5. THE UN FRAMEWORK CONVENTION ON CLIMATE CHANGE
5.4 Obligation to transfer finance and technology
5.4.1 Transfer of finance
101 It is, however, important to note that the UNFCCC does not saddle developing states with any emission reduction responsibilities. As seen in article 4(2)(a), the ‘starting point’ of each state party is taken into account in placing emission reduction obligations on them. Since developing states have a very recent starting point of emissions, they have no current obligations to limit emissions. The UNFCCC thus protects the rights of developing states to the utilisation of their fair share of atmospheric space in pursuit of development. This distributive justice conception of equity ensures that the climate change treaty does not impose restrictions that will have an impact on the right or ability of this group of states to achieve their developmental objectives.
102 technologies.206 Contributions to this fund were voluntary and administered primarily by the World Bank, the UN Environment Programme and the UN Development Programme.207 This progress gave momentum to the UNFCCC negotiations. The transfer of finance and technology became one of the most controversial matters during the treaty talks. Developing states argued that climate change obligations constitute additional burdens on their limited capacity, and they would only agree to such responsibilities if accompanied by additional financial resources.208 These financial resources must cover the cost of compliance with the Convention.209 On their part, developed states agreed to the provide financial resources if developing state parties would take on some obligations, establish national institutions to implement these obligations and that the transfer of funds would take place through a finance mechanism such as the Global Environment Facility.210
There were, however, disagreements on how these funds were to be generated. There had been initial proposals for establishing an automatic mechanism for generating finance through levies such as carbon tax, emissions fees, etc.211 This was turned down by developed states.
Ultimately, the parties agreed that the financial resources would come via ‘bilateral, regional, or other multilateral channels.’212 The transfer of funds would serve two purposes: (1) pay for the cost incurred by developing states in their execution of the provisions of the Convention;
and (2) support vulnerable developing states with the cost of climate change adaptation.213 Another issue of relevance was whether the provision of finance by developed states should be made voluntary or compulsory. Developing states contended that the provision of financial
206 Decision II/8, Second Meeting of the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer UNEP/OzL.Pro.2/3 29 June 1990, United Nations, Treaty Series, vol. 1598 available at https://treaties.un.org/doc/source/docs/unep_Ozl.Pro_2_3-Eng.pdf (accessed 6 December 2020).
207 Armin Rosencranz & Antony Scott ‘Bringing the developing world on board’ (1990) 20 Environmental Policy
& Law 201.
208 Report of the Third Session of the WMO/UNEP Intergovernmental Panel on Climate Change, Washington, DC 5–7 February 1990 at 8.
209 Ibid.
210 Bodansky (n170 above) 524.
211 Proceedings, World conference, Toronto, Canada 27-30 June 1988: The Changing Atmosphere: Implications for Global Security (Conference Statement) reprinted in ‘Selected international legal materials on global warming and climate change’ (1990) 5(2) American University International Law Review 516.
212 Article 11(5) of the UNFCCC.
213 Bodansky (n170 above) 523.
103 support had to be a mandatory requirement, while developed states argued that it was voluntary.214
Parties also struggled to agree on whether a specific or minimum amount should be set by the Convention. Initial proposals employed phrases like ‘adequate financial resources’, ‘financial resources, additional to the ones that are disbursed for development’ to assist developing states with climate change action.215 Developing states had also proposed that developed states commit a fixed percentage of their gross national product to climate change finance for developing states.216 Alternatively, they recommended that developed states make contributions of specified amounts based on a UN scale of assessments.217
Eventually, parties agreed that the provision of finance be made mandatory but did not provide a specific amount of funding.218 Instead, article 4(3) provides that developed states ‘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.’219 Although the exact meaning of the phrase, ‘new and additional financial resources’ is unclear, it is generally understood to mean that funds given under the Convention must be new and not diverted from existing developmental aid.220
These financial resources should also cater to the ‘full incremental costs’ spent by developing states in discharging their obligations under the Convention.221 Developed state parties shall also ‘take into account the need for adequacy and predictability in the flow of funds and the importance of appropriate burden sharing’ in providing finance and technology to developing states.222 These four factors – newness and additionality, accessibility, adequacy and predictability – have been defined as the basis upon which the legal framework on climate
214 Article IV(2)(2)(a) Consolidated Working Document in Report of the Intergovernmental Negotiating Committee for a Framework Convention on the Work of Its Fourth Session, (1992) U.N. GAOR INC/FCCC, 4th Sess., U.N. Doc. A/AC.237/15.
215 Report of the Intergovernmental Negotiating Committee for a Framework Convention on Climate Change on the Work of its Fourth Session held at Geneva from 9 to 20 December 1991 (hereinafter Report of the INC 4th session) available at https://unfccc.int/documents/921 (accessed 6 December 2020).
216 Stanley Johnson The Earth Summit: The United Nations Conference on Environment and Development (1993) 452.
217 Article 1(T), Montreal Protocol Parties: Adjustments and Amendments to the Montreal Protocol on Substances that Deplete the Ozone Layer, June 29, 1990, 30 I.L.M. 537 (hereinafter London Amendments).
218 Article 4(3) of the UNFCCC.
219 Article 4(3) of the UNFCCC.
220 Bodansky (n170) 526.
221 Article 4(3) of the UNFCCC.
222 Article 4(3) of the UNFCCC.
104 finance is established under the UNFCCC.223 Overall, the general language used gives room for each developed state to decide the frequency and size of its financial transfer to developing states.
It is significant to take notice of the fact that the provision of finance under the UNFCCC covers three different spheres: (1) transfers to assist developing states with complying with their reporting obligations; (2) transfers to assist developing states with complying with further provisions of the Convention on issues like mitigation, research, information exchange, training, and public awareness; and (3) transfers to assist particularly vulnerable developing states with climate change adaptation efforts.224
The third category had arisen from concerns by vulnerable developing states, particularly members of the Alliance of Small Island States. This group of states was concerned about the extra cost of adaptation measures and went as far as proposing an insurance fund to cover such costs.225 In other words, if climate change mitigation efforts turn out to be ineffective or inadequate and there are effects of climate change with which we must live, who bears the cost of living with and adapting to such effects? This includes the costs associated with measures like building sea walls, producing heat and drought-resistant crops, reduced agricultural yields, diseases, flooding, etc.226
Parties were unable to agree on how to apportion responsibility for such costs. Instead, focus was placed on climate change mitigation. This shift in focus has been attributed to the fact that the most vulnerable states are relatively small and offered little to no incentive to developed states in exchange for financial transfers compared to larger states like China, India, and Brazil.227 The latter also have higher levels of potential emissions. It, therefore, seemed that the transfer of finance and technology to these bigger developing parties for mitigation would be more significant to global climate change than supporting adaptation in small island states.
In other words, while adaptation efforts would serve the local island states, mitigation support to larger developing states would, arguably, have more global effects.228
223 Hao Zhang ‘Implementing provisions on climate finance under the Paris Agreement’ (2019) 9 Climate Law 23.
224 Article 4(3) – (4) of the UNFCCC.
225 Report of the INC 4th session (n215 above).
226 Bodansky (n170) 528.
227 Ibid.
228 Ibid.
105 Nevertheless, article 4(4) of the Convention represents some victory for small island states. It provides that ‘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.’ This serves as an additional protection for developing states that have peculiar circumstances that make them more vulnerable to climate change. While developing state parties are to receive funds to meet their obligations under article 4(1) of the Convention, vulnerable developing states will receive additional support towards the expenses incurred for climate change adaptation. The Convention is, however, quiet on the exact limits of such assistance.