Financing terms in draft Copenhagen Accord

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All reasonable efforts have been made to ensure the accuracy of this information at the time the advice was produced. However, the materials have been prepared for informational purposes only and may have been superseded by more recent developments. They do not constitute formal legal advice or create a lawyer- client relationship. To the extent permitted any liability is excluded. Those consulting the database may wish to contact LRI for clarifications and an updated analysis.

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Date produced: 19/12/2009

1. Does the reference to $100bn apply to mitigation financing only, or to both mitigation and adaptation financing? What does “to address the needs of developing countries” mean in this context?

2.Is the $100bn a cap on total financing foreseen by this agreement?

3. Is the mitigation financing contingent upon “meaningful mitigation actions and transparency on implementation”?

4. Does “meaningful mitigation actions and transparency on implementation” refer to developed or developing countries or both, in this context?

5. Could adaptation spending be contingent on “meaningful mitigation actions and transparency on implementation”?

6. What is the meaning of “fund arrangements”? Does that imply only public funding?

7. What is the definition of “funding from public sources”?

The entire relevant paragraph is constructed so as to be ambiguous and indefinite. In that context, sentences and phrases can be read in conjunction with one another or as free standing commitments. It is difficult to reach a definitive view on meaning / intent. However, we have tried to give the most likely construction under the circumstances.

General Comments on excerpt from paragraph 8 of draft Copenhagen Accord:

Subject to the above health warning on the ambiguous construction of this entire document, the situation room view on the meaning of the new text in relation to Q1 (a) and (b) is as follows:

The collective commitment by developed countries is to provide new and additional resources amounting to $30 billion for the period of 2010 to 2012 with balanced allocation between adaptation and mitigation, including forestry and new and additional investments through international institutions.

Our interpretation of this sentence is that $ 30bn in new / additional financing will be made available to developing countries (not specifically mentioned in this sentence, but the raison d’etre for this paragraph), for both adaptation and mitigation – possibly equally.

Funding for adaptation will be prioritized for the most vulnerable  developing countries such as the least developed countries, small island developing states, and countries in Africa.

Funding for adaptation, whichever pot it comes from, will be prioritized as stated.

In the context of meaningful mitigation actions and transparency on implementation, developed countries set a goal of mobilizing jointly $100 billion a year by 2020 to address the needs of developing countries.

The above paragraph is likely to only be referring to mitigation actions. The sentence above could be read,

  • In the context of [namely In relation toAs regards to / With reference to]
  • meaningful mitigation actions and transparency on implementation [add of the aforementioned meaningful mitigation actions] or
  • In the context of meaningful mitigation actions and a more open and transparent general implementation / namely transparency on implementation of an unrelated climate change area (unlikely) /general mitigation policies

This funding will come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance. New multilateral funding for adaption will be delivered through effective and efficient fund arrangements, with a governance structure providing for equal representation of developed and developing countries.

1. It is likely that this is a reference to mitigation financing only, and more specifically ‘meaningful mitigation actions’ and ‘transparency on implementation’, presumably of the aforementioned meaningful mitigation actions. (Please see below.)

This language cannot be read in isolation and needs to be read in the context of the whole sentence. It is likely therefore, that the ‘needs’ referenced here are intended to be aligned to the ‘meaningful mitigation actions and transparency on implementation’.

2. The agreement does not seem to be indicating a cap on total financing – certainly there is nothing in the language in Paragraph 8 that would lead to this conclusion. However, the ongoing concerns on double-counting etc still remain as there is no indication that the 100 billion figure mentioned is new finance. The beginning of the paragraph references ‘scaled up, new and additional…adequate funding’, but this sentence, in contrast to the final sentence in this paragraph, does not specifically refer to ‘new’ funding.

Furthermore, the commitment is to set a ‘goal of mobilizing jointly 100 billion dollars a year by 2020’. This means that it is merely a target which may or may not be achieved. Even if it is to be achieved, the financing possibilities outlined mean that the financing could come from any number of sources. Conditionality beyond that mentioned in this document does not appear to be prohibited.

Finally, there is no indication of what the financing goals would be between 2012 and 2020.

3. In relation to the proportion of funding allocated to mitigation from the $30bn, it seems as though funding is not conditional upon the ‘meaningful mitigation actions and transparency on implementation’. In relation to the $100bn, as above, it seems as though the most likely construction is that the funding is contingent upon and specifically for the purpose of the ‘meaningful mitigation actions and transparency on implementation’.

4. It is highly likely that the reference here is to developing countries, not both. As mentioned above, the way most of this document has been constructed is to leave things imprecise and subject to ambiguity, however, to refer to developed countries in this context would render the sentence close to nonsensical.

5. As with 3. above the proportion of funding allocated to adaptation from the $30bn, funding does not appear to be conditional upon ‘meaningful mitigation actions and transparency on implementation’ or any other action. The final sentence in this paragraph refers to adaption funding but there is no mention of the conditions that apply to mitigation funding earlier. In addition, this funding is specifically mentioned as new.

6. Fund arrangements” (with a capital ‘F’) tends to mean funding arranged by the IMF. However, in the context of para 8, it is more likely to mean that the arrangements for the fund dealing with adaptation finance under the Convention shall be efficient and effective. The language ‘fund arrangements’ does not necessarily imply public funding. However, in the context of the sentence, which starts ‘New multilateral funding for adaptation’, it is arguable that this funding for adaptation will come from public sources. However, the language of the sentence does not expressly exclude the possibility that there could be additional funding for adaptation that comes from private and non-multilateral sources.

7. From our limited research, we do not believe there is any special definition of “funding from public sources”. Therefore, as a rule of interpretation, the words must be given their ordinary meaning. Therefore, we believe it is likely that “funding from public sources” means funding from governments and multilateral institutions (eg UN, Development Banks etc): in short, not private finance.