Monitoring climate finance

Developing countries such as Pakistan are struggling with a limited amount of finances to respond to the damaging effects of climate change. The surmounting risks posed by climate change and race against time to achieve the below-two-degrees Celsius target means that our progress is subject to a considerable amount of financial aid flow from developed countries. Therefore, climate finance becomes the backbone of the matter. It upholds all international agreements that were made by parties at the 21st Conference of Parties (COP 21), organised on climate change in Paris in 2015.

A multitude of climate financing channels – from donors to receivers – are in place and functioning without any universally agreed upon accountability system. This means that climate finance flows are much more prone to transparency and accountability issues.

The Paris 2015 agreement was all about showing goodwill and signing off ambitious plans to reduce global carbon foot print. COP 22, organised in 2016, looked into how promises and commitments made at Paris 2015 would materialise.

It was highlighted during COP 22 that in order to successfully realise the previous year’s agreement mission, developing countries need to establish regulatory systems – that can help address challenges posed by complex modalities of accessing funds. Regulatory systems can also bring developed and developing countries on the same page by synchronising the process of monitoring and verifying flow of funds. COP 22, therefore agreed that the receiver-donor gap can be bridged through developing and following the same regulatory framework.

The Climate Finance Shadow report 2016 by Oxfam critically assesses climate finance commitment and resultant contribution for the period of 2010-2014. It shows that the lack of rules defining what counts as international climate funding makes it possible for contributing countries to register loans as climate finance aid. The result of this is countries overstating funding support figures. In 2013-2014 alone, a developing nation reported release of $41 billion as climate finance when only $11-21 billion was actually disbursed through allocation of grants.

The absence of a unified and agreed upon monitoring, reporting and verification (MRV) system means that countries at the receiving end of damages incurred by climate change also lose out on the front of fuzzy accountability system. Hence, it translates into them providing a free pass, somewhat willingly, to the contributing countries to project a pretty picture, by inflating the actual amount of dispensed funding.

The existing MRV system is being managed and mainstreamed by the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD) under UNFCCC negotiations. However, the aforementioned management and mainstreaming efforts are not as broad in their scope as envisioned by UNFCCC. An ideal MRV is not only about accountability related to before and during the project activities but is also designed to capture results and assess the extent of mitigation and adaptation outcomes that the project was initially set to achieve. The frequency of reporting in the robust MRV system is also supposed to provide real-time data, instead of varying and inconsistent reporting periods. The MRV systems present only the overall public level support through bilateral and multilateral channels, leaving a blind spot when it comes to the private sector climate finance flows.

All in all, the process of developing a robust and comprehensive MRV system is still a work in progress. As a developing country, Pakistan has a lot of stake involved to consider engaging in the ongoing discussion on international forums. A debate must be initiated for linking MRV with the existing monitoring systems. This discussion, starting out with active participation in the debate around definitions of what kind of financial inflow can actually be counted as climate finance, can move on to the national level.

Pakistan has been contributing to mitigation of, and adaptation, to climate change by utilising a combination of public and international funds. However, the prevailing widespread faulty system yields incoherent and inaccurate data. This hampers accurate data analysis and assessment. The level of ambiguity increases in monitoring of climate finance flows within the private sector.

A good starting point at the national level would be to expand the scope of Climate Public Expenditure and Institutional Review (CPEIR) study. LEAD Pakistan in partnership with UNDP, is in the process of concluding CPEIR study. This study estimates and analyses the level of climate change relevant spending in projects related to various provincial and federal departments. It also analyses the budgetary allocation of climate change in public funds. It ranks the institutions on the basis of their climate public expenditure and institutional policies in place to facilitate mitigation and adaptation measures. The CPEIR ascertains how proactive Pakistan is towards spending on projects that directly or indirectly help to tackle climate change.

Another way to expand the scope of the CPEIR study would be to develop a methodology to monitor and report private-sector funding. In this way analysis of policies and recommendations to promote voluntary principles for green fund reporting can also be looked into.

While floating big numbers and hoping for climate finance inflows towards a developing country like ours, we need to realise the importance of building a strong accountability structure. Pakistan’s government needs to seriously consider transformational change which looks into possibilities of important structural changes. In this way, capacity to automatically detect public and private sector climate change financial flows and their transfer to the MRV system can be developed.

The writer works at LEAD Pakistan.