(1) Does Article 9.1 of the Paris Agreement create a new financial obligation, or does it only confirm the existing ones under the Convention?

(2) Who has an obligation to provide financial resources under Article 9.1 of the Paris Agreement?

Summary:

There is considerable ambiguity in the application of Article 9.1 of the Paris Agreement.

It is possible to construe Article 9.1 narrowly, that Article 9.1 merely confirms existing obligations under Article 4.3 and 4.4 of the Convention (which only created obligations for Annex II Parties) and therefore only Annex II Parties to the Convention have an obligation to provide financial resources under Article 9.1.

However, considering the ambiguity in the application of Article 9.1, it should be read in the context of the Paris Agreement’s approach to differentiation, which supports a broader and more flexible construction of Article 9.1. The Paris Agreement has a more nuanced approach to differentiation than the Convention – it does not define “developed country Parties” or “developing country Parties”, nor does it support a static placement of Parties into Annexes. Rather, the Paris Agreement is intentionally flexible and recognises that the national circumstances of Parties will change and evolve over time.

In this context, we support a broader interpretation of Article 9.1 of the Paris Agreement, whereby all developed country Parties have an obligation to provide financial resources under Article 9.1, forming a new obligation for those developed country Parties that are not in Annex II to the Convention, and continuing an existing obligation for those developed country parties that are listed in Annex II to the Convention.

Advice:

Article 9.1 of the Paris Agreement states “Developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention“.

The legal character of Article 9.1 is defined by several elements:

• the use of the imperative “shall”;
• the plural subject “developed country Parties” rather than the singular “each developed country Party”; and
• the qualifier “in continuation of their existing obligations under the Convention”.

The use of the imperative “shall” indicates that Article 9.1 creates a “hard obligation” or a “legally binding commitment”.[1] The plural subject “developed country Parties” indicates that Article 9.1 creates a collective obligation rather than individual obligations.[2]

The qualifier “in continuation of their existing obligations under the Convention” is a reference to the obligations under Articles 4.3 and 4.4 of the Convention:

• Article 4.3 of the Convention states “The developed country Parties and other developed Parties included in Annex II shall provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties in complying with their obligations under Article 12, paragraph 1. They shall also provide such financial resources, including for the transfer of technology, needed by the developing country Parties to meet the agreed full incremental costs of implementing measures that are covered by paragraph 1 of this Article and that are agreed between a developing country Party and the international entity or entities referred to in Article 11, in accordance with that Article. The implementation of these commitments shall take into account the need for adequacy and predictability in the flow of funds and the importance of appropriate burden sharing among the developed country Parties.”
• Article 4.4 of the Convention states “The developed country Parties and other developed Parties included in Annex II shall also assist the developing country Parties that are particularly vulnerable to the adverse effects of climate change in meeting costs of adaptation to those adverse effects.“

Articles 4.3 and 4.4 of the Convention apply to “developed country Parties and other developed Parties included in Annex II”. The phrase to “other developed Parties” refers to the European Union.[3] Accordingly, Article 4.3 and 4.4 only apply to countries (and the EU) which are listed in Annex II of the Convention. We note that Annex II of the Convention only includes developed country Parties, whereas Annex I includes developed country Parties and Parties undergoing the process of transition to a market economy.

Considering that only Annex II parties have an obligation to provide financial resources under the Convention, there is an argument that that the reference to “developed country Parties” in Article 9.1 should be read together with the qualifier and interpreted as “developed country Parties that have an obligation to provide financial resources under the Convention”, namely Annex II Parties. If Article 9.1 is to be narrowly construed in this manner, there is an argument that Article 9.1 merely confirms existing obligations under Article 4.3 and 4.4 of the Convention (which only created obligations for Annex II Parties) and therefore only applies to Annex II Parties to the Convention.

Several leading international law academics have noted that Article 9.1 continues existing obligations rather than creating substantive new obligations. Rajamani observed that Article 9.1 is a mandatory obligation for developed country Parties, but this “continue(s) existing obligations rather than creat(ing) substantive new obligations.[4] Bodansky also observed that Article 9.1 does not create a new financial obligation on developed country Parties, because “the substantive obligation to provide financial resources expressly states that it is ‘in continuation of [developed country Party] obligations under the Convention’.[5]

However, it is also possible to construe Article 9.1 more broadly to apply to all developed country Parties – forming a new obligation for those developed country Parties that are not in Annex II to the Convention, and continuing an existing obligation for those developed country parties that are listed in Annex II to the Convention. This interpretation is supported by (1) considering the negotiations over the drafting of Article 9.1, and (2) considering the broader context of how differentiation is reflected in the Paris Agreement.

In relation to (1), the reason that the qualifier “in continuation of their existing obligations under the Convention” was included in Article 9.1 is that it permitted the United States to accept a mandatory financial obligation without losing the ability of the President to ratify the Paris Agreement without requiring a Senate majority.[6] This is critical to the interpretation of Article 9.1 and indicates that the intention of the qualifier was not to confine the obligation under Article 9.1 to Annex II Parties to the Convention, but to note that for those Parties that do have an existing obligation under Articles 4.3 and 4.4 of the Convention, Article 9.1 is a continuation of that existing obligation.

