The Governments of the UK and three other countries have put forward ideas on how climate change finance should be raised, disbursed and governed.

The joint paper co-written by the UK, Mexico, Australia and Norway provides the substantive detail that is needed to support an overarching commitments on finance and governance that will be made in the final stages of the Copenhagen negotiations.

The paper represents an emerging consensus between the four co-authoring countries about a possible structure for governance but is not the official negotiating position of any individual nations.

The paper sets out some core principles, proposes a new climate fund, makes some key practical suggestions about how finance could be governed more generally, and emphasises the importance of private and carbon market finance alongside public finance.

The actual of size of the funding will have to be part of a final agreement in Copenhagen but the paper clearly states that finance will need to be scaled up immediately and beyond 2012.  

The paper identifies two key options for sources of finance – out of the nine currently proposed by the UNFCCC – around which consensus might be built:

• The Norwegian Proposal (PDF 20.96KB) on auctioning allowances issued under the Copenhagen Agreement; and
• The use of aviation and maritime instruments to generate revenue for climate financing.

The paper clearly describes proposals for the establishment of a new Climate or Green Fund, whilst also suggesting that existing mechanisms should be reformed where necessary for maximum efficiency.

One key issue that the paper discusses is fast-tracking funding – the need to get finance flowing immediately after a politically-binding agreement is signed.

The paper suggests that such finance should be directed through existing bilateral and multilateral channels to avoid time being lost in establishing a new fund for these initial years.

It will be crucial to ensure that developing countries have finance available to take early action should they so wish, and they can also have immediate support to build their capacity to take actions further in a post-2012 framework.

Governance of climate finance will have to be overseen by an independent body. Many countries accept that the international governance and delivery arrangements for climate finance need radical overhaul if Copenhagen is to deliver at the pace and scale needed after 2012.

Sound financial management of any new system must build on the strengths of existing institutions, which means that it is sensible to have an existing IFI acting as trustee for a new fund, the paper says.

The paper also points out that international peer review, which is used in non-climate agreements, can be very helpful in building trust and transparency and show that countries are engaged in action and cooperating.

The paper’s author governments are interested in other country views on how this concept might be useful in the climate context.

In terms of the UK's position, the Government remains committed to the position set out by the Prime Minister in June:

• Contributing our fair share to climate financing separately from and in addition to our promises on aid and the Millennium Development Goals, as part of an ambitious international agreement;
• Capping existing aid being used to meet climate commitments at 10% and ensuring that all aid is ‘climate sensitive’; and
• Signing up to a European commitment to pay its fair share of global public finance of €22-50bn by 2020 under an ambitious deal.

Related links

Download the paper (PDF 91.55KB)

The Norwegian Proposal on auctioning allowances issued under the Copenhagen Agreement (PDF 20.96KB)