BRICS Climate Deal 2015

BRICS Analysis: Climate Finance and INDC commitments

Despite being emerging economies and with high levels of econmic growth over the past decade, none of the BRICS countries – Brazil, Russia, India, China, and South Africa – have pledged to contribute to the GCF. The following brief analysis of the Finance and Means of Implementation sections of these countries’ UNFCCC Intended Nationally Determined Contributions shows the nuances of their approaches to this topic and allows interesting comparisons.

Debates on climate finance within the United Nations Framework Convention on Climate Change (UNFCCC) context concentrate on two aspects: first, having developed countries credibly mobilizing resources in a predictable and sustainable way to finance developing countries’ mitigation and adaptation measures; and second, a better definition of what should or should not be counted as contributions to the bulk of climate finance available for developing countries.

Regarding the first, the main multilateral mechanisms available to catalyze and mobilize climate finance are the Global Environmental Facility (GEF) and the Green Climate Fund (GCF). As an outcome of the 2010 UNFCCC COP16 climate conference in Cancun, developed countries need to jointly mobilize at least $100 billion per year by 2020 through the GCF. Although the pledges are increasing, so far there is still little confidence that contributions will reach this amount – by October 2015, countries’ pledges totaled just $10.2 billion.

Despite being emerging economies and with high levels of economic growth over the past decade, none of the BRICS countries – Brazil, Russia, India, China, and South Africa – have pledged to contribute to the GCF. The Chinese government announced in a recent joint US-China statement its contribution of ¥20 billion to a new Fund (see section on China below), roughly matching the US GCF contribution, but none of the other BRICS members have provided official public figures on financial contributions to global efforts to address climate change challenges.

Discussion around what does or does not count as climate finance has two dimensions: one dimension regarding the nature of the funds (e.g., public, private, from multilateral banks, grants, loans, credit, etc.); the other concerning the allocation of funds between mitigation and adaptation projects. Civil society organizations across the globe and particularly in developing countries argue that climate finance should primarily come from public sources, with private flows summing up to developed countries pledges. Accordingly, the distribution of resources between mitigation and adaptation initiatives should roughly be equal. Despite this, a recent OECD report suggests that private climate finance reached almost 25% of the bulk of developed countries climate finance resources, with more than 75% of it to finance mitigation.

Lastly, but not least, an important element in this debate is the role of markets and carbon pricing in fostering investments and initiatives mitigating emissions. Discussions about market mechanisms such as cap and trade, carbon taxes, and payment for environmental services, amongst other instruments, are becoming more and more frequent in climate negotiations, sparking a highly complex and politically heated debate. Among civil society organizations, for instance, there are profoundly divergent positions, and just as well as among states. While there is virtually no expectation that the so-called Paris Agreement from COP21 this year will provide a conclusive statement on these issues, there is a clear trend of increased attention on the topic in and outside UNFCCC negotiations.

Finance and Means of Implementation in BRICS Contributions

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On the theme of climate finance and Means of Implementation, it is important to bear in mind the divergent approach taken by Russia and the BASIC bloc (Brazil, South Africa, India, and China). While all countries agree on strongly demanding the application of ‘Common but Differentiated Responsibilities and Respective Capabilities’ (CBDR-RC) as well as a right-to-develop approach, Russia aligns itself with the positions of its own negotiating scheme, known as the Umbrella group.

The BASIC bloc usually stresses their developing country nature and, whenever possible, negotiates in alignment with the G-77 positions. The group overall suggests preference for public climate finance over private, and have been trying to articulate common narratives on financial and technological support demands from developed countries.

Despite this, all BASIC countries are economic powers within their own regions, and though they still receive developmental assistance and finance, they are beginning to play larger roles as development cooperation providers to other countries. In addition, BASIC countries have been absorbing almost all sources of climate finance. A full 52% of Clean Development Mechanism (CDM) projects that have received Issued Certified Emissions Reductions have been based in China, while India hosted another 21.5% and Brazil nearly 8%. Along with South Africa’s 0.5%, the BASIC countries together hosted more than 81% of all CDM projects issued. This situation, in conjunction with their greater capacity to mobilize national resources for climate related initiatives as compared with other developing countries, puts the BRICS group in an awkward position within the climate finance system.

The following brief analysis of the Finance and Means of Implementation sections of these countries’ UNFCCC Intended Nationally Determined Contributions (INDCs) shows the nuances of their approaches to this topic and allows interesting comparisons.