In relation to (2), the Paris Agreement represents a considerable shift from the Convention and the Kyoto Protocol’s rigid approach to “common but differentiated responsibilities” and Annex I, Annex II and non-Annex I Parties. The Paris Agreement does not define the terms “developed country Parties” and “developing country Parties”.[7] The Paris Agreement does not make any reference to Annex I, Annex II and non-Annex I Parties, nor does the Paris Agreement refer to the category “economies in transition”. According to Voigt, this reflected the evolution of differentiation in response to changing circumstances, in this case that countries that formerly belonged to the Soviet Republic are now either part of the European Union or identify themselves as developing countries (with the exception of Russia). [8]

Importantly, the principle that was central to the Convention of “common but differentiated responsibilities and respective capabilities” is qualified under the Paris Agreement with the additional phrase “common but differentiated responsibilities and respective capabilities, in the light of different national circumstances”. According to Voigt,[9] this indicates that the principle applies to the Paris Agreement:

“in a manner that is not static, but open to change. The parties’ obligations are thus responsive to an evolutionary understanding of accountability for climate change, consid­ering parties’ constantly changing responsibilities, as well as their social and economic circumstances…

…Where references to “developed” and “developing” countries occur, they do not create a static placement of countries. Rather, the absence of annexes and definitions of “developed” and “developing” allow countries to move towards greater mitiga­tion ambition over time without the need to “graduate” from one category to the other.”[10]

According to Voight, the addition of “in light of different national circumstances” introduces a “dynamic and flexible element for interpreting responsibilities and capabili­ties, broadening the parameters of differentiation”.[11]

When read in this broader context, we consider the better argument to be that Article 9.1 applies to all developed country Parties. The use of “developed country Parties” should be interpreted in the broader context of the Paris Agreement’s nuanced and flexible approach to differentiation. Considering that the Convention’s Annexes no longer apply to the Paris Agreement, provisions of the Paris Agreement should not be construed or limited according to this previous system of differentiation.

To conclude, and in answer to questions (1) and (2) above, we consider that the application of Article 9.1 is ambiguous and therefore should be interpreted with reference to the broader context of the Paris Agreement, and accordingly:

• the stronger argument is that the obligation to provide financial resources under Article 9.1 applies to all countries that identify as “developed country Parties” (noting that this is not a static classification, and that if more countries identify as developed country Parties in the future, this obligation will apply to those Parties if and when they identify as a developed country Party); and
• Article 9.1 continues an existing obligation for developed country Parties that are included in Annex II to the Convention, and creates a new obligation for Parties that identify as developed country Parties but that are not included in Annex II to the Convention.

We note that, while we consider that all Parties who identify as developed country Parties have a collective obligation to provide financial resources under Article 9.1 of the Paris Agreement, the extent of this obligation should be read with the principle of “common but differentiated responsibilities and respective capabilities, in the light of different national circumstances”. Accordingly, the quantity of financial resources that a developed country Party is required to provide under Article 9.1 depends on their ability to do so (and will therefore represent a much smaller obligation for developed country Parties who have limited capacity to provide financial resources in accordance with their national circumstances).

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[1] Lavanya Rajamani, “The 2015 Paris Agreement: Interplay Between Hard, Soft and Non-Obligations” (2016) 28 Journal of Environmental Law 337, 353; Christina Voigt and Felipe Ferreira, “Differentiation in the Paris Agreement” (2016) 6 Climate Law 58, 70.

[2] Daniel Bodansky, The Legal Character of the Paris Agreement (2016) 25(2) RECIEL 142, 147; Christina Voigt and Felipe Ferreira, “Differentiation in the Paris Agreement” (2016) 6 Climate Law 58, 70.

[3] Farhana Yamin and Joanna Depledge, The International Climate Change Regime: A guide to Rules, Institutions and Procedures (Cambridge University Press, 2004) p 266.

[4] Lavanya Rajamani, “The 2015 Paris Agreement: Interplay Between Hard, Soft and Non-Obligations” (2016) 28 Journal of Environmental Law 337, 353.

[5] Daniel Bodansky, The Legal Character of the Paris Agreement (2016) 25(2) RECIEL 142, 147.

[6] Lavanya Rajamani, “Ambition and Differentiation in the 2015 Paris Agreement: Interpretative Possibilities and Underlying Politics” (2016) 65 ICLQ 493, 512.

[7] Lavanya Rajamani, “Ambition and Differentiation in the 2015 Paris Agreement: Interpretative Possibilities and Underlying Politics” (2016) 65 ICLQ 493, 513.

[8] Christina Voigt and Felipe Ferreira, “Differentiation in the Paris Agreement” (2016) 6 Climate Law 58, 70.

[9] Christina Voigt and Felipe Ferreira, “Differentiation in the Paris Agreement” (2016) 6 Climate Law 58, 70.

[10] Christina Voigt and Felipe Ferreira, “Differentiation in the Paris Agreement” (2016) 6 Climate Law 58, 66-67.

[11] Christina Voigt and Felipe Ferreira, “Differentiation in the Paris Agreement” (2016) 6 Climate Law 58, 66.