Joint EFC-EPC Working Group on the International Financial Aspects of Climate Change

Scope

The purpose of this Working Group is to bring together expertise on international climate finance and consider practical solutions to outstanding issues in this area in preparation for the COP 17 in Durban in December 2011.

Main tasks

Against the backdrop of decisions made by the UNFCCC Conference of the Parties in Cancun (COP16), the Working Group should focus on issues related to the mobilization of long-term finance for climate change actions in developing countries, notably potential sources of international climate finance, in line with the December 2010 mandate from the ECOFIN Council for follow-up work on the UN Secretary General's AGF report.

A contribution from the Group is expected on the three main areas noted below to prepare ECOFIN meetings in advance of the UNFCCC sessional meetings.

Potential sources of climate finance

• Building on existing work, notably the AGF report, the Group should further assess and set out key elements of the mix of potential international and national, public, private and innovative finance instruments (including for leveraging private finance, market-based instruments, and a more prominent role for the multi- and bilateral development banks) for scaled-up financial resources for long-term climate finance after 2012, subject to meaningful mitigation actions in developing countries and transparency on implementation. The group could also analyse the global distribution of revenues from these sources and instruments.

• Assess and propose methods to count public and private finance towards agreed financial commitments, including the issue of gross vs. net financial flows.

Governance

• The monitoring, reporting and verification (MRV) of financial flows.

• The delivery channels, operating principles and reporting of long-term climate finance, including from private sources, at the global level.

• Possible trajectories for scaling up of financial flows: the transition from fast –start finance to post-2012 finance in the context of e.g. delivery channels and policy frameworks in recipient countries.
• A framework for ensuring the efficient and effective use of increased flows of finance to developing countries, coherent with other types of development assistance (drawing on ongoing work within the EU on the efficiency of Development Aid).
• Issues related to the design of the new Green Climate Fund.

Fast start finance

• Issues related to the EU and its Member States’ fast-start finance commitments and other Parties' fast start financing contributions.

In addition, the group should maintain the flexibility to address other issues of relevance to finance ministers in the international negotiations, as appropriate.

Participation

The Working Group will consist of 2 reimbursed experts per Member State. Delegations are encouraged to nominate senior officials and climate experts from finance or economics ministries.

Workshop on Leveraging private finance for climate action in developing countries, 12 April 2011