Brazil

The Brazilian contribution is emphatic and clear: while developed countries’ resources are welcome, “the Brazilian INDC is not contingent upon international support”. The INDC suggests the use of resources from financial mechanisms within the UNFCCC framework as well as other bilateral and trilateral cooperation schemes. Contrary to most of the BRICS, Brazil does not separate Finance and Means of Implementation in its INDC.

This message of “independence”, coupled with the option of submitting an economy-wide absolute target, provides a strong political signal that Brazil sees itself as a leading country within the climate regime. Brazil reinforces this message by laying out its “best efforts” to enhance joint initiatives within global South-South Cooperation schemes, notably in forest-related initiatives, biofuels, low-carbon agriculture, and social protection systems.

The Brazilian INDC indicates the need for increasing international support, investment flows, and technology development and transfer to undertake additional actions, but it does not provide any indication on the quantity of resources necessary to implement the INDC or additional actions. It cites the need to establish an adequate institutional framework to allow REDD+ implementation activities and the respective results-based payments system.

China

The Chinese INDC provides information on Finance in three sections: (1) China’s policies and measures outlook, titled “Section II.K: Increasing Financial and Policy Support”; (2) China as a climate finance provider, titled “Section II.O: Promoting International Cooperation on Climate Change”; and (3) a glimpse of Chinese views on the 2015 Paris agreement in “Section III.D: Finance”.

Although China reaffirms its position as a developing country throughout the document, in alignment with other BASIC approaches, none of the targets or actions predicted in the Chinese INDC is expressly dependent on the receipt of funds from developed countries. In section II.K the INDC delineates policies and institutional frameworks that need to be developed to foster the low-carbon economy transition within its territory, encompassing a range of fields such as taxation, insurance, financial markets, and public-private partnerships.

On September 25, 2015, during his US visit, Chinese President Mr Xi Jinping, made a public statement about climate change that elaborated the Chinese views on bilateral and multilateral cooperation. The Chinese government acknowledged its responsibility within the global climate regime and reaffirmed its position as a climate cooperation provider to other developing countries by announcing the establishment of a “Fund for South-South Cooperation on Climate Change”. Interestingly, China and the US announced contributions of roughly the same amount ($3 billion), but through different financial mechanisms. The option of designing a new and independent fund instead of contributing to the GCF yet of announcing an equal financial contribution carries a strong political gesture. It emphasizes the “G-2” approach that both countries have been adopting on climate issues, and strengthens the notion that the North-South division remains in place within the UNFCCC system.

The Chinese view on finance matters within the 2015 Paris agreement is straightforward: the INDC reinforces the CBDR-RC principle and suggests that developed countries should provide “new, additional, adequate, predictable and sustained financial support to developing countries for their enhanced actions”. China advocates for “quantified financing targets and a roadmap to achieve them” to be inserted into the Paris agreement. While reaffirming the need to secure the $100 billion threshold, it is not as strict as other developing countries about the source of funds, suggesting that the target “shall primarily come from public finance”.

On Means of Implementation, the Chinese INDC follows the same structure as Finance and provides its view for domestic demands under “Section II.J: Enhancing Support in terms of Science and Technology”, and for the Paris Agreement under “Section III.E: Technology Development and Transfer” and “Section III.F: Capacity Building”. Again, it suggests independence from foreign resources to implement its domestic demands. In both sections about the global climate agreement it reaffirms the duty of developed countries to provide the means for developing countries to address climate challenges via mitigation and adaptation. China’s contribution underpins its positioning as a developing country, while strengthening its intermediary position within the system or putting itself in a position to do so.

India

India’s INDC provides a full section on domestic initiatives called “India’s Climate Change Finance Instruments”, and a separate section indicating the resources and means of implementation needed to implement its targets and additional actions.

The contribution indicates that most climate finance currently comes from public national resources, while suggesting that fiscal incentives and market mechanisms should play a role within its strategy to mobilize further climate resources. Interestingly, while Brazil’s INDC opted for a general narrative and China choose a forward-looking approach, India provides the details and figures of domestic resources and initiatives currently underway and available for mitigation and adaptation, notably through its National Clean Environment Fund and a National Adaptation Fund.

Additionally, India calls for bilateral cooperation initiatives with other developing countries in developing climate friendly technologies, fortifying the critical role of these transfers “both into the Indian market and from India into other markets” to sustainably allow further reductions to national economic carbon intensity.

