18TH CONFERENCE OF THE PARTIES TO THE UN FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC) Doha, Qatar (26 November - 7 December 2012

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PAKISTAN’S POSITION ON FINANCE Context Enhanced provision of climate finance remains unresolved. It is a defining issue for a restructured climate regime within the UN Climate Change negotiations particularly since the adoption of Durban Plan of Action (DPA) and the negotiations that have taken place since then. The commitment by the developed countries to provide financial resources to the developing countries is an obligation stipulated in the Article 4 of the 1992 UN Framework Convention on Climate Convention (UNFCCC), and reiterated in the Kyoto Protocol of 1997 in accordance with Rio principle of Common but Differentiated Responsibilities. 2. As a country vulnerable to the adverse impacts of climate change, our reliance on provision of finance to manage and undertake Nationally Appropriate Mitigation Actions (NAMAs) as well as Adaptation is consistent with the principle and legal provisions embedded in the Framework Convention. It is in our national interest to ensure that such provisions are enhanced, defined and institutionalized in a manner that does not constrict Pakistan’s ability to counteract the growing climatic impacts on Pakistan especially in the area of adaptation that remains a priority action. 3. Pakistan has played a prominent and active role in defining the essentials of a global agreement on climate finance as well as in the evolution of institutional arrangements to manage it. Notably, Pakistan has chaired the negotiations for Finance building block during 2008-2009; secured membership of the Adaptation Fund Board and acted as its Chairperson during 2010-11, led the negotiations on the agreement on establishment of Green Climate Fund and the Standing Committee on Finance at CoP-16 (Cancun); was a member of the Transitional Committee to Design the Green Climate Fund (GCF) and later led in Developing Countries in negotiating the operationalization of the GCF and the Standing Committee on Finance. Pakistan is presently serving as an alternate member of the GCF and a member of the Standing Committee on Finance. 4. Given our active engagement both in negotiations and in the international institutions dealing with climate finance, we have managed to secure international financing notably through the Adaptation Fund for Reducing Risks and Vulnerabilities from Glacial Lake Outburst Floods in Northern Pakistan (GLOF) Project and Global Environment Facility for projects: (i) Sustainable Transport; (ii) Sustainable Land Management for Combating Desertification in Pakistan; (iii) Regional Barrier to the Cost Effective 1

Development and Implementation of Energy Standards and Labeling, etc. Our National Environment and Economic Development Study (NEEDS) in Pakistan commissioned by the UNFCCC, has clearly put a price tag on future mitigation and adaptation needs of Pakistan in the range of USD 8 - 17 billions and USD 6 – 14 billions respectively for the period till 2050. The successive floods of 2010, 2011 and 2012 have all had climate triggers including enhanced glacial melting and spatial shifts in the yearly monsoons. Moreover, the price tag has been U$ 10 billion in 2010 and U$ 7 billion in 2011, which, ironically, closely follow the NEEDS, forecast for climate adaptation finance needs for Pakistan. 5. Securing enhanced and positive results from our engagement at the international level, necessitates several corrections in the national context to build on the good will and political importance that Pakistan delegation has managed to achieve in the climate change framework. This paper outlines Pakistan position at the forthcoming CoP-18, Doha, Qatar i.e. identifying challenges in the domain of finance; what are and could be the potential sources and avenues of enhancing funding for both mitigation and adaptation actions by the developing countries; our strategy to access and benefit from these resources; our ability to generate public resources for climate change and our potential to leverage additional resources from the private sector and national development banks. Background 6. In 2007, the Bali Action Plan (BAP) called for enhanced action for implementation of the Conventions. Enhanced provision of finance to support mitigation (NAMAs) and adaptation actions was agreed as one of the four building blocks, negotiations for which have been conducted in the framework of the Ad-Hoc Working Group on Long Term Cooperative Action (AWG-LCA) since 2007. In accordance with the BAP, the negotiations were to conclude by 2009 at Copenhagen (COP-15) by adopting an “agreed outcome”. The socalled “Copenhagen Accord” lacked consensus and in the face of widespread opposition largely from the developing countries, it was merely taken note of by the Conference. 7. Notwithstanding the above, Copenhagen Accord did lead to a political commitment on the part of developed countries to mobilize jointly US $ 100 by 2020 in the context of meaningful mitigation actions and transparency on implementation to address the needs of developing countries. 8. The Cancun decisions (pertaining to finance) adopted at COP-16 managed a defined progress building on the above-mentioned Copenhagen political pledge. It adopted two goals and established two new institutions. The goals included; developed countries collective agreement to provide US $ 30 Billion in fast start finance to developing countries during 2010-2012; and mobilizing US $ 100 Billion a year in public and private finance by 2020. 9. The institutions established at Cancun included; the Green Climate Fund (GCF) which was to be designed by the 40 member Transitional Committee; and the Standing Committee on Finance to assist the COP in 2

