On Saturday, following two weeks marked by dramatic rhetoric and intense negotiations over legal language, close to 200 Governments bridged a deep global divide and agreed on the set of rules meant to steer countries worldwide in implementing the historic 2015 Paris Agreement on climate change. UNEP FI’s Climate Lead, Remco Fischer gives more detail on the decisions made at COP24 and provides a summary of UNEP FI’s events and inputs including recordings of sessions, which helped facilitate a strong presence from the financial industry.

The Rulebook of the Paris Agreement

The finance sector – including over 400 investors –asked for a Paris Agreement rulebook. COP24 in Katowice delivered this. 

By defining nations’ responsibilities for tackling climate change, reporting their progress – both reductions in greenhouse gas emissions as well as in the provision of financial resources – and upping their efforts for decades to come the Rulebook puts the Paris Agreement into action.

Two common threads ran through each of the areas in the Rulebook. First, whether to agree a single set of rules for all countries – with flexibility for those that need it – or to maintain the current and historic divide between rules for developed countries and rules for developing countries. This is commonly referred to as “differentiation”.

Overall, the COP decisions made on Saturday tend towards single sets of rules for all countries, with some latitude for those that lack the capacity to meet them. On finance, the rules are relatively permissive, giving flexibility to developed countries in what and how they report their contributions. More details on the various decisions made on the Rulebook are provided further below.

The Ratchetting-up of Ambition

The finance sector – including over 400 investors –  have demanded that countries up their climate ambition to align with the long-term objectives of the Paris Agreement. COP24 in Katowice delivered momentum for more ambition, as well as the mechanisms for more ambition, but no country has stepped up yet.

In addition to the challenge of operationalizing the Paris Agreement through the Rulebook another key theme at COP24 was the climate and decarbonization ambition that countries have shown in their climate pledges to date and – given the persistent lack of collective ambition and, as a result, the still enormous ‘emissions gap’ – the avenues at hand to increase it.

According to UN Environment’s Emissions Gap Report, launched at UNEP FI’s Global Roundtable in Paris, the ‘emissions gap’ is the difference between “where we are likely to be and where we need to be”. As the emissions gap assessment shows, the current level of ambition in countries’ climate pledges needs to be roughly tripled for the 2°C scenario and increased around fivefold for the 1.5°C scenario.

To that effect, and in addition to the Rulebook, COP24 delivered the Talanoa Dialogue Call for Action, as well as dramatic appeals from UN Secretary-General António Guterres, Sir David Attenborough, and Swedish schoolgirl Greta Thunberg.

However, COP24 did not yield any increased country ambition yet. This is an urgent need now and the UN Secretary General’s Summit in September of 2019 will focus on meeting that need.

Financial institutions, as well as their clients and investees, also need to increase their own ambition by phasing out fossil fuels in ways that minimize impacts for workers and communities, scaling-up low-carbon financing, and ultimately aligning their portfolios with the Paris Agreement and a 1.5 degrees-compatible global economy.

The COP decisions in detail

In more detailed and specific terms, COP24 agreed:

On NDC guidance – Article 4

1. That countries’ climate pledges – the so-called nationally Determined Contributions (NDCs) – will be recorded in a public, and ‘searchable’, registry based on the current interim registry.
2. That, in their reporting on NDC progress, all countries shall use the latest emissions accounting guidance from the Intergovernmental Panel on Climate Change (IPCC). This is meant to make it easier to compare pledges, to monitor progress over time, and to add them to global aggregates.
3. That NDCs should cover a common timeframe from 2031, with the number of years included in such a timeframe to be agreed on later on. Some current pledges at the moment cover five years while others cover 10.

On Climate Finance Reporting – Article 9

4. That developed countries ‘shall’ and developing ‘should’ report on any climate finance they provide, as demanded for developing country Governments, but heavily caveated by loose wording such as: “Enhanced information to be provided […] as available” or “An indication of new and additional resources to be provided”. Also, countries are allowed to report the full value of loans they provide as climate finance, rather than the “grant-equivalent” portion of the total, which is a departure from established practice in development finance & assistance, and as such is being criticized heavily by civil society organizations.

