Climate finance transparency – is there an app for that?

16May12

International climate change talks are underway again in Bonn over the next two weeks. One of the key topics under discussion, as always,  is climate finance: how to mobilise and deploy money to accelerate the pace of change towards low-carbon development, and prevent the costs of adapting to climate change falling on the poorest.

As well as trying to make sense of funding mobilised so far, discussions are  focused on building the mechanisms needed for managing and accounting for larger funding flows in the future. If nothing else, most agree that more transparency can only be a good thing.

I am going to Bonn to help launch a study;  Towards Climate Finance Transparency, which I have been working on with aidinfo and Publish What You Fund (‘the international campaign for aid transparency’) examining the whether there are lessons, tools and synergies from the world of aid transparency which are likely to be useful for those creating the systems for tracking climate finance  .

The conventional wisdom says that three things are needed:

  1. A clear and agreed definition of what counts.
  2. A system for publishing more, better and harmonised information on different kinds of funding flows – what is available, what is needed, what has been committed, and what has been deployed.
  3. A central database to make it more accessible (for example, the recently released plan for the UNFCCC Nama Registry) .

Do aid transparency lessons support these conclusions? The answers we outline in the paper are ‘yes’ (but don’t just look for the big number), ‘yes‘ (but you don’t need to start from scratch) and ‘no’.

Are we there yet?

The  pledge to mobilise a hundred billion-dollars a year by 2020 looms above the climate finance debate like one of those fundraising thermometers traditionally used for the concentrating people’s mind on the church roof appeal.  Countries have started to report on their fast start funding and researchers (for example at the Open Climate Network and IIED) have pored over these results seeking to make sense of the funding flows; Are pledges being delivered? Is the money new and additional? Are programmes balanced between mitigation and adaptation? Does it add up and how should it bemeasured?

But we are no closer to knowing how  high the line of red paint should be painted on the thermometer. One assessment of the landscape of climate finance found that US$ 98 billion was already flowing across borders to finance low carbon development (although the authors stress that this should not be taken to mean that all of this funding should ‘count’ towards the US$ 100 billion). Others note that while the fast start funding commitment in the first three years is likely to be met on paper through public funding, it is not clear whether very  much of this is really ‘new and additional’.

Part of the problem is that the target itself is not really agreed.  Should concessional loans be accounted for at their face value, or only at the discount they offer compared to commercial loans? Should private investment in clean energy be counted in full, or only in terms of the incremental contribution it makes beyond displacing investment in dirty energy? If purchases of offsets are included under the definition of climate finance supporting NAMAs, won’t that mean the same funding is being counted as reducing emissions in two countries? It is like agreeing to take a house for $1 million, but not knowing whether this amount is the rent or sale price, or whether the current occupants will move out or not. Transparency about whether the $1 million has been paid is the least of your problems.

In 2011, the UN High Level Advisory Group  on Climate Finance came together to discuss these issues. After much deliberation they reported on the different options but came to no clear conclusions as to what should count.

Not mobilising billions…shifting the direction of trillions

What the UN High Level Advisory Group did agree on, along with many others, is that the US$ 100 billion target is only a fraction of the overall sums of finance that need to be influenced and redirected away from high-carbon and climate vulnerable industries and technologies into low carbon, climate resilient development. Over the next 20 years investment in fixed assets is set to triple, with most of this growth in infrastructure taking place in the developing world. The sums are measured in trillions, and are expected to rise to US$ 10 trillion a year. It is estimated that around US$ 1.1 trillion additional annual  investment needs to be mobilised to green these economies.  For climate finance to be successful, not only does it have to mobilise US$ 100 billion and spend it well, it has to do it in a way that influences and shapes these much larger flows of investment, both international and domestic.

It turns out we don’t need to fix the church roof, we need to build a whole new church.

The transparency challenge

Does all this mean that climate finance transparency is a lost cause? Far from it. But it does mean that climate finance transparency cannot be seen as simply a quest to assess progress towards the single ‘big number’ measured in billions, it also has to help us understand effectiveness at influencing the ‘big-big numbers’, measured in trillions, and it has to actively support this effectiveness by enabling better decision making on the ground.

A key lesson from aid transparency is that while high quality statistics are crucial, so too is detailed, accessible and timely information to meet the needs of different information users – international, national and local. As climate finance begins to flow in earnest, and in larger volumes, the key questions will not just be ‘Are developed countries meeting their commitments?’ but ‘How best should the funding available be used to match up to the need and opportunity?’; ‘Is the funding being used for the purpose agreed?’; ‘What impact is it having on climate adaptation and mitigation outcomes?’; and ultimately, ‘Are resources being effectively used in addressing climate change impact?’.

These questions concern not just ‘official climate finance’ however that is eventually defined but also ODA with climate benefits, private investment (whether counted towards the US$ 100 billion goal or not), south-south development cooperation, development bank loans, ex-im and other industrial finance, as well as carbon markets.

The danger, which we are already seeing, is that the quest for clearer definitions of the different funding flows will also give birth to separate and incompatible monitoring and reporting mechanisms,  even when in practice the funding flows overlap and leverage each other,  or where they represent the same money at different points in the lifecycle (pledged, budgeted, committed, deployed etc…). There is a real danger that we will  end in up with a situation where information on climate related funding is collected and published multiple times and in different and incompatible formats for different categories, neither supporting effectiveness or transparency.

One estimate is that if we are not careful up to 40,000 new and highly paid staff in places like Washington and Brussels would be needed to administer it. To this ridiculous figure must we also add another few thousand researchers  and analysts just to make sense of the resulting data buried in pdfs and mutually incompatible databases?  Researchers at the World Resources Institute, for example, most recently found that in order to track and map the fast start climate finance flows of just one funder for one year they had to find, read  and manually cross reference 240 different documents.

A key message from the aid transparency world is that  it doesn’t have to be that way.

Is there an app for that?

The International Aid Transparency Initiative is an innovative that offers potential to provide a bridge between different systems and users, unlocking data from individual databases and reports. It uses data standards rather than centralised databases to combine standardisation and flexibility. Data can be published once but used many times – including by apps and computer programmes which can automatically fetch and analyse data, and make it useful for different users; combining finance information on a map, with climate vulnerability data for example.

It is an approach that could be used to support both the new biennial reports on climate finance and the UNFCCC Registry of funding available and needed. I won’t solve the politically vexed question of additionality, but it would enable more and better information both on dedicated climate finance, and on green aid, and the extent to which they overlap.

Ultimately however, the question is not how to build the most elegant system to track volumes of finance, but how to use transparency to enhance and demonstrate the effectiveness of international collaboration in creating both environmental and economic benefits. We hope the paper provides a useful basis to bring together those working on different areas of this question to explore synergies and gaps and to work together towards this common aim.



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