[A2k] TWN Bali Update: G77-CHINA¹S PROPOSAL ON REVIEW OF CLIMATE CHANGE FINANCING

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Title : TWN Bali News Update No.7
 Date : 10 December 2007

 Contents:
TWN BALI NEWS UPDATE  NO. 7

10 December 2007
Published by Third World Network
www.twnside.org.sg

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G77-CHINA¹S PROPOSAL ON REVIEW OF CLIMATE CHANGE FINANCING

Nusa Dua, Bali, 9 Dec (Neth Dano) -- In the wake of a screaming headline in
the Jakarta Post on Thursday that developing countries have agreed to a
proposal that the Global Environment Facility (GEF) will manage all funds
raised to help developing countries cope with the impacts of climate change,
the G-77 and China presented a bold proposal to explore other sources of
financing under the UN Framework Convention on Climate Change (UNFCCC).

Several delegates were heard commenting that the headline was ³misleading²
since the Conference has yet to take up the issue on the role of the GEF
vis-a-vis other financing sources under the Convention.

At the Contact Group meeting on Financing under the Subsidiary Body on
Implementation (SBI) on Thursday, G-77 and China presented a forward-looking
proposal for Elements of a Draft Decision on Additional Guidelines for the
Review of the Financial Mechanism of the Convention.  The written proposal
appeared to have taken other Parties by surprise, as they were expecting
that the discussion will only focus on the modalities of the fourth review
of financial mechanisms under the Convention, which is mainly the GEF. The
Co-Chair of the Contact Group from Canada had earlier set the tone of the
discussion that the fourth review will provide guidance to the fifth
replenishment period of the GEF scheduled on the last half of 2008.

While the EU and the US took take a cautious approach of wanting to study
the proposal and expressed openness to discussions on it, Japan did not hide
its resentment of the G-77 and China proposal.  Japan said that the bloc ³is
not doing it right² and that the proposal limits the financial flow to
developing countries.

It said that ³it is almost impossible² to bring all other financial
mechanisms into the Convention, and   reminded other Parties that the GEF is
aimed to catalyze financial flow into the Convention, including private
sector investments.  The US supported Japan¹s point on the GEF as a
catalyzer of investments, by saying that the GEF is not an end in itself,
thus the importance of complementing it with enabling environment for
private sector investment and an open-market climate.

The elements of additional guidelines for the review of the financial
mechanism of the Convention presented by G-77 and China are comprised of
objectives and methodology, which are meant to complement existing
guidelines adopted in previous Conferences of the Parties (COPs).

The objectives include the examination of options for encompassing all
sources and means of financing that would assist developing countries,
contribute to achieving consistency in financing activities for developing
countries, and develop options for innovative means of financing climate
change activities in developing countries.

Also included in the aims are development of options for improvement of the
complementarity of the financial mechanism with other sources of investment
and financial flows for mitigation and adaptation to climate change and the
examination of practical ways for scaling up of the level of resources and
enabling the most efficient use of available resources. Other objectives are
to contribute to financing for the development of endogenous technologies in
developing countries and to gather elements for the development of a
framework to be used as a guide for the financing of all climate change
activities from all sources.

G-77 and China outlined a general methodology for the review of the
financial mechanism of the Convention. It includes reviewing technical
papers and reports prepared by the UNFCCC Secretariat relevant to the
financial needs of developing countries, reports from the UN Commission on
Sustainable Development and other UN agencies and international
organizations as well as relevant bilateral and multilateral funding
institutions and governmental and non-governmental organizations.

It also proposed looking at the information contained in the national
communications of Parties to the Convention and in other mechanisms such as
technology needs assessment and the National Adaptation Program of Actions
(NAPAs), as well as information available on private sector financing and
investment for climate change activities.

The Philippines, speaking on behalf of G-77 and China, explained the
rationale behind the strategic proposal to go beyond the GEF by citing the
massive resources required by developing countries to address the effects of
climate change, as stressed in the recently-concluded fourth Assessment
Report of the Intergovernmental Panel on Climate Change (IPCC-AR4).

It reasoned that confining the financial mechanisms of the Convention to the
GEF will not be sufficient to meet the needs of developing countries, thus
the importance of exploring other sources of financing. It explained that
the Parties should open other possibilities for financing without prejudice
to the GEF in order to enable developing countries contribute to the
achieving the objectives of the Convention.

G-77 and China also said that the fourth review of the financial mechanisms
under the Convention may or may not feed into the fifth replenishment of the
GEF due to timing and schedules.  It expressed concerns on whether or not
the GEF has really taken on board the Decisions of the COP from the past
three reviews of the financial mechanism under the Convention into the GEF
replenishment process, citing a specific instance when a GEF official
admitted of not being aware of the Annex to the Memorandum of Understanding
(MOU) between the UNFCCC and GEF.

The EU, supported by Norway, expressed their reservation on the
appropriateness of the proposal being discussed in the SBI.  Norway thought
that the matter should be part of the process coming out of the Dialogue and
should be considered in the context of other discussions since financing is
one of the four building blocks in Bali.

The US suggested to package the discussion on financial mechanism in a
³coherent way², taking into account the submission of the other groups
related to financing which the Co-Chair explained will be consolidated by
the Contract Group on Financing.  G-77 and China reminded the Parties that
the Contact Group on Financing is considered as the expert on financing
matters under the Convention, and thus all matters related to financing
discussed in other groups should be referred to this group, not merely to
consolidate those inputs.

At the second meeting of the Contract on Financial Mechanisms on Saturday,
the Co-Chairs presented a draft Decision on the Review of the Financial
Mechanism incorporating the entire proposal of G-77 and China as an Annex,
as the basis of discussion during the closed informal meetings until Monday.

The US is presenting proposed language for amending the Annex in the draft
decision, largely highlighting its concerns on the impacts of projects on
the enabling environments for investments in climate mitigation technologies
and the consideration of information on tariff and non-tariff barriers to
the adoption of such technologies, as well as the transparency and strength
of national and local governance.  The EU proposal on the table expands on
the consideration of additional information and technical papers in the
review.  G-77 and China expressed their willingness to proceed with the
discussions on the basis of the proposals on the table, as summarized in the
compilation text circulated.

G-77 and China negotiators earlier expressed optimism that their proposal
for additional guidelines for the fourth review of the financial mechanism
of the Convention will be fully taken on board in the final decision, paving
the way for the exploration of other viable financing options that will help
developing countries to contribute in the attainment of the objectives of
the Convention.

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