Finance: Enabling the Full, Effective and Sustained Implementation of the Convention Through Long-Term Cooperative Action Now, up to and Beyond 2012

First,

Article 4 of the Convention requires developed country Parties in Annex II to meet developing countries’ agreed full costs of their national communications and the agreed incremental costs of Article 4(1) measures, as well as to assist developing countries that are particularly vulnerable to the adverse effects of climate change in meeting costs of adaptation to those adverse effects.

We have met both of these obligations in full, including through substantial funding for the Global Environment Facility (GEF). We have provided the funding necessary for developing countries to prepare national communications. And we have observed a relative balance between the supply of GEF climate focal area funding and demand. We look forward to examining as part of our review of the financial mechanism whether a lack of funding has affected the outcome of project proposals.

What’s more, the United States also has several proposals before our Congress for fiscal year 2009 to promote clean technology development, to help reduce emissions from deforestation, and to help countries adapt to the adverse impacts of climate change. We would note these proposals are in line with Article 11(5) of the Convention, which states that developed country Parties may also provide financial resources through bilateral, regional and other multilateral channels.  We proposed these activities independent of this negotiating process.

This leads to our second point: Our new efforts need to be based in reality and to leverage existing private and institutional funding.

Today, private capital is more widely distributed among Annex I and non-Annex I Parties. Foreign direct investment (FDI) is another important source. Between 1990 and 2005, net FDI inflows for non-Annex I Parties increased by almost a factor of ten. We are interested in exploring options for funding mechanisms that take into account this new reality of international financial capacity. Moreover, there are many domestic and international institutions already providing financing and expertise for climate change activities.

We would suggest that our discussions should focus on three questions:

• One, how can governments encourage the flow of private capital towards the objectives of the Convention?

• Two, how do we ensure that our resources go to the highest priority actions, and that we get performance for our investments?

• And three, how to do we leverage and integrate any financing solution with existing institutions and strategies in order to maximize the advantages of existing resources and expertise?

Our third point is that the only way to approach funding is to decide on the "What" before we think about the "How".

The "What" is new actions to reduce greenhouse gas emissions. Financing is one of the "Hows": a means of supporting these new actions. We clearly cannot commit to new funding unless we understand what it is we will be funding. And, enhanced funding implies enhanced actions from developing countries.

We have traditionally agreed to meet those costs that specifically address global environmental benefits accruing as a result of the action. This is especially so here—the UNFCCC is a climate change convention, not a development aid convention.

We also note that with scaling-up public financial resources will also be accompanied by increased scrutiny from appropriating entities and from the taxpayers who are asked to foot the bill. We need to bear this in mind as we consider various proposals for new funding mechanisms.