Climate Finance 2011 Operationalising the Standing Committee Benito Müller Director ecbi european capacity building initiative initiative européenne de renforcement des capacités ecbi for sustained capacity building in support of international climate change negotiations pour un renforcement durable des capacités en appui aux négociations internationales sur les changements climatiques

The Cancun Agreement (Decision 1/CP16) 102. Decides to establish a Green Climate Fund, to be designated as an Operating Entity of the Financial Mechanism of the Convention under Article 11, with arrangements to be concluded between the Conference of the Parties and the Green Climate Fund to ensure that it is accountable to and functions under the guidance of the Conference of the Parties, […]; 112. Decides to establish a Standing Committee under the Conference of the Parties to assist the Conference of the Parties in exercising its functions with respect to the Financial Mechanism of the Convention in terms of improving coherence and coordination in the delivery of climate change financing, rationalization of the Financial Mechanism, mobilization of financial resources and measurement, reporting and verification of support provided to developing country Parties; Parties agree to further define the roles and functions of this Standing Committee.

The UNFCCC Financial Mechanism: Oversight UNFCCC COP SBI SBI Finance Contact Group Submits draft Decision for approval Presents draft Decision for submission Provides annual guidance Sends annual reports “An Operating Entity of the Financial Mechanism of the Convention under the guidance of and accountable to the COP” GEF Council

Box 1.1: SBI Draft Guidance to the GEF on funding National Communications 2006: The COP invites the Global Environment Facility, as an operating entity of the financial mechanism of the Convention, … (b) To provide updated information on the operational procedures for the expedited financing of national communications from Parties not included in Annex I to the Convention, for consideration by the Subsidiary Body for Implementation at its twenty-sixth session; 2007: The COP requests the Global Environment Facility, as an operating entity of the financial mechanism of the Convention: (g)To continue to ensure that financial resources are provided to meet the agreed full costs incurred by developing country Parties in complying with their obligations under Article 12, paragraph 1, of the Convention; (j) To refine, as appropriate, operational procedures to ensure the timely disbursement of funds to meet the agreed full costs incurred by those non-Annex I Parties that are in the process of preparing their third and, where appropriate, fourth national communications; 2008: The COP reiterates the following requests to the Global Environmental Facility made by the Conference of Parties at its thirteenth session to the Global Environmental Facility: (a) To continue to ensure that financial resources are provided to meet the agreed full costs incurred by developing country Parties in complying with their obligations under Article 12, paragraph 1, of the Convention; (b) To refine, as appropriate, operational procedures to ensure the timely disbursement of funds to meet the agreed full costs incurred by those non-Annex I Parties that are in the process of preparing their third and, where appropriate, fourth national communications; 2009: No guidance (Copenhagen) 2010: The COP requests the Global Environment Facility: (c)To work with its implementing agencies to further simplify its procedures and improve the effectiveness and efficiency of the process through which non-Annex I Parties receive funding to meet their obligations under Article 12, paragraph 1, of the Convention, with the aim of ensuring the timely disbursement of funds to meet the agreed full costs incurred by developing country Parties in complying with these obligations, and to avoid gaps between enabling activities of current and subsequent national communications, recognizing that the process of preparation of national communications is a continuous cycle; (d) To finalize any remaining operational procedures to ensure the timely disbursement of funds for those Parties that decide to access resources for the preparation of their national communications through direct access;

The COP’s key function with respect to the Financial Mechanism is ‘oversight’, i.e. the provision of guidance to, and the holding accountable of, the Operating Entities of the Financial Mechanism of the Convention. By assisting the COP in carrying out this oversight function through the provision of draft guidance and reviews, the Standing Committee would provide the assistance to the COP in the coordination (between Operating Entities) referred to in the Cancun Agreement. The Cancun Agreement task of assisting the COP in improving coherence of the overall climate finance regime, in turn, would be carried out by the Standing Committee through the provision of draft recommendations. Operationalizing the Standing Committee: What Functions? Source: Khan and M üller (2011)

