Waters still troubled: What will the COP16 deliver on transparency?

Lisa Elges, Climate Governance Programme Manager at Transparency International, reflects from Cancún on the Climate Summit- the 16th meeting of the Conference of Parties to the UN Framework Convention on Climate Change (COP16).

Troubled waters and no way out?

After one week of the climate summit, clarity on what the COP 16 will deliver remains elusive. What agreements government negotiators can reach regarding a long term agreement on climate change, the terms and agreement of a second commitment period to the Kyoto Protocol, the continuation of the clean development mechanism are still not evident. With most negotiations taking place in informal contact groups and sessions closed to observers, the outside non-governmental community can only speculate.

While there may be understandable reasons why the yellow badges (observers) should not listen in on negotiation talks, i.e. to advance open discussions and make progress on achieving agreements, the lack of transparency in decision-making process on how we – nations, governments, people, businesses – will adapt to and mitigate climate change is disconcerting. It is likely that future generations in looking back will question or even hold in disbelief the exclusive approach to global treaty making processes. Future generations may hold many things we do now in disbelief.

COP 16 is about many things with the global agreement on climate change being at the fore. It is as much about agreements as it is about practical ways to adapt to and mitigate climate change using existing and new technologies, develop and strengthen green economies and how to generate new and additional money to pay for ways to address climate-related damages (adaptation) and for ways to prevent further damages by keeping temperature rises low by reducing GHG emissions (mitigation). Mitigation includes a wide range of activities including carbon sequestration through natural resources e.g. forests, oceans and land (soil and plants) and technology, energy efficiency measures and technology, and the development of green energy sources such as renewables.

The side-events are surely testimony to this. At least half of the side events and side-side events (not official, off site meetings hosted by research, NGO, business and other organisations) are discussing the tough financial and governance questions around what a post-2012, climate impacted world faces. The discussions pose questions, solutions, best practices, recommendations, tools, the latest research and evidence around how measuring, monitoring, reporting and verification of emissions reductions and climate finance generation, delivery and effectiveness can be made as transparent and accountable as possible. These are key concerns and demands from a wide range of actors. They are seeking to address the concerns by developing and implementing multistakeholder approaches such as climate finance registries, tracking mechanisms, effectiveness monitoring/results-based management tools and civil society consultation practices. In this context, transparency is a common buzz word.

Transparency is probably the least contentious and most agreeable principle in the negotiations and in outside discussions amongst all stakeholders, governments, companies and NGOs alike. Transparency is necessary to identify where public finance for climate change is sourced, how much is being generated, how much is being delivered and distributed, to which countries, on what basis, for what and to what extent the money will be or has been effective in achieving the climate-related goals for which it is meant to accomplish. In climate finance for mitigation, it is equally important to ensure transparency in the emissions reductions (ERs) actually achieved and how those ERs are actually measured, reported, verified.

Although the interests in ensuring transparency vary, transparent decision making is a key concern across all forms and methods of fast–track, long-term and existing climate finance for both adaptation and mitigation.

Fast track financing refers to the commitment of developed countries under the Copenhagen accord to contribute up to USD$ 30 billion of new and additional money by 2012 to address urgent adaptation and mitigation needs. So far almost USD$ 29 billion has been pledged, most of which is being delivered through bilateral channels. Questions have been raised whether the fast track finance is actually new and additional, whether it is distributed equally across both adaptation and mitigation projects (current analysis suggest much more is being spent or earmarked for mitigation actions), and for which countries, on what basis it is being delivered. Transparent reporting on the part of fast-track finance donors will be important to address these concerns. At the minimum, transparency can shed light on the sources of climate finance to avoid the double counting of donor money as both development aid and climate finance. While it appears that most donor countries are transparent in how they have allocated their public finances and for what i.e. adaptation or mitigation, what actions are actually funded and why still lacks sufficient clarity.

Transparency is particularly important around decision-making processes on how public finance should be spent. Within the adaptation stream there is an agreement that countries most vulnerable to climate change should have priority in receiving climate finance. What exactly “vulnerability” means, however, is not clear. Given the complexities in identifying who is or who is not vulnerable, such a definition may be a long way off. In the absence of a definition, at minimum, transparent decision-making is essential: People should know which countries do, and which countries do not receive adaptation financing and why. This concerns both fast-track and long-term sources of finance.

