COP24: the challenge of implementation
COP24 in Katowice just ended and was marked by the difficult adoption of a package of practical rules – the Katowice Climate Package – on transparency, the content of national contributions or their revision. It was also a COP marked by deep concerns about the willingness of Signatory Countries to increase their climate ambition in the coming years. Currently, countries’ commitments to reduce greenhouse gas emissions will lead to global warming well above 2°C, the threshold above which our climate would jump into the unknown.
However, since COP21 the COP is more than just negotiations between States. Increasingly, it is a key moment to link the political agenda, the negotiation process, and the various initiatives – led by NGOs, local authorities or companies – and move forward to implement the Paris Agreement. It is also an opportunity to take stock of the progress and the challenges involved.
The COP of the “just transition”
In Katowice, one of the principal challenges discussed is that of the “just transition”. This subject came up across almost all of the dozen events that I4CE organized to present our most recent results. For example, this is a major issue in Poland who is facing the social challenges posed by the necessary scaling-down of its coal industry. It was also a key point taken up in a joint declaration on the just transition supported by more than 50 countries. Beyond the COP, the relevance can be seen at the national level as in France with the “yellow vest” crisis during the month of December in France and its international impact.
While carbon pricing was not a topic directly discussed in the negotiations, it was nevertheless discussed at length in the corridors and side events. National and local governments, international organizations, companies and observers demonstrated how carbon pricing is increasing in importance around the world, and that it is a necessary tool for the transition. Importantly, during the various events dealing with the subject, many speakers also reiterated that a transparent use of revenues from carbon taxes and markets was essential to strengthen the acceptability and sustainability of these public mechanisms. They stressed the need to establish a tangible link between the generated revenue, and how it is used – stressing the importance of accompanying these instruments with social measures. These statements echo the work carried out by I4CE on the use of carbon revenues around the world.
The COP of the “Paris Alignment” of finance
While the negotiators’ attention focused mainly on “climate finance”, i.e. public and private financial flows mobilized specifically for climate change mitigation and adaptation, the parallel events and corridor discussions principally focused on the challenge of operationalizing the third objective of the Paris Agreement: making all financial flows “consistent” with a pathway towards a low-carbon and climate change resilient development.
On one hand, the climate finance accounting rules and the mobilization of the 100 billion USD every year from 2020 for developing countries was negotiated in a context of great uncertainty, following this summer’s Green Climate Fund crisis. Germany and Norway sent a strong positive signal to the international community by committing to double their contribution to the Green Climate Fund as the 2019 replenishment process begins with the absence of a US contribution. The World Bank’s announcement to invest USD 200 billion for climate action over the period 2021-2025 clearly reiterated the role of other public financial actors in meeting the financing needs for mitigation and adaptation.
On the other hand, the COP opened with the publication of the Joint Statement of the Multilateral Development Banks presenting their approach to “align with the objectives of the Paris Agreement”. A few days later, the International Development Finance Club (IDFC) – a network of regional, bilateral and national development banks – published a similar position paper on this subject. Finally, a group of commercial banks launched a network to work on aligning their portfolio with a 2°C scenario. Operationalizing alignment commitments and translating them into day-to-day governance and operations is now a key challenge public and private banks are now facing. I4CE as Secretariat of the Climate Action in Financial Institutions Initiative will be working with its Support Institutions in 2019 on how to move forward.
While discussions at COP24 show that financial actors are increasingly integrating climate change in their operations, much remains to be done as seen in I4CE’s latest publication on climate physical risks for the financial sector.
Financing terrestrial carbon sinks
Since the last IPCC report on 1.5°C scenarios was published, the role of carbon sinks, with forests in the forefront, has been highlighted. COP24 was marked by the Katowice Ministerial Declaration “Forests for Climate”, initiated by Poland, which invites companies and local authorities in particular to make commitments. However, this statement may have caused concern among those who fear that carbon sequestration, which is essential to achieving a carbon-neutral world, may be a substitute for emission reductions in political discourse and in practice.
In any case, financing of climate action in the land use sector, and in particular the fight against deforestation, is still insufficient – even if the operational framework known as REDD+ has been finalized since 2015. In the context of the formal negotiations on market mechanisms (Article 6), important mechanisms for financing the forest sector, the question of double counting has again arisen. How can we prevent an emission reduction from being counted by two different countries, the one that finances and the one that actually reduces emissions on its territory? This will require the adoption of guidelines at the international level. The same question arises outside the official bodies of negotiations between countries, and agitates the sphere of the actors of the voluntary compensation market, first and foremost I4CE. I4CE contributed to the creation of the Low-Carbon Label, published in November by the French Ministry of Ecology, which should make it possible to direct public and private funding towards domestic agricultural and forestry projects that reduce emissions or improve carbon sequestration.
Many issues on the agenda for 2019
Outside the negotiating rooms, discussions at COP24 thus reflected the challenges of implementing the “just transition”. Discussions will continue into 2019 on the key topics, such as the implementation by governments of carbon pricing policies in a tense social context; the concrete implementation of commitments by financial institutions, both public and private, to align their activities with the objectives of the Paris Agreement; or the financing of carbon sinks. In this respect, this does not from the discussions between negotiators, who have had difficulties in finding compromises on the rules for implementing the Paris Agreement that continue into 2019 as well.