improving coherence and coordination in the delivery of climate change financing, rationalization of the financial mechanism, mobilization of financial resources and measurement, reporting and verification of support provided to developing country Parties. Both the institutions were operationalized at Durban (COP-17) held in December last year. Assessment and the Current Status of negotiations 10. Notwithstanding the broad progress, the agreements so far reached in the context of Climate Finance fails to resolve the politically protracted issues to include questions related to Climate Finance being new and additional, scaled up, predictable, adequate, improved access, balanced allocation, sources (public or private, bilateral or multilateral) including alternative sources. 11. The controversy surrounding the delivery of climate finance remains mired in contradictory claims and divergent approaches both from the developed and the developing world. On the one hand and from the perspective of the developed world, the Fast Start Finance of roughly US $ 30 billion has actually been met. On the other hand, the developing world has questioned that Fast Start Finance did not meet the agreed requirements i.e. additional, balance in mitigation and adaptation and its delivery through international institutions. Also, lack of political commitment on part of the developed country parties to commit new and additional, adequate and predictable sources of finance both for mitigation and adaptation coupled with worsening international economic turbulence has a direct impact on commitment to funding. Contrary to the promises, the international economic environment for climate finance presents a sharp contrast. 12. While the progress on climate finance could be lauded from the perspective of institutional arrangements, in terms of actual commitments and delivery of finance, it is far from satisfactory both from our national perspective and from the perspective of the developing world. While important institutional developments have finally taken a place, these institutions with requisite means of implementation would merely be empty shells. 13. The core issues under Finance negotiations includes; a. Assessments for Finance required to meet the needs of developing countries for both mitigation and adaptation actions. There is a fair amount of controversy that the figure of USD 100 Billion was conceived for only targeting mitigation and that too falls far short of the requirement for meeting the 2 degree Celsius goal by 2020 and does not target Adaptation. The question of mid-term finance between 2013 and 2020 adds another layer to the level of ambiguity in the finance debate. It would be interesting to see how this confusion around finance is removed in the ongoing climate talks. This can only happen if developed countries clarify by putting on the table concrete 3

b.

figures for the mid term as well as long term finance beyond 2020 if they are serious in meeting their commitment towards 2 degree Celsius target. Standing Committee on Finance 14. Due to late confirmation of nominations from the Asia-Pacific Region for the Standing Committee on Finance (SC), the Committee has met twice in a record time of less than a month i.e. from 6-8 September, 2012 in Bangkok and from 4-6 October, 2012 in Cape Town. The report of the Standing Committee contains information and recommendations on the work of the Committee, list of nominated SC members, Work Program of the SC for the period 2013-2015, the preliminary elements of the Forum for the communication and continued exchange of information among bodies and entities dealing with climate finance and the Standing Committee’s revised composition and working modalities. It was decided that the forum would be delivered through a dual modality: in person (once per year) and virtually (on a continuous and ongoing basis). Based on its work program, the SC is preparing a more detailed annual operational plan with budgetary implications. The SC decided to admit observers from Parties and all accredited observers with the Secretariat including observers from the operating entities of the financial mechanism of the Convention, from funding entities (multilateral, bilateral, regional and national) involved in climate finance and from observer organizations from the private sector and civil society, to attend SC meetings in order to observe and participate in the proceedings of the Committee. The SC also agreed that it may at a later stage further elaborate its modalities to facilitate its future work. Long Term Finance 15. Two workshops and two webinars have been held on the issue of Long Term Finance which were well participated by stakeholders including public, private, multilateral and regional development agencies and civil society organizations. The Co-chairs report will be presented to the CoP-18 for consideration. Green Climate Fund (GCF) 16. The GCF Board comprises of 24 members (12 each from the developed and developing countries) and an equal number of alternates, has so far held two meetings: in Geneva in August and in Songdo, Incheon City, October, 2012. GCF once established will become the premier institution in channeling climate finance. Initial replenishment is expected to be USD 3 – 4 billions and by 2020 the GCF should be able to channel roughly USD 20 – 25 billions towards the developing countries based on their ability to conceive and implement programs and plans of action. 17. The Board has been undertaking discussions on organizational and institutional aspects of the Fund i.e. Host Country of the Fund, budget, hiring of staff, operational policies, transparency and rules of procedure. Several donor countries have laid emphasis on the need for launching “readiness” 4