1. Guidance and Recommendations The Standing Committee should support the COP by providing: 1.annual synthesis reports of the annual reports by the Operating Entities of the Financial Mechanism of the Convention which, for that purpose, should report directly to the Standing Committee; 2.draft guidance to the Operating Entities; 3.draft decisions on how other UNFCCC bodies, such as the Adaptation Committee or the Technology Transfer Executive Committee, are to relate to the Financial Mechanism; 4.draft decisions/recommendations on rationalizing the Financial Mechanism; 5.draft recommendations/guidance to all actors involved in climate finance, with a view to improving coherence in delivery of finance and complementarity in their approaches, including comparable standards, guidelines, and rules of allocation. 6.draft recommendations/guidance with regard to overcoming thematic and geographical imbalances in the international flows of climate finance. Operationalizing the Standing Committee: What Functions? Source: Khan and M üller (2011)

2. Review The Standing Committee should support the COP in reviewing: the accountability of the Operating Entities to the COP, inter alia through independent external evaluations; the operational rules and modalities of Operating Entities; the modalities of the Operating Entities with respect to implementation of Art (b) of the Convention; the modalities for reporting and verifying financial support, including certification by recipient countries (if applicable); resource access modalities, including direct access; (and promoting) comparable standards, guidelines, and rules for the allocation of finance; contractual arrangements between the COP and Operating Entities; the scale of assessed contribution, if applicable; 1.the adequacy of resources, in particular the needs for, and sources and flows of, international financial support. Operationalizing the Standing Committee: What Functions? Source: Khan and M üller (2011)

The UNFCCC Financial Mechanism: Oversight UNFCCC COP Standing Committee Commissions External Evaluations of OEs Submits draft guidance for approval Provides annual guidance Send annual reports “Operating Entities of the Financial Mechanism of the Convention under the guidance of and accountable to the COP” Operating Entities GEF Council GCF Board Submits Annual Report on OEs

In order to assist the COP in reporting and verifying the support provided to developing country Parties, the Standing committee should: 3. Reporting 1.set up and manage a Financial Support Registry to record all relevant information on financing channels, both inside and outside the Financial Mechanism, particularly with reference to the information required in performing the review functions; 2.request/invite Operating Entities and other entities involved in providing climate finance to provide required information; 3.act as a platform of consultation with private sector and civil society, as well as with multilateral and bilateral funding entities; 4.liaise on all relevant matters with other relevant bodies – in particular, but not solely, with Convention bodies such as the Adaptation Committee and Technology Executive Committee; 4. Verifying 5.provide the COP with all necessary support to verify: financial flows to be counted against financial obligations under the Convention, including, if applicable, assessed contributions; certification by recipient countries, if applicable. Operationalizing the Standing Committee: What Functions? Source: Khan and M üller (2011)

5. Other functions 1.Support the COP in the mobilization of financial resources, including from the private sector, by inter alia: developing policy frameworks for mobilizing supplementary finance sources for the guidance of, and recommendation to, the Operating Entities; commissioning independent studies on the topic. 2.Report directly to the COP. 3.Fulfil any other function assigned by the COP. Operationalizing the Standing Committee: What Functions? Source: Khan and M üller (2011)

Operationalizing the Standing Committee: What Form? Source: Khan and M üller (2011)

Operationalizing the Standing Committee: What Form? Source: Khan and M üller (2011)

Operationalizing the Standing Committee: What Form? Source: Khan and M üller (2011) Miscellanea Being a subsidiary body of the COP, the Rules of Procedure of the COP are deemed to apply mutatis mutandis to the proceedings of the subsidiary bodies. As to the provision of secretariat services, there is equally no choice: according to Article 12.1, the first function of the UNFCCC Secretariat is: To make arrangements for sessions of the Conference of the Parties and its subsidiary bodies established under the Convention and to provide them with services as required.

