The Durban Deal: Time for Private Sector Leadership?

By Thomas Kerr and Brindusa Fidanza* 

In the late hours of the climate change negotiations in Durban, South Africa, a few decisions have been reached by the Conference of the Parties (COP17). They include (http://unfccc.int/2860.php):

On future commitments to replace those made in the Kyoto Protocol and the Copenhagen Accord

The Parties struck agreement to develop a new treaty that renews the Kyoto Protocol, the fraying 1997 emissions agreement that sets different terms for advanced and developing countries, for several more years.  They also agreed to begin a process—known as the Ad Hoc Working Group on the Durban Platform for Enhanced Action—that will aim to replace the Kyoto agreement with something that treats all countries — including the economic powerhouses China, India and Brazil — equally. This ad hoc working group will consult with Parties and stakeholders and develop new proposals for commitments by no later than 2015, with the expectation that the first commitments will come into effect in 2020.  Parties and observers were invited to submit new ideas by February 2012 on “proposals for increasing ambition and possible further actions.”

Analysis:   While the negotiators managed to squeeze out what looks to be a positive outcome, most commentators feel that political environments in the countries that are large emitters (China, India, the United States) will continue to frustrate any real progress in adopting binding greenhouse gas reductions.  As such, we are not much further along on addressing the growing risk of global climate change than we were when we began the Durban process two weeks ago.

On the Green Climate Fund

The Parties approved the governance principles for the GCF.  Highlights include:

• Governance agreement for the Fund, GCF, which will provide US$ 100 billion to fund mitigation and adaptation in developing countries;
• Korea offered initial funding to establish an interim secretariat at the UNFCCC, working with the Global Environment Facility, but no real funding has been allocated toward the $100 billion;
• The GCF will be governed by a Board made up of 24 governments, split equally between developed and developing countries.  Stakeholders are invited to participate as observers (including 2 civil society and 2 private sector representatives, one each from developed and developing countries);
• The Board will Develop environmental and social safeguards and fiduciary principles and standards;
• The Board will have thematic windows (eligible activities include adaptation, mitigation, REDD-plus, technology development and transfer (including CCS), capacity building and the preparation of NAMAs);
• The Board will establish a framework for the monitoring and evaluation of performance;
• The GCF will receive financial inputs from developed country Parties but others (developing, foundations, private sector can submit funds);
• The Board will develop methods to enhance complementarity between the activities of the GCF and the activities of other relevant bilateral, regional and global funding mechanisms and institutions. The Fund will promote “coherence” in climate funding at the national and international levels.
• The Fund will have a private sector facility that enables it to directly and indirectly finance private sector mitigation and adaptation activities, and will seek to catalyse additional public and private finance through its activities;
• Access to Fund resources will be through national, regional and international implementing entities accredited by the Board. Recipient countries will determine the mode of access;
• The GCF will provide financing in the form of grants and concessional lending; financing will be tailored to cover the identifiable additional costs of the investment necessary to make the project viable. The Fund will seek to catalyse additional public and private finance through its activities at the national and international levels.
• A results-based approach will be an important criterion for allocating resources; programmes and projects funded by the GCF will be regularly monitored for impact, efficiency and effectiveness in line with rules and procedures established by the Board; and
• The Board will develop mechanisms to promote the input and participation of stakeholders, including private-sector actors, civil society organizations, vulnerable groups, women and indigenous peoples.

Analysis:  The agreement on GCF governance is an important step forward, as it gets the process started by establishing a secretariat at the UNFCCC and outlines the types of activities that will be funded.  Further, the Parties did explicitly state aims to both bring more coherence to the international climate finance landscape and to leverage private sector investment—both goals that the World Economic Forum have been advancing as key to a successful Fund.

However, major questions remain, most notably the lack of commitments by countries to contribute to the $100 billion initial funding.  Further, the governance agreement contains language that could prove quite contentious and difficult to implement.  For example, the language stating that “financing will be tailored to cover the identifiable additional costs of the investment necessary to make the project viable” sounds very close to the criterion of “additionality” from the Kyoto Protocol’s Clean Development Mechanism, which proved in practice to be a complicated and expensive aspect that prevents many good projects from moving forward.  In addition, while the private sector is explicitly mentioned, it is more of an afterthought (the Board is comprised of 24 government representatives with observers from the private sector and civil society).  Given the significant role that the private sector needs to play in financing low-carbon infrastructure, corporate representatives should be given full Board membership.

Much remains to be done. Initiatives, partnerships and iconic projects at national level, such as the work that was highlighted at the World Economic Forum/South African government Durban Growth Series, need to be strengthened in order to instill a “can do”, optimistic perspective to complement what individual governments can bring at the negotiating table. Bringing together public and private sector in developing country contexts can continue to provide opportunities to scale up collaborations at the national level. The climate change negotiations must capture, encourage and quickly ramp up these sorts of “bottom-up” efforts. Failure to do so will continue the world on its high emissions trajectory to 2020, with potentially dangerous consequences.

*Thomas Kerr is Director, Head of Climate Change Initiatives at the World Economic Fourm

*Brindusa Fidanza is Associate Director, Deputy Head Climate Change Initiatives at the World Economic Forum