Late in February, the UNFCCC Standing Committee on Finance (SCF) met in Bonn to discuss various technical reports it has been tasked with delivering. Its discussions highlight how disagreements over what counts as climate finance, and the scope of what it is meant to track, are undermining the ability of negotiators to take discussions forward based on agreed data.
At its heart is a longstanding debate about what counts as climate finance. Should it include funds actually provided, or should it also include funds from the private sector which are mobilised by a government’s actions such as loans? It is also about whether those amounts are new and additional to what was already promised (for example, Overseas Development Assistance). This matters because a country can argue that it has increased the amount of finance it has channelled to developed countries if non-concessional loans and other forms of “mobilised” finance are counted.
Another issue is how to address three historic obligations. The first was to provide US$100 billion a year, the second was to double adaptation finance by 2025. At the end of COP30 last year, African negotiators were calling for more transparency around these figures, particularly the adaptation finance target asking for the SCF to hasten its reports on these issues.
To this end, the role of the SCF, among other things, is to prepare biennial overview reports on climate finance flows (Overview Report), and a report that assesses the extent to which the US$100billion target was met (US$100 billion Report). The committee is also preparing to develop the first report on the delivery of the NCQG and has been tasked with assessing the extent to which adaptation finance doubled up until 2025.
The Overview report that will be released later this year will capture the country level data (transparency reports) submitted by every Paris Agreement which were due in December 2024. It will also capture trends on whether funds are aligning with national needs and enabling country ownership. Importantly, it will reflect on key barriers to accessing finance, notably the costs of capital, debt and fiscal space as well as the reform of the international financial architecture.
It is not often that these issues are addressed in detail within the mechanisms of the UNFCCC, and it would be important for the Committee’s findings to be used substantively in the new Article 9 Work Programme that was created last year. In other words, developing countries now have a dedicated forum within which to discuss finance and the technical finance reports prepared by UNFCCC mandated bodies can and should be used to feed into this work. This underscore the importance of the SCF’s reports as platforms to argue for better reforms to the international system. If these reports are weak and unclear, negotiators will be ill placed to argue for better.
Equally important is that the Committee will be updating its last report from 2022 on whether the US$100 billion goal was met. Between then and now, there have been numerous other organisations such as the OECD and Oxfam which have given their own estimations, but no data coming out of a globally mandated body such as the SCF. For instance, Oxfam found in 2022 that the true value of reported finance was between US$28 and 35 billion in 2022, a lower amount because it excludes loan repayments, non-concessional loans and certain other finance instruments. By comparison the OECD estimated US$116 billion was achieved for the same year, using a more expansive definition. The OECD amount is often quoted by developed states as proof that the target was met, with the Oxfam findings largely ignored. Ideally instead of relying on these external organisations, the SCF, a government mandated institution following transparent and representative processes, should be using its own accounting methods to make an independent determination.
The difficulty is that the SCF does not yet have an agreed definition of climate finance, an issue that has plagued discussions for over a decade. This gap was pointed out by Antigua and Barbuda’s representative Diann Black-Layne, who questioned which methodologies the technical team drafting the reports would use in order to classify climate finance. She argued that for small island developing states, much of the funding is in the form of loans, which can be devastating for small states as they are unable to borrow any further, and that the reports needed to be “rigorously honest” on this point. Exacerbating it was the fact that “some [in an apparent reference to the U.S] have left the Convention and the Paris Agreement and we need to talk about it since it’s a fact and it will impact on resources.”
In response, the technical experts developing the report responded that they were using relevant reports as key sources of information and not using their own definition or methodology, relying on the transparency reports of countries, the OECD and Oxfam’s reporting. This follows the approach adopted in the SCF’s 2024 report on the US$100 billion target.
Perpetuating this approach results in a report that continues to present a smorgasbord of options of whether the target was met and leaves it to lay-readers to unpick the technical definitions and lack of clear conclusions. This haziness then translates upwards into a lack of clear findings from the SCF on the ability of countries to deliver on their commitments and leaves negotiators ill equipped to argue for reform. Until such time as this body can agree on a definition, climate finance negotiations are unlikely to move clearly forward as parties will be singing from different data sheets.
Not only does it muddy negotiations but it leads to skewed reporting. For example, representatives from Namibia asked for there to be more clarity on what is provided vs what finance is mobilised vs what is received, and announced at the meeting that they would not include loans in their transparency reports.
If the SCF is unwilling to clarify its accounting methods then the first issue that the new Work Programme on Article 9 should address should be agreement on what counts as finance. Reaching consensus on this point is likely to be challenging, given historic discussions around the relevance of and relationship between Article 2(1)(c) and Article 9 and the stated objectives of the Work Programme. However until such time as this issue is resolved, the SCF will be unable to fulfil its function well, both in relation to historic accounting and guidance as well as future accounting for the New Collective Quantified Goal.