Submissions I: JUSCANZ Decision 1/CP16 provides a role for the SC in advising the CoP on the four issues enumerated in paragraph 112. We look forward to further defining the role and functions of the SC in the AWG-LCA. Decision 1/CP16 provides for an advisory, rather than supervisory or executive role for the SC. Decision 1/CP16 confirms that the SC’s relationship with operating entities of the financial mechanism is via CoP guidance, rather than direct. Therefore, the SC could most usefully provide advice via the SBI to the CoP on the four issues enumerated in paragraph 112 of Decision 1/CP16, inasmuch as they are related to the CoP’s execution of its functions with respect to the financial mechanism as defined in Article 11. We support a continuation of the current role of the SBI in developing draft recommendations on CoP guidance to the financial mechanism. To best advise the CoP, the SC could undertake the following functions […] Helping to inform and improve the guidance to the financial mechanism that is recommended by SBI to the CoP and enhancing the periodic review of the financial mechanism.

Through, inter alia: the development of recommendations to the COP for the coordination of all current and future funds under the Convention to ensure coherence in the delivery of climate change finance the provision of a forum for the exchange of information with relevant financial institutions, bilateral aid agencies, and UN agencies dealing with climate change financing, as well as the provision of assistance to the COP in analyzing relevant information to ensure coherence and coordination; and the establishment of a communication platform to advice coordination and coherence of operating entities of the financial mechanism under the Convention, as well as coordination with other thematic bodies of the Convention to identify the gaps in implementation related to financial support. Standing Finance Committee should, besides establishing a communication platform to advice coordination and coherence of funds under the Convention, also advance and enable such coordination in order to improve the effectiveness of these funds through rationalization measures; assessing this information to consider its consistency with the guidance provided by the Conference of the Parties on policies, programme priorities and eligibility criteria in financing climate change; 1. Improving coherence and coordination in the delivery of climate change financing Submissions II: G77 and China, Africa Group, India

Through, inter alia, the preparation of recommendations to the COP on the technical feasibility and enhancing accessibility of the mobilization of resources from a wide variety new and additional sources, including public and private, bilateral, multilateral and alternative sources, taking into account the financial needs identified by developing country Parties, including those contained in their national communications. Preparation of financial needs assessments of developing countries, based on information received from developing countries, and including through, information received from other thematic bodies under the Convention, reports on the needs and estimates of the cost of climate change by UN bodies and other Multilateral financial institutions, and any other sources of information the Committee considers ; 3. Mobilization of financial resources Through, inter alia, (i) the assessment of information related to the measurement, reporting and verification of support and enabling means provided to developing country Parties under the Convention, including through the information contained in Annex I national communications and information received from developing countries. (ii)the development of recommendations on indicators for an assesed scale of contributions for Annex II countries, where applicable. 4. MRV of support provided to developing country Parties Submissions II: G77 and China, Africa Group, India 2. Rationalization of the Financial Mechanism Through, inter alia, developing recommendations to rationalize the financial mechanism of the Convention and existing funds under it, for achieving cost‐effectiveness and efficiency.

Submissions III: The EU We do not see the standing committee having a role in designing, operating or revising the MRV system relating to reporting obligations of individual parties. This is addressed through the updates to the guidance on preparing national communications. We could not agree to a separate additional MRV system. The SC could somehow include expertise eg. from GCF, GEF, AF, LDCF, and experts from other relevant financial institutions in an ex officio role. An important issue is that we need clarity on the division of labour between SBI and Standing Committee. The division would depend on the functions in question and also the composition of the SC. We are open to discussion on this area and to explore the issue. There shall be no duplication of work between the Standing Committee and institutions. The functions outlined in the Cancun Agreements, as developed above, together with an expert composition could help improve the production of guidance given by the COP to the financial mechanism by making it more result orientated