The concern is echoed in other financing modalities. The Climate Investment Funds, for example, have selected the first pilot countries to receive financing under three programmes: Scaling-up Renewable Energy (SREP), Forest Investment (FIP)and Climate Resilience (PPRC). In the SREP, some evaluation was provided as to why certain countries were chosen for the pilot phase but no information was provided as to why those countries not selected were not chosen. Even if on a bilateral level, this information is important to potential pilot countries so that they can either contest the decisions made and/or be successful in future pilot selections. Suggestions for improving the transparency of the evaluation have been made and take into account.

Sufficient levels of transparency are also needed to encourage and incentivize private investment – a significant resource in generating the climate finance. The Copenhagen Accord also aims to achieve a global commitment of USD$ 100 billion by 2020 through both public and private sources. The recent High Level Advisory Group in Climate Change Finance report provides a useful analysis of how the development of carbon markets and the stabilization of a carbon price of USD$ 20-25 will be necessary to contribute achieving the Copenhagen goal. Still, private sector investors and carbon market entrepreneurs will require transparency to ensure a level playing field and confidence in the market to make a difference. Clear regulations and oversight also ensure the environmental integrity and mitigation benefits of investments, particularly those which are leveraged through public finance schemes.

Transparency, however, is only part of the solution and may become part of the problem if it is not accompanied with integrity and accountability. Enormous headway has been made in achieving consensus on the need and formal inclusion of transparency in the operations of climate change governing and financing institutions. These advances can only be applauded. Still, some caution needs to be had in terms of what transparency actually means and how it is actually exercised. If the transparency requirement becomes a tick box which can be checked off with only partial and not full transparency, then there is a danger that the effectiveness of climate financed projects is less than what is actually reported. If decisions on how to spend climate finance are not fully transparent, as in the example given above, this calls into questions of the credibility, legitimacy and equity of the decision-making processes. While transparency tends to be used to actually increase decision legitimacy, without accompanying processes and procedures to hold those decisions accountable – enabled by public oversight and monitoring mechanisms, the value and importance of transparency can be undermined.

On the flip-side, to be a useful tool to enable public oversight, transparency needs to be understandable. Both in the context of climate finance and emissions reductions, measuring, reporting and verification can be transparent but given the highly complex and technical nature of what MRVs may entail, one would require special expertise and capacities to evaluate and monitor whether or not climate benefits and environmental integrity were achieved.

The Clean Development Mechanism (CDM) is a clear example of this. Under the CDM, a company or project developer in a developed country can initiate a project in a developing country with the goal of reducing greenhouse gas emissions and on that basis earn carbon credit. To verify that emissions reductions were actually made and how much, the project initiating company must contract a Designated Operational Entity (DOE). The DOE is also a private company which has expertise in verifying emissions reductions and is accredited with the CDM. Because the DOE is contracted by the Project companies, there is a potential conflict of interest. There are concerns that DOE verifications may not be as robust or accurate as they should be. To date, a number of DOEs have been suspended on this basis. While the CDM aims to ensure transparency in making publicly available project documents, MRV reports and decisions taken, the special expertise is required to effectively monitor and evaluate the accuracy and integrity of emissions reductions and decisions to issue carbon credits.

These concerns are certainly on the Cancun table. Stakeholders concerned with the governance of climate change commitments and the financing needed to reach those goals are developing thinking and tools to ensure transparency and accountability are meaningful.

The draft negotiation texts for Further Commitments of Annex 1 Countries under the Kyoto Protocol and for Long term Cooperative Actions, both include draft provisions on requirements (mandatory/ non-mandatory) for robust governance, transparency and accountability in measuring, reporting, verification and compliance in relation to emissions reductions commitments of Annex 1(Developed) Countries. The latter includes additional provisions which could require transparency and accountability of mitigation and adaptation actions and climate finance decisions relevant to all countries.  Deciding on these principles could be a significant achievement in Cancun. Most modalities and procedures for ensuring compliance and accountability will be negotiated next year at the COP 17 in South Africa.

In the meantime, decisions are being taken as to how climate finance should be spent under fast track and established global financial mechanisms. Transparency is clearly a principle to which all stakeholders seem to subscribe – as is the need for accountability to ensure effectiveness of public money to meet climate goals. Still and importantly, what is missing from the conversations is the need for public integrity and oversight.

