CLIMATE CHANGE FINANCING

13 October, 2010
David Sheppard – Director, SPREP
 AIMS OF PRESENTATION

A) Outline the context for Climate Change

Financing in the Pacific Region

B) Outline preliminary findings of the SPREP Study

on Climate Change Finance

C) Identify key principles relating to climate change

finance, and next steps
(A) The context for Climate
Change Financing in the
Pacific Region
 CONTEXT FOR CLIMATE FINANCE
• Pacific leaders have consistently identified Climate Change as
the greatest challenge facing Pacific Island Countries,
underlining the vulnerability of Pacific Islands and the need
for urgent action. They have given many clear directions; for
example:
• The 2010 SIS leaders meeting asked the Forum Secretariat
and SPREP to facilitate the development of a regional
financing modality to administer, manage and monitor the
influx of funding T he 2010 Leaders Meeting tasked Forum
Economic and Environment Ministers to advise on options
to improve access to, and management of climate
change resources.
 KEY MESSAGES ON CLIMATE FINANCE

• The priority is to ensure adequate finance to implement

practical and relevant actions at the national level to
adapt to climate change
• Funding for Pacific Countries must be hugely scaled up . It
must be new, predictable and sustainable
• Commitments, such as those in the Copenhagen Accord,
must be met and progress towards meeting these
commitments must accelerate
• Climate Change is an issue of environmental change - but
it has many implications – political, moral and economic
 Vulnerable sectors in Kiribati

Bio-
Water Social
Food diversity
resource Coasts Health Dimensio
security based
security n
resources

NATIONAL SECURITY
 KEY MESSAGES ON CLIMATE FINANCE

• Environment Ministers (Madang 2010) supported the

principle of a Climate Change Financing Mechanism. But
more information is required and this should be seen as
the means to an end not the end point, which is the
delivery of finance quickly and effectively to meet
identified national and regional needs
• Donor support must recognize and support existing
processes and policies, such as the Pacific Plan, PIFFAC
and the Climate Round Table, and national development
and climate plans, including NAPAs
 KEY MESSAGES ON CLIMATE FINANCE

• Better information on Climate Change funding amounts and

options, including a Financing Mechanism, is essential
• It is essential to better coordinate efforts at regional, and
national levels as well as between donors
• A balance of financing for adaptation, mitigation and policy
support will be required, with increased emphasis on
adaptation and building resilience
• Mechanisms for improved and enhanced country access to
climate funds are required
 KEY MESSAGES ON CLIMATE FINANCE
• Pacific Countries want a strong and effective Legally
Binding Agreement from the UNFCCC, with strong and
clear targets and long term and adequate financing
ensured. SPREP and other CROP agencies must continue
to support Pacific Countries at Cancun and beyond
• At the UNFCCC meeting in China there was some
questioning about which countries are the most
vulnerable, with some countries questioning language
from the UNFCCC COP at Bali (SIDS, LDCs and African
countries suffering from desertification) . We must
continue to argue the unique case of the Pacific in terms
of its vulnerability as well as its size and isolation.
How big is the Pacific region?
 Climate impacts on coral reefs
 At a temperature increase of 1.5 small islands will
encounter severe climatic stresses – coral reefs will bleach
and eventually die at 2 degrees

Global mean temperature will increase in a variable

manner so localised impacts may be more intense than just 2
degrees increase
(B) Preliminary findings of
the SPREP Study on Climate
Change Finance
 BACKGROUND ON CLIMATE FINANCE STUDY

• Pacific Leaders have established a framework within the

Pacific Plan for action on Climate Change – the PIFFAC –
the Pacific Islands Framework for Action on Climate
Change 2006 – 2015. This outlines a policy framework and
a number of actions for the region. A mid term review has
been recently undertaken of PIFFAC, which has
recommended a number of improvements and
adjustments
• The PIFFAC establishes a Pacific Climate Change
Roundtable which has met in 1997 (Apia) and in 2009
(Majuro).
 BACKGROUND ON CLIMATE FINANCE STUDY

• SPREP was requested by the 2009 Roundtable in Majuro to

develop a study to: consider establishment of a Pacific
Regional Climate Change Fund or funding modality, including
capacity for technical backstopping and facilitation
mechanisms.
• The study has involved review of past reports and
experiences, and there has been wide consultation within
the region
 BACKGROUND ON CLIMATE FINANCE STUDY

• A draft is still under preparation and will be tabled at the

Finance and Economic Ministers Meeting in late October
2010 and widely circulated for review in the region
• The report will be revised following review comments and
will be finalised at the 3rd Climate Roundtable in Niue in
March 2011. Recommendations will be brought forward for
consideration of the 2011 Forum Leaders in September,
2011.
THE CLIMATE FINANCE STUDY WILL COVER

(1) An assessment of the current situation with regard to

resources available to PICs for Climate Change initiatives at
national and regional levels;
(2) Analysis of options for a Pacific Region Climate Change
Funding Facility/Mechanism that will support PICs and
Donors decisions in this area;
(3) Pros and cons of instituting a regional backstopping
mechanism as an adjunct of the Funding Facility/Mechanism
or a stand alone mechanism
(1) Current situation with regard to resources for Climate
Change.

