilation and synthesis reports;
- Biennial communications provided by Parties in line with Article 9, paragraph 5 of the Paris Agreement, and the related compilation and synthesis report.
- In compiling and synthesizing the information for this report relevant to finance, efforts were made to avoid duplications with the information to be provided by the SCF in response to decision 19/CMA.1, paragraph 24. Special consideration was therefore given to the information as provided by Parties in line with the various reporting guidelines under the UNFCCC. Furthermore, the information was compiled and synthesized in line with the guidance provided by the co-facilitators of the Technical Dialogue.
- Technology
- The technology development and transfer part of this synthesis report (section IV.B below) draws on the following sources:
- NDCs and related compilation and synthesis reports;21
21 FCCC/PA/CMA/2021/8/Rev.1.
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- BRs22 and related compilation and synthesis reports;23 24
- TNAs, TAPs25 and related compilation and synthesis reports.26
- Capacity-building
- With regard to capacity-building (section IV. C below), this report synthesizes information contained in the following documents:
- Revised synthesis report on NDCs under the Paris Agreement (October 2021);27
- NDCs under the Paris Agreement;28
- Compilation and synthesis of fourth BRs of Parties included in Annex I of the Convention;29
- Compilation and synthesis of third BRs of Parties included in Annex I of the Convention;30
- Comprehensive reviews of the implementation of the framework for capacity- building in developing countries31 and in countries with economies in transition;32
- Annual synthesis reports on the implementation of the framework for capacity- building in developing countries;33
- Annual compilation and synthesis reports on the capacity-building work of bodies established under the Convention and its Kyoto Protocol;34
- Annual reports on the Durban Forum on Capacity-building;35
- BURs of Parties not included in Annex I of the Convention;36
- NCs of developing country Parties.37
- The information provided in this report is intended to inform the Technical Dialogue, as mandated (see section A above). Furthermore, the Chairs of the subsidiary bodies have issued a non-paper that includes guiding questions for the Technical Dialogue (15 Sep 2021, updated in Feb 2022) which include the following questions relevant for this synthesis report,
22 Available at: https://unfccc.int/BRs.
23 FCCC/SBI/2020/INF.10 and FCCC/SBI/2020/INF.10/Add.1.
24 FCCC/SBI/2018/INF.8 and FCCC/SBI/2018/INF.8/Add.1.
25 Available at: https://unfccc.int/ttclear/tna/reports.html.
26 FCCC/SBI/2020/INF.1.
27 FCCC/PA/CMA/2021/8/Rev.1.
28 See UNFCCC interim NDC registry at: https://www4.unfccc.int/sites/ndcstaging/Pages/LatestSubmissions.aspx. Only NDCs received between the cut-off date of 12 December 2021 for the preparation of the revised synthesis report on NDCs and the cut-off date of 15 December 2021 for the preparation of this report were considered.
29 FCCC/SBI/2020/INF.10 and FCCC/SBI/2020/INF.10/Add.1.
30 FCCC/SBI/2020/INF.8 and FCCC/SBI/2020/INF.8/Add.1.
31 FCCC/SBI/2019/INF.17.
32 FCCC/SBI/2017/INF.5.
33 FCCC/SBI/2021/3, FCCC/SBI/2020/5, FCCC/SBI/2019/3, FCCC/SBI/2018/5 and FCCC/SBI/2017/3.
34 FCCC/SBI/2021/2 and FCCC/SBI/2021/2/Add.1, FCCC/SBI/2020/2 and FCCC/SBI/2020/2/Add.1, FCCC/SBI/2019/2 and FCCC/SBI/2019/2/Add.1, FCCC/SBI/2018/3 and FCCC/SBI/2018/3/Add.1, and FCCC/SBI/2017/2 and FCCC/SBI/2017/2/Add.1.
35 FCCC/SBI/2021/8, FCCC/SBI/2020/3, FCCC/SBI/2019/11, FCCC/SBI/2018/13, FCCC/SBI/2017/9
and FCCC/SBI/2016/4.
36 As reflected in annual synthesis reports on the implementation of the framework for capacity-building in developing countries.
37 As reflected in annual synthesis reports on the implementation of the framework for capacity-building in developing countries.
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which the information provided in this report aims to address, and which readers of this synthesis report may wish to bear in mind when considering this information:38
- What is the state of current global climate finance flows and the overall progress made towards making the financial flows consistent with the pathways towards low GHG emissions and climate-resilient development, in the light of equity and the best available science (Article 2, para.1(c) of the Paris Agreement)? (See section D below for specific information);
- What collective progress has been made towards provision and mobilization of means of implementation, including finance, technology development and transfer and capacity-building? (See section E below for specific information);
- What are the barriers and challenges, including finance, technology development and transfer and capacity-building gaps, faced by developing countries? (See section E below for specific information);
- What collective progress has been made towards achieving the long-term vision on the importance of fully realizing technology development and transfer in order to improve resilience to climate change and to reduce GHG emissions referred in Article 10, paragraph1 of the Paris Agreement? What is the state of cooperative action on technology development and transfer? (See section E below for specific information);
- What progress been made on enhancing the capacity of developing country Parties to implement the Paris Agreement (Article 11, paragraph 3 of the Paris Agreement)? (See section E for specific information).