Insofar as rules and definitions to guide climate finance decisions remain unclear, assurances that decision-makers are acting with integrity are critical. The integrity of those responsible for measuring, reporting and verifying emissions reductions and monitoring and evaluating climate finance effectiveness is equally important. Greater trust, confidence and credibility in the transparency aspired to under emissions reductions schemes can be developed when the integrity of operational actors can be assured. This is particularly necessary when highly technical and complex information is involved and where special competencies are required to enable public scrutiny. The same observation may be made for climate finance decisions and decision-makers. Equally, non-governmental actors including NGOs, research institutions, the media and the private sector assuming roles in contributing to climate policy development, implementation and monitoring need to provide assurances of their behavioural integrity within climate change frameworks. Of course, one would generally hope to assume that decision-makers,  operators and non-governmental stakeholders are acting with the highest level of integrity. Assurances such as legally-binding codes of conduct, requirements that both donor and recipient countries ratify and enforce anti-corruption safeguards and provisions under the UN Convention against Corruption might help underscore that assumption. Transparency International’s project and sector-based Integrity Pacts could be a useful tool to help ensure integrity as could our Advocacy and Legal Advice Centers which provide a hotline for citizens to report cases of corruption and legal advice and support services to help people address those cases.

Public oversight is an important component of transparency, accountability and integrity to ensure robust climate governance. Civil society can and should contribute to the public scrutiny of climate finance decisions and effectiveness of adaptation and mitigation actions as well as climate policy development and implementation. In many cases, efforts are being made to include civil society through consultative processes regarding climate policy, project actions and financing decisions. Much more needs to be done to expand and improve these processes and to build the capacity of local civil society in both developed and developing countries so that they can play a meaningful role in climate decisions impacting them and possibly other people across the globe. The way climate change issues are framed, the language, the mix of disciplines – economics, politics, science and industry – make it difficult for people to engage and for public scrutiny on many levels.

Capacity building is one of the action areas under the Draft Long Term Cooperative Action Agreement and is largely understood to assist countries in developing the capacity to absorb large flows of climate finance on top of development aid, and to gain technical expertise to adapt to and mitigate climate change. Capacity building may very well also include actions to support civil society to better engage in national and local climate policy making, implementation, financing decisions and mitigation and adaptation project monitoring. Some civil society groups have acquired sufficient technical knowledge and expertise to engage meaningfully in climate finance, technology and market mechanism debates. But those competencies tend to be rooted in a handful of well-resourced organisations in the North and in some emerging economies. Efforts to develop networks and “networks of networks” to enable shared learning are underway but much more needs to be done and done in a way that is helpful and makes good sense.

Capacity building in conjunction with establishing formal roles for civil society actors to contribute to the areas of climate policy and decision-making would help enable public participation and oversight. What is needed is a more inclusive approach to ensuring transparency, accountability and integrity.  It would be ideal if national governments would embrace the public participation and oversight as a health and positive contribution to climate polices and plans. That still may be tenuous though as good models for such engagements are few and far between. The example of the UNFCCC COP process itself by excluding observers from most discussions is not particularly inspiring.

Invest now or pay later?

Investing in “new and improved” institutional measures and mechanisms to ensure transparency, accountability, integrity, public participation and oversight would likely save future costs which no one can afford. It is fairly clear that GHG emissions reductions have to happen now and with as much efficiency and effectiveness as possible. If mitigation efforts are undermined by corruption and corrupt behaviour, the net impact of those efforts to reduce future impacts of climate change will be less than what is needed. If significant portions of adaptation finance are lost to corruption, the beneficiaries of projects aimed to help them cope with climatic impacts will suffer. If climate finance decision makers or emissions reductions MRVers abuse their entrusted power for private gain, aside from financial implications, they will bear the costs of loss of credibility and reputation. Trust in institutions will be damaged.

Perhaps, none of the billions of new and additional dollars will be corrupted and all of it will help adaptation and mitigation efforts. However, real and perceived corruption that does in fact damage people’s lives, livelihoods and the environment – in all countries across the globe in varying degrees, is not likely to go away the minute climate finance cheques are signed. It would be unrealistic and irresponsible to assume this. That does not mean that the climate billions should not be spent. To the contrary, climate money is needed and in an urgent way – but with the necessary assurances that the money will get to where it is supposed to go and achieve what it is intended to – save the earth, people and future generations from climate change.

Photo credit: © Greenpeace/Jiang He

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