• The study notes that current spending in the Pacific on

Climate Change is in excess of US $200 million in total
• This is a huge shortfall when compared with the money that
is needed to respond to Climate Change
• It is anticipated that future funding will represent a quantum
increase over existing funds. Funding will come from an
increasing number of sources
(1) Current situation with regard to resources

• Copenhagen Accord agreed that developing countries shall

aim to provide US$30 billion for 2010-2 for adaptation and
mitigation
• Accord commits developed countries to a “goal” of
mobilising US$100 billion a year by 2020 to support climate
change efforts by developing countries
• Of the $30 billion promised by developed countries under
the Copenhagen Accord Fast Start only 13% (3.9 billion) has
been provided so far
(1) Current situation with regard to resources

• There are many existing and future proposals to finance

Climate Change in the Pacific. These will be documented in
the study. They include:
• Multilateral funding sources such as the UNFCCC Adaptation
Fund ($300 to 600 million by 2012, the Global Environment
Facility ($48.8 billion supplemented by 38.7 billion for co-
financing for more than 2,400 projects in 165 developing
countries), Climate Investment Funds ($6.3 billion), ADB
Climate Change Fund ($40 million); EU Global Climate
Change Alliance ($180 million). There are many others
(1) Current situation with regard to resources

• Bilateral funding sources include a number of initiatives such

as Australia’s International Climate Change Adaptation
Initiative, the International Climate Initiative of the German
Government, the recently announced climate funding
support from USAID as well as many others
(1) Current situation with regard to resources
ANALYSIS

• It is clear there will be a quantum increase in future climate

funding for the Pacific region. The SPREP Climate Study will
quantify these amounts but there is still a level of
uncertainty
• However, it is unclear when and at what rate these
resources will flow to the region.
• The level of linkages and coordination between climate
financing initiatives of different donors needs to be
improved. Different initiatives are all making demands
on already overstretched Pacific governments
(2) OPTIONS FOR A PACIFIC REGIONAL CLIMATE CHANGE
FUNDING MECHANISM

The Report identifies a number of options, at different

levels
• Regional
• National
• Multilateral
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• REGIONAL
• Could involve a stand alone mechanism – Pacific Climate
Change Fund or a Fund either located within an existing
regional organisation or rotating among regional organisations
• There are existing funds in the region, such as the Pacific
Region Infrastructure Facility (multiparty infrastructure
coordination and financing mechanism), the HIV-Aids Fund
and the Micronesia Challenge. These have attracted funding
from a range of sources, such as from NGOs for the
Micronesia Challenge and the private sector for HIV-Aids
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• REGIONAL (Stand Alone Fund)

• A separate Secretariat would be required with technical and
financial expertise, and
• A stand alone Fund would need effective and transparent
governance structures, an agreed funding strategy, and
mechanism for distribution of resources
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• REGIONAL (linked to an existing agency)

• A Fund located within an existing regional organisation or

rotating among regional organisations would also need
effective and transparent governance structures, building on
established mechanisms and structures of each agency
• Fund mechanisms could build on mechanisms such as the
Pacific Climate Change Roundtable, and existing governing
councils of regional agencies, and/or mechanisms such as
the Pacific Plan Action Committee
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM
• REGIONAL (linked to an existing agency)

