Financing INDCs’ implementation?

unfccc_indcIntended Nationally Determined Contributions (INDCs) were intended to be a way to clarify how each Party to the United Nations Framework Convention on Climate Change (UNFCCC) could contribute to averting dangerous climate change and demonstrate progress from their current position. To date, much analysis of INDCs has understandably focused on the ambition and, in the case of mitigation, the likelihood of achieving goals in the context of current policy and economic trends.

An impressive numbers of INDCs are now submitted to the UNFCCC during the Paris Summit and now the most relevant question, faced by the parties is- how to implement it? Indeed, finance, technology and capacity can be the difference between achieving – or perhaps even exceeding – commitments, or failing to meet them. Therefore, a critical gap assessment is necessary within the countries on availability of resources, technologies and capacities to implement.

One of the key concern and gaps on implementation of INDCs is financing. This is a contested issue, both from the perspectives of ‘source of financing’ and lack of coherent information on mobilizing and utilization of resources. It is unlikely that GCF’s target of US$100 billion of finance by 2020 from a variety of sources (as agreed in Copenhagen), will be enough to meet the full cost of INDCs implementation, including low-emission climate-resilient development in developing countries. In addition, there is little point in pumping international money into climate-compatible development, if wider investment in recipient countries continues to support a ‘business as usual’ (BAU) trajectory. The final outcome text of the 2015 Financing for Development conference recognized, that funding from all sources – public and private, bilateral and multilateral, as well as alternative sources – will need to be increased for investment in many areas, including low-carbon and climate-resilient development[1].

Therefore, a standalone climate financing model to fund INDCs’ implementation may not be logical. Rather, countries need to strengthen its domestic financing instruments as well as engage private sectors. A clear and practical resourcing strategy to achieve these development ambitions is needed. One ideal approach for developing this resourcing strategy for INDCs implementation could be to map out the financial situation of countries, as well as detailed mapping of the financing situation in the priorities sectors of INDCs, both public and private:

  • Financial needs for growth and development– based on the macro and sector objectives, and focus on types and magnitudes of capital required over time. This should include estimates of CAPEX and OPEX.
  • Financing gaps and constraints – what current levels of capital, what are the limits to sources of existing capital sources such as regional block grants, federal grants or borrowing and what is the estimated financial gap for implementation of plans
  • Financing options – what public and private financial mechanisms are available for these plans, how much capital could they generate and what are the major risks?
  • Financing sources – for each mechanism, what sources are available and how much (by transaction and in total) can they reasonably supply? Which types and sources of finance are most suitable for the specific countries?

There are also issues of capacity gaps for managing the financing and implementation of INDCs. The development partners and in particular the UNFCCC needs to provide these supports to the parties to bridge up this gap.

Keshav C Das

Feb 9, 2016

[1] From para. 60 of the final text of the outcome document adopted at the Third International Conference on Financing for Development, Addis Ababa, 13–16 July 2015, and endorsed by the General Assembly in its resolution 69/313 of 27 July 2015

Picture source: UNFCCC

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