- Overview of approaches used in the preparation of available sources of information, including information on definitions, methodologies, data gaps and uncertainties related to the transparency of climate finance
- This section provides insights into the approaches used in the preparation and communication of information in the available sources of information that this report draws from. Under the Convention, 24 Annex II Parties are required to provide information in their NCs, BRs and CTF tables 7, 7(a) and 7(b) on the financial resources provided to non-Annex I Parties.39 The other 20 Annex I Parties are required to submit NCs and BRs, but not required to provide information in CTF tables 7, 7(a) and 7(b) on the financial resources provided to non-Annex I Parties. However, many do voluntarily provide such information. An international assessment and review process is conducted with regard to the BRs of Annex I Parties. As a first step, expert review teams are established to assess the completeness of BRs in accordance with the reporting requirements, and a technical review report is prepared for each BR, taking into account the comments of the Annex I Party.40
- As at November 2021, 24 Annex II Parties had submitted BRs and CTF tables. Of the 20 other Annex I Parties that may voluntarily submit information, 13 had provided data on financial support in their CTFs. An in-depth overview of the methodological approaches taken by Parties in submitting information on financial support provided is included in the fourth BA, as well as in the compilation and synthesis of the fourth BRs.
- The “UNFCCC biennial update reporting guidelines for Parties not included in Annex I of the Convention” state that non-Annex I Parties should provide updated information on financial resources, technology transfer, capacity-building and technical support received from the GEF, Annex II Parties and other Parties that provide support, the GCF and multilateral institutions for activities relating to climate change, including for the preparation
38 UNFCCC. 2022d. Guiding questions by the SB Chairs for the Technical Assessment component of the first Global Stocktake. Revised questions, 18 February 2022. Bonn: Germany. Available at https://unfccc.int/sites/default/files/resource/Draft%20GST1_TA%20Guiding%20Questions.pdf.
39 Features of the current system of the MRV of support are described in a technical paper prepared by the secretariat, available at http://unfccc.int/sites/default/files/resource/docs/2017/tp/01.pdf.
40 See the UNFCCC guidelines for technical review of information reported under the Convention related to GHG inventories, BRs and NCs of Annex I Parties, in accordance with the reporting requirements contained in decisions 2/CP.17 and 19/CP.18.
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of BURs.41 However, there is no associated common reporting format, and the guidelines do not require information on the underlying assumptions, definitions and methodologies used to generate the information. Limited institutional capacity and resources to track climate finance received, as well as a lack of data, can pose challenges for non-Annex I Parties in reporting this information.
- According to the fourth BA, 63 non-Annex I Parties had submitted BURs as at December 2020. Not all BURs include information on finance received. A total of 55 non- Annex I Parties have reported on finance received across 86 BUR submissions. An in-depth overview of the scope and coverage of reporting on finance received in BURs is available in the fourth BA.
- CMA 1 adopted the modalities, procedures and guidelines for developed country Parties to report on the financial support they provide and mobilize and for developing country Parties to report on their finance needs and finance received. Other Parties which provide support should also provide such information and are encouraged to use the same modalities, procedures and guidelines. CMA 3 adopted the CTFs, as applicable, for use when Parties are due to submit their first BTRs under the Paris Agreement in 2024, as well as the definitions of underlying concepts and methodologies used in the reports.
Figure 1
Climate finance reporting with common tabular formats under the Convention and the enhanced transparency framework of the Paris Agreement
Definitional challenges related to climate finance
- Since the 2014 BA, the SCF has used the following core definition for climate finance to guide the work of the BA, based on a review of the climate finance definitions adopted by data collectors and aggregators, which pointed to a convergence that could be framed as: “Climate finance aims at reducing emissions, and enhancing sinks of GHGs and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts.” When determining the amounts to be reported as climate finance, different data providers and aggregators apply their respective operational definitions of climate finance.
- Operational definitions of climate finance in use generally reflect a common understanding of what is considered mitigation or adaptation finance but differ on the details of sector-specific activities, certain financial instruments and approaches to public and private finance flows. Operational definitions of climate finance in use have evolved over
41 See annex III to decision 2/CP.17.
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time; the MDB list of activities eligible for classification as mitigation finance included charging stations for electric vehicles and hydrogen or biofuel fuelling in 2017 and resource efficiency in aquaculture in 2018, whereas OECD DAC integrated adjustments to adaptation finance eligibility criteria in 2016 to harmonize with a stepwise approach developed by MDBs.
- The lists of climate mitigation activities developed by MDBs have served in part to inform green or climate-aligned taxonomies in recent years to support the development of the green bond market and regulatory efforts in the field of sustainable finance to combat greenwashing and promote the standardization of financial products. Approaches to defining mitigation and adaptation activities are broadly consistent across various international organizations and regulatory initiatives, although inclusion and exclusion lists and approaches to the criteria used to define such activities can vary.
- Methodologies to track, estimate and report climate finance vary widely in terms of what is counted, depending on the purpose and scope of the tracking exercise. An overview of key variables used in accounting for climate finance flows, including geographical scope, instruments, points of measurement, is provided in the fourth BA.
