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Climate Change Mitigation in Developing Countries Presents Financing Challenges

ClimateFinanceMechanismA new global deal on climate finance will significantly redistribute power, responsibility and accountability between traditional donor and recipient countries, according to a new study released by World Resources Institute (WRI).

The new analysis provides recommendations on how climate change mitigation and adaptation programs in developing countries could be financed by a new set of institutional arrangements.

According to WRI, as the December deadline approaches to conclude a new agreement under the UN Framework Convention on Climate Change (UNFCCC), climate negotiators have yet to agree on how to finance cuts in greenhouse gas (GHG) emissions while meeting the energy needs of developing countries.

Maria Athena Ballesteros, a senior associate at WRI and lead author of the report, Power, Responsibility, and Accountability: Re-Thinking the Legitimacy of Institutions for Climate Finance (PDF), said there is no consensus on how the money is to be delivered or what the right mix of institutions or mechanisms need to be.

The report analyzes various country proposals and 10 international and national climate finance funds, with emphasis on the Global Environment Facility (GEF), which has served as the operating entity of the financial mechanism of the UNFCCC. The report identifies three key areas of institutional legitimacy: power, responsibility and accountability.

Here are some key findings from the report.

The study indicates if existing institutions are to meet evolving standards of legitimacy, then their fundamental governance structures and their operational procedures will need to be reformed to give greater voice to developing country recipients.

In addition, the international community must also make greater efforts to de-link the source of finance from the informal power by donors, by adopting new levies such as the levy on Clean Development Mechanism (CDM) projects.

The study also recommends that the next generation of climate finance needs to promote the responsibility of recipient countries, by strengthening the national institutions that will implement mitigation and adaptation activities and by ensuring their transparency and accountability to citizens within their countries and the international community. They will also need to work in closer partnership with national stakeholders.

The study finds that national implementing institutions that take on a greater role in climate finance need to demonstrate their ability to be held accountable, both nationally and internationally, for the results of their investments.

The report suggests several standards of good governance for national implementing institutions. These include governance structures that should be inclusive and transparent, with their responsibilities clearly articulated. They must also have the technical capacity to develop ambitious and effective programs in partnership with local stakeholders, particularly citizens and other potential program beneficiaries.

The report also notes that it will be essential to have strong provisions for accountability in place, including to ensure compliance with international good practice for fiduciary management, robust anti-corruption measures, and to manage potential environmental and social impacts.

If these standards can be met,  national institutions may hold significant promise for climate finance, said WRI.

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