There is nothing known as a free lunch.

Hunger is priceless , for feeding it you need MASTERCARD

Given the vast negative effects of runaway climate change one needs to not only reduce emissions ie mitigate but also adapt to the adverse effects since countries might lack the capacity and resources to do so on there own. Hence the story of financial mechanisms in the UNFCCC begins with the concept that there is a requirement for a pool of finance and there are countries who are able and obligated to provide this finance upfront ( developed countries) to the developing countries ( refer to convention article 4.3) since they are the ones who have caused the problem.

The UN Secretary General appointed a High Level Advisory Group on Climate Finance (AGF) to determine look at private and public sources of finance and to make a final report of recommendations just prior to Cancun. Today in the afternoon they held an open discussion to highlight the methodology they were working with. The group is chaired by H E Mr Ato Newai , Chief economic advisor to the Prime Minister of Ethiopia. There presentation would assist in explaining the key issues of finance in course of 2010.

the amount and criteria of assessment of need

time period of the finance coming in and

the sources of funding

Where the restaurant picks up its supplies

Climate Finance can be broken down into two broad sources (these sources also form the working groups that have been formed under the advisory group on finance of which the meeting was held today.On the obvious sources comes from the ODA - Money given by developed countries as development assistance and the other would be the mechanism setup by the UNFCCC that is the Adaption Fund , now over and above this the finance that is needed can be mobilized by the following:

ADDITIONAL PUBLIC FINANCE

1. Carbon Finance Public revenue - this comes from the auctioning of the AAUs- Assigned amount unit , assigned to all the developed world under the kyoto protocol, as a part of the emissions trading mechanism

2. International Transport - This would be the bunker fuel levies and levies on the international air and maritime transport

3. Other carbon related mechanisms - carbon taxation and carbon border adjustment- tariffs and taxes on imported goods which I had talked in detail about in my previous blog

4. Role of Multilateral organizations and linking it to the the IMF’s Special Drawing Rights and using that to create additional finance

5.International finance transfer taxes

6. Direct Budget Contributions- this would be a pool of the GNP of countries given for adaptation and capacity building in the annex 1.

ADDITIONAL PRIVATE FINANCE

1. Using Public finance to leverage private investment is a bit like when you use feed in tariffs to attract private sector investment into the sector

2. Private companies having there own compliance mechanisms and carbon offsetting in the carbon markets.

no free lunch

How do we ensure the kids get appropriate serving of lunch

The criteria for the assessment of the money brought in as per the advisory group on finance

1. Efficiency - this would take into account the impacts on costs , market developments and economic development and economic growth.

2. Incidence and Equity - Incidence in burden of source of finance between nations and within the working groups or within nations.

3. Practicality - institutional design and rules , law and legal form of it. Seeing whether we could implement it as an independent decision of the COP or as a part of a treaty.

4. Political acceptability among different countries and different constituencies.

5. Domestic Budgeting and seeing the competitiveness and trade.

6. Reliability/ Predictability - Checking how stable the revenue stream is from the source in specific seeing how tit reacts to business cycles or change in policies if government.

7. ADDITIONALITY: To explore new and innovative sources for financing.

Today in the briefing countries raised valid concerns over the presentation and it was good to see that the observer organizations were also allowed to be a part of the discussion. One of the key concerns being raised today was how were the countries that were not a part of the Copenhagen accord being taken into consideration knowing full well that the advisory group was setup in the spirit if the accord.

Also there were concerns as to what legal form would the decisions of the advisory group take and whether they would be playing a political role in the process.

The group made it clear that they were on the lines of the UNFCCC convention and were taking into account the CBDR- common but differentiated responsibility principle under the Equity criteria mentioned above. As for there role is limited to being advisory , it is upto the parties to do what they want with the report. The report will be ready in September 2010.

This was largely the discussion around sources and transparency issues on climate finance, stay tuned for fast track dinner to be served late in the night.

This is a very hungry stomach signing off…..