• The advantage is that all agencies have mechanisms for

accountability to Pacific Countries, through governing
councils, however not all are set up as to deliver on a
financial mechanism, particularly one dealing with the
amounts of funding likely to be available for climate change.
Additional and focussed capacity building would be essential
under this option
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• NATIONAL
• National Trusts Funds would be operated at national levels
working with an through existing government mechanisms
• There is some experience with national Funds in the region,
such as the Tuvalu Trust Fund - supported by a number of
countries with 20 years of operation and has allowed
increased financial autonomy
• There are a number of examples in other regions which have
worked effectively, such as the Mexican Fund for the
Conservation of Nature
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• NATIONAL
• National Trust Funds that have worked require similar features
to all other regional funds, relating to effective and
transparent governance structures, an agreed funding
strategy, and mechanism for distribution of resources
• The Tuvalu Fund for example, was developed to give donors
confidence to make contributions while allowing better
budget planning by the national government
• National Funds have the advantage of national ownership but
are obviously less well placed to deliver on regional or
transnational initiatives
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• MULTILATERAL
• These have a long history of operation in the Pacific Region
• For example, the GEF has a regional programme for the Pacific
(GEFPAS), under the GEF 4, which has delivered 28 projects
covering $100 million
• Countries have raised issues associated with access of
resources and heavy procedural and reporting requirements,
as well as the difficulty of involving civil society
• There is however a recognition that GEF systems are
improving in line with the GEF change management
strategy
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• MULTILATERAL
• In particular, the GEF 5 is increasing planning support to
countries (funding for National Portfolio exercises) and is
opening up implementation to include national and regional
agencies as Implementation Agencies – as long as they meet
the standards of financial management and accountability
• Current discussions at the UNFCCC preparatory Meeting have
also included the role of the GEF. Some parties have
supported reaffirming the GEF as the operating entity of the
Financial Mechanism, while others advocate further
reform of the GEF to make it more responsive to the
Convention. This debate will continue at Cancun
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM

• MULTILATERAL

• There are other multilateral funds available to the region,

including the Adaptation Fund (resourced by 2% of the CDM)
and PICs could negotiate direct access to the Fund . Solomon
Islands currently has direct access
• Many of the current structures have utilised the World Bank
and Asian Development Bank in the role of Trustee
(2) OPTIONS FOR A CLIMATE CHANGE FUNDING MECHANISM
• SUMMARY
• There are many options for Funding Mechanisms
• The best option may involve a combination of the options set
out
• The SPREP Paper will set out these options and the pros and
cons of each – as a basis for discussion and consultation within
the region
• SPREP’s aim is to work seamlessly with the PIFS and other
relevant agencies as we move forward on this matter
• Irrespective of the options agreed upon there are a number
of common principles that must apply
(C) Key principles relating to
climate change finance, and
next steps
 KEY PRINCIPLES RELATING TO CLIMATE
FINANCE
There are a number of key principles arising from the study
and from practical experience of SPREP and other agencies
over many years. These include:

• Any funding mechanism must meet the highest standards of

transparency and financial management including issues such
as an adequate capital base, effective governance structures,
and mechanisms for audit and monitoring and reporting . Any
fund must have very clear objectives.
 KEY PRINCIPLES

• Donor investments on climate must be country driven.

They must address identified national priorities and
support priority setting exercises. There are already many
national priority setting mechanisms , including NAPAs,
UNFCCC National Communications and projects such as
PACC. These need to be strengthened better linked and
used as the key point of reference by donors
• Any Financial Mechanism must be capable of receiving
support from a range of different donors and partners
(government, private sector, and NGO) and must
recognize the important roles played by each
 KEY PRINCIPLES

• Better coordination and linkages are essential. Climate

Change is a cross sectoral issue and responses need to
reflect this. Better and more focused coordination is
essential at national levels (particularly between finance,
environment and other sectoral agencies)
• Coordination between donors is essential and forums
such as DPCC provide a useful function
• Regional coordination between CROP agencies is
important and the CEO Task Force on Climate Change can
and should play an important role in support of Pacific
countries
 KEY PRINCIPLES

• Existing, “home grown” mechanisms need to be

strengthened At the regional level these include PIFFAC
and the Climate Round Table, at the national level these
include National Committees for Climate Change as we
heard yesterday. Mechanisms for donor coordination,
such as DPCC, are also important and need to be
strengthened and expanded
• Better Linkages between climate (UNFCCC) and
Biodiversity (CBD) Conventions need to be developed, in
the context of GEF and other related financial systems.
Nature or Ecosystem Based Adaptation can often provide
a key front line strategy for climate change.
 KEY PRINCIPLES

• There is a need for greater harmonisation of regional

funding arrangements There are many funding sources in the
region and these need to be better coordinated, within the
context of a regional mechanism or independently
• Better information on climate change finance is essential
Any Climate Funding mechanism must provide for the
provision of information to countries on issues such as how to
best access resources and also provision of technical
backstopping advice and expertise. Systems should recognize
and build on existing systems such as the Climate Portal being
developed by SPREP with support from the
Australian Government
 NEXT STEPS
• Wide circulation of the SPREP Paper on Climate Change
Finance Options, including to countries, donors and
partners
• Discussion at the Finance and Economic Ministers at the
end of October, 2010
• Major discussion at the 3rd Climate Roundtable: 14 to 18
March, 2011 in Niue. By this time a revised Finance paper
will have been prepared based on comments and
suggestions received
• Recommendations to 2011 Forum Leaders for their
discussions and decision
• Recommendation to other relevant Fora, such as
Governing Councils of SPREP and other CROP agencies
 Thank you

In the future it will

be pretty easy to
draw World maps and
charts