Toward a Proposal for Just Climate Finance

Published by Institute for Policy Studies Sustainable Energy
and Economy Network

The world will require a global commitment to limit temperature increases and stabilize CO₂ emission concentrations. The vast majority of these cuts must be found in Northern countries, but some Southern countries will also likely have to cut emissions. Under debate is how developed countries will raise and channel finance to compensate developing countries for existing impacts of climate change, and provide financial support for their transition to low carbon economies. By 2030 developing countries will need between US$170-275 billion to meet their climate mitigation and adaptation needs. Civil society has demanded that it must be public funding, must be obligatory and predictable, impose no conditionalities on countries of the global South, not generate external debt, be new and additional to existing financial commitments, and be channeled through a financial architecture under the authority of the UNFCCC.

Criteria for Raising Revenue for Climate finance

	Criteria	Definition
ESSENTIAL	Adequate	Raises volume of revenue consistent with the scale of the need, in a manner that is additional to pre-existing ODA and other pledges, and with low transactions costs.
	Predictable	Automatic, sustainable over time, not easily evadable or subject to declining returns.
	Public	Must be raised and contributed by governments.
	Equitable	Obtains money from those countries with most responsibility for causing human-induced climate change, as well as capacity to pay. The mechanisms should also minimise negative impacts on developing countries and on low-income and other marginalised groups in all countries.
	Transparent & accountable	Potential for citizen input and oversight in monitoring how and from whom revenue is raised.
DESIRABLE	Transformational	Promotes economy-wide reform away from fossil fuel systems, promotes the transition to renewable energy sources and local control of natural resources.
DESIRABLE	Financially responsible	Helps curb speculation, increase transparency of financial flows, limits trading in derivatives and other toxic financial products and move towards a balanced and well-regulated economy.

Innovative Finance Sources: Summary Table

	Adequate	Predictable	Public	Equitable	Transparent & Accountable	Transform-ational	Financially Responsible
Financial transaction tax	J	K	J	J	K	K	J
Global carbon tax	J	K	J	K	J	J	K
Fossil fuel subsidy reallocation	K	L	J	K	K	J	J
Air passenger levy	K	J	J	J	J	K	K
Bunker fuels levy	K	J	J	K	J	J	K
Sales of carbon quotas	K	J	K	K	K	J	K
Climate Special Drawing Rights	K	K	J	J	J	K	J

Proposal for a Global Climate Fund

Global civil society calls for an enhanced financial architecture in the form of a Global Climate Fund to be set up under the control of the United Nations Framework Convention on Climate Change. The Fund should be founded on the recognition of a Climate Debt owed by Northern countries for their responsibility for the majority of global warming. Their emissions deny southern countries their share of atmospheric space and cause severe climate impacts, which disproportionately fall on marginalized communities.

The Fund should acknowledge that reparations require the drastic reduction of their emissions through domestic measures. The Fund will serve as the channel for the transfer of the full financial costs to enable developing countries and peoples to adapt to the impacts and deal with the effects of climate change and pursue equitable and sustainable development. The Fund should be established according to the following principles

Sustainable, Obligatory and Automatic Funding from diverse sources to generate the volume of funding needed, established on the principle of historical responsibility for causing the climate crisis
Representative Governance that is democratic, transparent, and accountable to the most impacted communities, with civil society formally represented in all governance structures and equitable representation of southern countries
Full Participation of climate-impacted peoples in developing actions and policies for adaptation and the shift to low-carbon economies; policies and actions designed by countries through sovereign and democratic processes must reflect local decisions and solutions
No Conditionalities must accompany disbursements from the Fund to governments or civil society groups; nor lead to the accumulation of debts
Direct Access for the Most Vulnerable so that social movements, NGOs and community-based groups have direct access to funds (in addition to government agencies)
Protecting Rights of all people, particularly recognizing and respecting the rights of Indigenous Peoples and local communities, to determine their own development path, decision-making processes, and activities related to climate change

Executive Body under the authority of the UNFCCC, sets overall policy guidance for all windows, composed of a majority of developing countries, with seats for vulnerable countries and communities

Adaptation, Mitigation and Technology Windows disburse money directly to the recipient country for implementation of locally and nationally developed plans; Window board would judge plans based on soundness of approach, participation of affected communities, environmental sustainably, and other criteria as established by the board

Technical Panels review plans for technical merit and would make recommendations to window boards as to whether the plan is ready to receive funding

Indigenous and Women’s Rights Desks ensure Indigenous Peoples and women’s rights are central in all aspects of adaptation funding

Secretariat responsible for providing administrative, legal, and financial support to the Executive Body; collect data on the Fund’s impacts on women, marginalized communities, and the environment

Trustee manage the funding of each window in a separate bank account and disburse funding to recipients upon instruction from Executive Board

Innovative Finance Sources: Summary Table

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