The 2019 Annual Meetings of the African Development Bank Group will be held from 11-14 June 2019, in Malabo, Republic of Equatorial Guinea. Find out more
A race against time
Gareth Phillips is Chief Climate Change and Green Officer in the AfDB Environment and Climate Change Division. His background is in forestry and sustainable resource management; carbon market mechanisms including Clean Development Mechanism and Joint Implementation; emission trading schemes and the international climate negotiations; climate finance and green growth.
Results-based finance is a mechanism that enables an “off-taker” to pay a “project developer” for the delivery of specific results. For a results-based payment mechanism to work, four key elements are required
The challenge of the Paris Agreement is “to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”. It’s a 50-year marathon, made up of successive five-year sprints, and we need to approach it as such.
In the run-up to 2015’s historic COP21, there was a lot of debate about the role carbon markets should play in the final negotiated Paris Agreement. Many, myself included, called for inclusion of carbon trading; and I recall a general sigh of relief when Article 6 of the Agreement was accepted, seemingly creating space for a new carbon market mechanism (Article 6.4) and transfer of International Mitigation Outcomes (ITMOs) (Article 6.2).
The imbalance in investment in adaptation and mitigation is both well documented and logical. The Multilateral Development Banks, for example, report that 80% of climate finance is tagged as mitigation whilst only 20% is adaptation, and that comes from institutions whose mandate is development. For the private sector, there is no obvious or easy return for investing in technologies that improve public health or air quality, or provide long term flood defenses or irrigation services to subsistence farmers. These are public goods that are traditionally provided by public funds.
Article 6 of the Paris Agreement makes provision for the development of both market and non-market mechanisms. While there is no formal definition of a market and a non-market mechanism, one may suppose that market and non-market mechanisms could share a common basis of how to methodologically determine baselines and estimate climate outcomes. The verification process could also be similar. The key difference could be that non-market mechanisms do not result in universal and internationally tradable units that could be re-sold and be subject to market price fluctuations and speculation. It may be assumed that non-market-based mechanisms is an umbrella for a variety of climate policies, measures and actions that could not be described as market mechanisms.
The December 2015 Paris Agreement on climate change is a global treaty in which all participating countries agree to do what they can to contribute towards “holding the increase in global warming to well below 2°C above pre-industrial levels and pursuing efforts to limit it to 1.5°C above pre-industrial levels”. Specifically, countries agree to do this through their Nationally Determined Contributions (NDCs) to be submitted every five years to the UN Climate Change Convention.
The Pilot Program for Climate Resilience (PPCR), the Climate Investment Funds’ (CIF) resilience program for low-income countries, is a bellwether for today’s emerging renovation of the global climate finance architecture. Its role as a preeminent global public sector program funding adaptation to climate change must be reviewed in light of the advent of the Green Climate Fund (GCF), which is aiming to direct 50% of its funds to adaptation.
Positive GDP growth has occurred across the continent for many years with bright spots in North, East, West and Southern regions which clearly show that development is spreading. Initiatives to promote energy such as the New Energy Deal for Africa recently launched in the African Development Bank, the Africa Renewable Energy Initiative, Sustainable Energy 4 All (SE4ALL) and SEFA and CTF under the Climate Investment Funds are just some of the large scale initiatives promoting various forms of energy across Africa. The recent Economic Community of West African States (ECOWAS) renewable energy competition hosted by the AfDB showed that there is no shortage of small scale and innovative initiatives being promoted by avid entrepreneurs.
Under a post 2020 climate regime, all countries will have the opportunity (obligation?) to develop and implement effective policies and measures to help meet their climate change commitments. Carbon markets have had a chequered history but their time could be approaching. Here are seven steps to create a carbon market which can be implemented approximately sequentially over a timescale of 5 to 15 years:
The US$100 billion additional finance unveiled in the run-up to CoP21 is an important sign of commitment from developed countries. In fact, many developing countries see it as the single most important issue for the Paris COP. However, while it's a significant sum, there is a danger that if we focus too much on it, we'll miss the real event.
You may be forgiven for thinking that Intended Nationally Determined Contributions or INDCs are just another UNFCCC requirement to add to a long list of reports and official submissions on the UNFCCC website which consume resources in hard-pressed finance, planning and environment ministries.