programs to build capacity of the countries to access funding from the GCF. In this regard, Germany, Denmark and Australia have informed that together with some countries they have made budgetary allocations to the tune of USD 200 million to initiate capacity building programs. It has been learnt that United Kingdom, USA, Norway and Sweden are also considering investing in readiness initiatives. Such initiatives will remain under the bilateral arrangement till the Fund becomes completely functional. The readiness and capacity building initiative would aim at evolving National Plans of Action (NAPAS) on Adaptation and Nationally Appropriate Mitigation Actions (NAMAS) and policies and programs to promote the role of private sector to address challenges of climate change. Hosting of GCF 18. The GCF Board during its second meeting selected Songdo, Incheon City, in the Republic of Korea to host the GCF. Initially six countries, namely, Germany, Switzerland, Republic of Korea, Namibia, Mexico and Poland contested for hosting of the GCF. A six member committee comprising of India/Pakistan, Egypt/DRC, Belize/Cuba from the developing countries and USA, UK and Norway from the developed countries was established to only give opinion on whether a bid meets the requisite criteria or not, instead of assigning weightage numbers or ranking. Germany, Switzerland and Republic of Korea remained the front runners. Germany offered to provide more than 8 million Euros each year to finance operations of the Fund. Republic of Korea besides other incentives offered USD 6 million and the Swiss had offered USD 14 million in support of the GCF for the next three years. Arrangement between the GCF with the COP 19. One of the contentious issues under the Finance debate is the arrangement between the Green Climate Fund and the CoP. The developed countries are adamant on giving the Fund more independence and autonomy in performing its functions whereby the COP would only be informed about the activities of the GCF. On the other hand, the developing countries want to see the GCF being accountable and responsible to the CoP in the delivery of its mandate. There is a general feeling amongst the developing countries that if the authority of COP over the GCF is not established, there is every likelihood that the new Fund would function more on the lines of the World Bank and the IMF where the big powers having the financial resources would ultimately exercise their authority in the decision making process regarding financial matters. The GCF contrary to its vision would be another parallel structure similar to the Bretton Woods institutions. The issue was discussed at the Standing Committee and it was agreed to seek clarification from the COP on the arrangements and between COP and GCF and guidance for GCF. Policy Options General guideline for the delegation 20. Following are essential for the new global agreement: 5

a.

Maintaining the legal nature and status of the commitments on finance and integrating it in the Durban Plan of Action negotiations; Mandating, the Standing Committee on Finance to undertake quantitatively and through credible estimates of the costs of mitigation and adaptation actions; Pushing for sectoral allocations of funds, particularly in the area of energy, slow onset events/disasters given the absence of National Programmes of Action on mitigation and adaptation in Pakistan; Maintaining that eligibility criteria and determining the special needs of climate vulnerable developing countries must not be limited to Small Islands and Least Developed Countries; Pushing for formal financial pledges to the new institutional arrangements to channel funds such as GCF.

b.

c.

d.

e.

International Context 21. Pakistan has contributed actively and constructively during the negotiations on climate finance as a member of the G77, helping to evolve common positions in the face of widening divisions among its members as well as between the G77 and the developed countries in the negotiations. The adoption of proposal made by Pakistan to establish a Standing Committee on Finance was a clear manifestation of its role. Pakistan delegation must maintain its constructive leadership on this issue within G-77. Pakistan’s association with Like Minded Group should further strengthen our lead on the issue rather than retard our significance. 22. In the context of issues to be addressed at Doha, we should: a. Seek for a decision on the sources and scale of long-term finance. The report of the Co-Chairs on the Workshops and Webinars on Long Term Finance (LTF) and elements of Work Plan are due for submission. While we need to carefully review the contents of this report, possible elements of our position on the issue of LTF are the following: i. Primary source of funding from developed countries must be public funds and private sector funding should only supplement public sources. The developed countries must table concrete figures for LTF. Adaptation – mitigation division of committed funds is essential to ensure that adequate focus is given to adaptation financing. 6

ii. iii.

iv.

We should not lose sight of the mid term targets while defining long term finance. These targets must be clearly stipulated and agreed upon. Innovative sources of finance with clear recommendation for balanced approaches such as imposition of levy on international financial transactions and other alternative sources such as levies on bunker fuels and aviation consistent with principle of Common but Differentiated Responsibilities and their imposition only after clearly defining and estimating the issue of incidence on developing countries. Defining the application of CBDR on alternative and innovative sources of funding; Role of UNFCCC in providing policy advice and institutional support for identifying alternative sources of funding.

v.

vi. vii. b. c.

Emphasize that the GCF must be accountable and work under the guidance of the COP; Seek mandate for the Standing Committee on Finance to define arrangements between the GCF and the COP. GCF could be asked to outline its elements for such an arrangement to be concluded and finalized by the COP.

National Context 23. Depending on the level of political participation, our agenda on Finance would also seek to undertake bilateral engagements with a view to securing financial and technical support on the following elements: a. Establishment of National Climate Change Fund. To this end, it is proposed that at Doha high level political/bilateral engagement will be sought with the World Bank, Asian Development Bank, the European Union, China and Global Environment Facility (GEF) based on the attached Terms of Reference; Evolving a national strategy for engaging private sector both in mitigation and adaptation. To this end, we will bilaterally approach Germany, France, Sweden, Denmark and Norway; Evolving a National Plan of Action to build NAMA Framework. To this end, bilateral engagement will be sought with UNFCCC, Center for Clean Air Policy, World Resource Institute (WRI), USAID, Japan, Republic of Korea and Australia (AUSAID).

b.

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