Most international agreements addressing development and social issues are set out in nonlegally binding form which, in general, lacks financial mechanisms to assist developing country signatories to meet agreed objectives. Any financial assistance necessary for achieving goals set out in such instruments is typically provided through bilateral Official Development Assistance (ODA) and multilateral financial institutions.
The international climate change regime established by the 1992 UN Framework Convention on Climate Change (UNFCCC) and its 1997 Kyoto Protocol, by contrast, boasts a complex and highly innovative financial architecture. This architecture is composed of two elements: (1) legal binding commitments mandating Organisation for Economic Cooperation and Development (OECD) countries (known in the UNFCCC as Annex II Parties) to provide “new and additional” financial and technological resources to developing countries to fulfil treaty commitments relating to reporting and mitigation and also to assist developing countries most at risk from the impacts of climate change meet the costs of adaptation to climate change; and (2) an institutional machinery to deliver such financial and technological assistance to developing countries. The core of this machinery is a multilaterally governed financial mechanism, operated by the Global Environment Facility (GEF) in accordance with the political guidance of the Conference of the Parties to the UNFCCC. The provision of financial and technological resources through bilateral and other multilateral channels is also permitted by the Convention.
As climate impacts increase, there are likely to be more calls on donor resources to address climate change impacts through both mitigation and adaptation strategies (see Huq and Reid, this Bulletin). Although many factors other than aid will determine the availability of resources for the take up of these options by developing countries (such as opening up trade to developing countries and reducing the burden of debt), for many countries public financing will remain an important source of assistance.
However, global trends in ODA funding now indicate a stagnation or decline from earlier levels that appears unlikely to be reversed (see Bezanson, this Bulletin). This suggests much more policy attention will need to be paid to ensure that existing flows, whether under the Convention’s financial mechanism or otherwise, are being used as effectively as possible. This article focuses on how donors could improve the delivery of climate aid. Increased use of private sector finance for adaptation and mitigation options is discussed by Hamilton in her article on insurance and the financial services sector and by Humphrey and Leach and Leach in their articles on the Clean Development Mechanisms, in this Bulletin.
This article begins by describing the main trends in the size of aid flows and the structure of disbursement, focusing particularly on the problems associated with aid proliferation and fragmentation. For those unfamiliar with the operation of the Convention’s financial machinery, the next section provides an overview of the climate change regime financial architecture, including a brief overview of its history and reforms in response to criticisms. The article then examines whether the financial mechanism could enhance the effectiveness of delivery of ODA on climate issues, highlighting in particular the significance of large, parallel flows of bilateral ODA for climate change programmes. The concluding section examines the scope for improvements in climate change aid and makes some suggestions that may be useful in future policy discussions.
This article comes from the IDS Bulletin 35.3 (2004) Aid Fragmentation and Proliferation: Can Donors Improve the Delivery of Climate Finance?