- COP 25 and CMA 2 invited Parties to submit their views on the operational definitions of climate finance for consideration by the SCF in order to enhance its technical work in the context of preparing the fourth BA. Thirteen submissions were received from Parties or Party groupings.42 A summary of their views is provided below:
- Current operational definitions used in the BA: some Parties noted that the current operational definition of climate finance described in the BA reports since 2014 remains valid, aligns with their views or is broad enough to encompass varying definitions in use. The form of the operational definition was also noted, with some Parties mentioning that a single definition would not be useful. Some also indicated that the operational definition was useful, as it was broad enough to cater for the dynamic and evolving nature of the definitions owing to a variety of factors, including:
- The way in which the bottom-up approach outlined in the modalities, procedures and guidelines for the enhanced transparency framework will be implemented over time;
- The way in which the need to track progress against the long-term goal in Article 2, paragraph 1(c) of the Paris Agreement will affect the scope of climate finance, with some Parties referring to the global stocktake of collective progress;
- The way in which methodologies and clarifications of definitions will evolve owing to greater data availability over time;
- Some Parties pointed to the use of a classification system or taxonomy over a single definition and referred to the development of a taxonomy or classifications external to the UNFCCC process or within their national sustainable finance frameworks;
- Other Parties noted how the lack of a common definition impacts the ability to track and assess the fulfilment of obligations of Annex II Parties under the Convention and of developed country Parties under the Paris Agreement. A common definition is needed not only in the context of preparing the BA but also for the overall transparency and effectiveness of the UNFCCC process. This, in turn, could have an impact on the linkage between levels of actions by developing countries and levels of support provided and, ultimately, the achievement of the objectives of the Convention and the Paris Agreement. In this context, two submissions proposed an operational definition, whereas other submissions proposed an operational approach to achieve greater convergence over time, based either on common principles or responses to a common set of questions to provide granular information;
42 As at October 2020, submissions had been received from the African Group of Negotiators, Alliance of Small Island States, Canada, Environmental Integrity Group, EU, Independent Association of Latin America and the Caribbean, Indonesia, Japan, LEG, Norway, the Philippines, Solomon Islands and Vanuatu. The submissions are available at https://www4.unfccc.int/sites/submissionsstaging/Pages/Home.aspx.
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- Coverage and scope: the submissions affirmed the focus on mitigation and adaptation objectives in operational definitions of climate finance, while some Parties also included references to finance for loss and damage (e.g. relocation) as one of the thematic areas under climate finance;
- Sources of finance: many Parties noted that climate finance may derive from a variety of public or private sources. Some noted that a significant portion of climate finance should derive from public funds and some noted that mobilized climate finance from private sources should be accounted for in a grant-equivalent manner. Some submissions referred to climate finance in both domestic and international contexts, in line with the overall scope of the BA, while several submissions defined climate finance flows as international funding only;
- Instruments: most submissions considered a variety of financial instruments as relevant to the operational definitions of climate finance, either by listing them (e.g. grant, equity, concessional loan, guarantee and blended finance) or by making a reference to the bottom-up approach of the modalities, procedures and guidelines, which includes similar instruments. One submission suggested including only grant and concessional finance instruments in a proposed definition, while another submission included a wide variety of instruments but noted that loans should identify the net or grant equivalent contribution once loans are repaid;
- New and additional climate finance: several Parties noted, with reference to Article 4, paragraph 3, of the Convention, that climate finance should be incremental in respect of ODA or exclude existing ODA, or should be in addition to the 0.7 per cent of gross national income committed by donors to development finance flows. One submission called for an operational approach to deciding whether and how to account for development aid classified as climate finance by either identifying a suitable baseline to assess what is new and additional funding or taking a formulaic approach to discounting. One Party noted that although there was a need for this differentiation within the context of the UNFCCC negotiations, at the implementation level it was difficult to differentiate climate finance from development finance. Other Parties noted that climate finance needs to be understood in the broader context of implementing the SDGs and the Addis Ababa Action Agenda on development finance and that methodologies to understand how much development finance is dedicated to climate action were improving;
- Other factors: many Parties noted the importance of tracking and monitoring climate finance to avoid double counting not only finance flows from provider to recipient countries but also from the national to the subnational levels, and to demonstrate its effectiveness and impact. Others noted how the impact of climate financing should be linked to enhancing implementation of climate policies, regulations and action plans to meet NDC targets. The importance of timely access to climate finance was also mentioned by several Parties.
- At COP 26 and CMA 3, Parties recognized that there is no multilaterally agreed definition of climate finance, noted the submissions outlined above, which highlighted that some Parties noted how the lack of a common definition impacts the ability to track and assess climate finance, while other Parties mentioned that a single definition would not be useful, and also noted that the operational definitions in use generally reflect a common understanding of mitigation and adaptation finance. Parties further requested the SCF to continue its work on definitions of climate finance, taking into account the submissions received from Parties on this matter, with a view to providing input for consideration by COP 27.43
43 Decision 10/CMA.3 and decision 5/CP.26, paras. 6 and 7.
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