Differently from Brazil and China, and more in alignment with South Africa, India’s government has made clear the need to receive GCF financing and for support from developed nations in order to accomplish targets, particularly in the transition to low-carbon energy supply.

Interestingly, while India is among the ten largest economies in the world and one of the fastest growing countries (with an average GDP growth rate around 7% in the past decade), it adopts a narrative on climate finance and means of implementation that is somehow dissenting from its emerging economy condition. By emphasizing the “enormity of funds” needed to cope with national adaptation and mitigation efforts, it suggests that overall $2.5 trillion will be necessary for Indian climate change actions between 2015 and 2030. Putting this in perspective, India’s GDP has grown from $1.2 trillion in 2007 to about $2 trillion in 2014 according to World Bank data.

South Africa

South Africa’s INDC clearly highlights climate finance requirements for adaptation over mitigation measures, and provides a broader view on climate finance requirements and Means of Implementation under a section called “Support Component of the INDC (S-INDC)”.

South Africa’s plan provides greater amount of details on diagnosis of demands, goals, action plans, and estimated costs than most BRICS countries, particularly in adaptation. This different approach is understandable as South Africa is a substantially smaller economy, globally ranking 32nd in GDP in 2014. Its carbon emissions are also remarkably lower than its counterparts in the bloc: national emissions in 2012 represented roughly 1/23 of China’s emissions, 1/6 of India’s, 1/5 of Russia’s, and 1/4 of Brazil’s respectively.

The South African INDC combines a description of resources that have already been expended by its government in different economic sectors to allow transition to low-carbon practices and to provide indicative scales of finance and support required by each. It stress the demand for further resources, particularly for its South African Green Fund and including contributions from domestic, private, and international sources. It does this without calling for a necessary leading role of developed countries in this regard. On means of implementation and technology transfer to enhance mitigation efforts, the contribution goes further in naming specific demands, particularly in energy efficiency and renewable sources.

Two final aspects of the South African INDC are worth highlighting: First, even while being a well-known emerging leader in the African continent, there is no explicit mention of eventual provision of funds or other resources for South-South climate cooperation initiatives. Second, its language on ‘equity’ calls for a concerted global effort, recalling responsibilities but without clearly putting emphasis on a North-South division. In fact, it endorses the interesting narrative that investing in climate adaptation represents an opportunity in poverty and inequality cost reduction and addresses other development challenges.

Russia

The Russian INDC is by far the most dissonant within the group. Overall, it provides little information on Russian views for the 2015 Paris agreement and is silent in matters of Finance or Means of Implementation. The document endorses the perception that climate change is not a priority for the Russian authorities.

Considering that Russia is an Annex I party to the UNFCCC and a powerful leader within its region, any contribution on finance and means of implementation would be expected to place Russia in a donor position rather than as a recipient as most of its BRICS cohorts posit themselves. This expectation is even more so considering the massive decline of Russian carbon emissions since the end of the Soviet Union and its relatively comfortable position to meet mitigation targets given the natural carbon sink of large territorial forests. Russia, however, has never made any GCF pledges. Exact figures on national climate finance contribution are scant, but the country does arguably provide support to former soviet countries and other allies.

Preliminary Conclusions

Despite the consistency of affirming their developing country nature and emphasizing respect to the CBDR-RC principle, some of the BASIC bloc’s INDCs bring elements that show shifting positions on climate finance and Means of Implementation. The ownership of elaborating their contributions and the absence of enforcement may be part of the explanation, and the pressure from both developing and developed countries to do so another part. Among the BRICS, India adopted a somewhat more reactive position on finance, whereas Russia the most evasive.

By analyzing these countries’ INDCs, it becomes clear that there was no substantive alignment between them on a commonly grounded contribution profile or even a shared narrative or strategy beyond reinforcing CBDR-RC. When Russia is considered among them, any common arrangement seems to be null.

All developing countries will need to count, in one way or another, on foreign resources to foster robust transitions to low-carbon economies and to build climate resilient infrastructure. At the same time, most of them seem to recognize, within or outside the UNFCCC framework, their increasing responsibility in assisting other developing countries through South-South cooperation initiatives. The New Development Bank, a BRICS-operated multilateral bank that will begin activities next year, is an obvious possibility to channel these resources and expertise, but it is not the only one.

Regardless of what happens at the UNFCCC climate summit in Paris, it is critical to deepen and improve the debate on the role of the BRICS in the international climate finance regime and to better explore possible climate finance alliances, as well as concerted efforts among them.

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