On Transparency – Article 13

5. That – when it comes to countries’ reporting on their climate efforts including emissions reporting, NDC progress, adaptation to physical climate change, climate finance provided or received – a single set of rules shall apply to both developed and developing countries. This had been a key issue and key red line for the US and EU, which had wanted to hold the likes of China to the same reporting standards that they face. Still, this single set of rules is to be applied with flexibility for “those developing country parties that need it in the light of their capacities”, with developing countries themselves “self-determining” whether they need flexibility, but also with them stating why they need it, how long they expect to continue needing it, and what they plan to do to stop needing it. Despite this flexibility, it is widely recognized that the new rules will translate into a substantial intensification of biannual reporting requirements under the UNFCCC and a key departure from the current practice of only having the 44 developed nations under the Convention report biannually.
6. That these new reporting rules will kick in from 2024, one year after the first global stock-take of progress.

Global stock-take – Article 14

7. On the ground rules of the Global Stock-takes through which: i) every five years, countries are meant to come together and take stock of progress towards the long-term Paris goal of avoiding dangerous global warming, and then, with this global stock-take in hand, ii) countries go home and return with enhanced climate pledges to fill gaps in ambition.
8. On the structure of the stock-take process which is to be divided into three stages – i) Information collection; ii) Technical assessment: iii) Consideration of outputs – with the technical assessment being key as a step meant to ‘de-politicize’ and ‘objectify’ the stock take deliberations and their outcomes.

On Market mechanisms – Article 9

9. To defer most decisions related to Market Mechanisms (Article 6) to 2019, which includes the extent to which countries can ‘trade’ their NDC-related overachievement, the extent to which individual projects can generate carbon credits for sale (in manners resembling the Kyoto Protocol’s Clean Development Mechanisms – CDM) , and related measurers to avoid ‘double-counting’ of emissions reductions.

Other matters

10. To set up an expert compliance committee to enable monitoring of countries’ compliance with their NDCs with this committee being “facilitative in nature…non-adversarial and non-punitive”. The committee will be able to investigate countries that fail to submit climate pledges. Regarding transparency reports covering climate finance or emissions and progress in cutting them, the committee “may, with the consent of the party concerned, engage in a facilitative consideration of issues in cases of significant and persistent inconsistencies of the information”.

UNEP FI’s Input and Involvement at COP24

UNEP FI helped facilitate a strong presence from the financial industry through a range of events and inputs, many of which were recorded and can be viewed below.

• Side event hosted by the International Chamber of Commerce on Climate Finance – Next steps for climate action with participation from the German Federal Ministry for Economic Cooperation and Development (BMZ), the ICC, the NewClimate Institute, WWF, and UNEP FI.
• A cross-cutting roundtable convened by the UN Climate Secretariat on Climate-Action and Finance Mobilizing climate-aligned investment
• The official side event of the Investor Agenda and the final launch of the Global Investor Statement on Climate Change, now signed by a record 415 investors managing over US $32 trillion. A recording of the session can be viewed here.
• A European Commission-hosted event on Public finance for low-carbon transitions: Changing paradigms, policies and practices in Europe and the G20, with participation from the European Investment Bank, IPEEC, and UNEP FI.
• A side event on Adaptation finance and the TCFD recommendations convened by Acclimatise and the European Investment Bank, with participation from the EIB, the EBRD, the AFD, the IDB, the Global Commission on Adaptation, and UNEP FI. A recording of the session can be viewed here.
• UNEP FI’s official side event at COP24, in partnership with the OECD, and with participation from the German Minister of the Environment, the Costa Rican Minister of the Environment, the World Bank, KLP, OECD, UN Environment. Focused on: Aligning Financial Systems with the Climate Goals of the Paris Agreement. A recording of the session can be viewed here. Watch the highlights here.
• A WWF-hosted session focused on Financial regulation as a lever for driving the shift of financial flows. A recording of the session can be viewed here.

For more information contact Remco Fischer.