OCN Sheds Light on Fast Start Climate Finance Commitments

An assessment of Japan's commitments to UNFCCC Fast Start climate finance sheds light on international commitments and reporting shortcomings.

For national governments party to the UN Framework Convention on Climate Change (UNFCCC), the so-called “Fast-Start Finance” (FSF) program, as the name indicates, is the investment vehicle aimed at promoting an accelerated pace of new and additional capital investment on the part of developed nations in climate change mitigation, adaptation and other climate change-focused projects in their developing nation counterparts.

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Offering insight and analysis of nature and composition of individual UNFCCC member nations' FSF contributions to date, the World Resources Institute (WRI), the Overseas Development Institute (ODI) and the Institute for Global Environmental Strategies (IGES) this week published an assessment of Japan's, one of a series of Open Climate Network (OCN) studies.

Such independent, third-party analysis is particularly valuable given that UNFCCC member nations account for their FSF contributions differently, including different types of finance in their own reporting. OCN developers produce the FSF assessments in consultation with “a range of experts that aims to shed light on how developed countries are defining, delivering, and reporting FSF using common research methodology,” they explain.

Is Fast Start Climate Finance Really "Fast"?

Commensurate with the size of its economy, the second or third largest in the world, Japan's FSF commitment is one of the largest among developed countries, accounting for nearly half the total pledged by developed countries as a group for 2010-2012. “New” and “additional” are the operative words when it comes to FSF contributions. They're meant to be just that--over and above development finance commitments included in other, pre-existing programs.

When it comes to Japan's 2010-2012 FSF contributions, OCN analysts found that some 70% have been allocated to projects aimed at realizing climate change mitigation goals. Most of that is financed via loans—both ODA (Official Development Assistance) and non-ODA. In turn, about 75% of Japan's FSF ODA and non-ODA loans represent some 75% of its contribution for infrastructure development projects, such as urban transport.

There's a more even balance between climate change mitigation and adaptation when it comes to Japan's FSF financing via grants. Thirty percent of Japan's FSF grants have been allocated to adaptation; 27% to mitigation and REDD+ (the UN Reducing Emissions from Deforestation and Land Degradation program), and 27% to projects with multiple objectives.

“A significant share of Japanese FSF addresses one or more non-climate objectives in addition to mitigation or adaptation urban transport projects. Asia receives the most FSF among all regions, irrespective of financial instrument type,” OCN report authors note.

“It is worth noting that the Japanese FSF includes a number of 'clean' fossil fuel power plant construction projects, such as a natural gas combined cycle (NGCC) power plant project in Central Asia. There is a need for greater clarity amongst members of the international community about how support for lower carbon fossil fuel facilities should be treated in the context of climate finance.”

Applying five criteria developed by experts for OCN's specific purposes, the authors of the Japan FSF assessment state that, “Since the start of the FSF period, Japan has substantially increased international finance that explicitly targets climate change. Some Japanese agencies have also begun integrating climate change into aspects of development assistance and development finance.” That notwithstanding, OCN analysts found “the results indicate that at least a portion of the Japanese FSF spend is not new and additional.

“A significant share of Japanese FSF reflects pre-existing pledges to development assistance initiatives to scale up climate change related finance such as those articulated in the Japan Cool Earth Partnership of 2008. Furthermore, Japan’s FSF cannot be seen as additional to its existing commitments to scale up development finance to 0.7 percent of its GNI (gross national income).”

Furthermore, OCN sees room for improvement in the standard processes Japan employs to report on development assistance so that it better meets the FSF needs. “There is room for improvement in terms of the transparency, accountability and credibility of Japanese FSF.

“Some of the identified issues may be attributable to the fact that Japanese FSF contains a large number of projects supported by a variety of channeling institutions. This has made it difficult for the government to present a clear overview of Japanese FSF.”

Assessing Fast Start Climate Finance Reporting

Disaggregation of FSF data in its reporting is the biggest issue OCN analysts found in conducting their assessment. They note that while details on individual projects is provided by the agencies implementing them, “most of the climate finance projects could not easily be identified without extensive key word research on the websites of the implementing agencies.

“This study identified about 250 likely FSF projects, amounting to USD 11.7 billion or nearly 90 percent of the amount committed by 29 February 2012,” they write. “At the same time, about 500 FSF projects – most of which are of relatively low monetary value – could not be independently identified.”

While noting that the Japanese government has already initiated efforts to improve its FSF reporting, OCN offer a list of suggestions to improve the transparency of Japan's climate finance reporting practices:

  • Provide a complete list of the projects that have been supported through the Japan FSF spend. Specify the climate finance projects that constitute aggregated numbers in the official documentation;
  • Include hyperlinks to the relevant webpages that describe the projects that have been supported through FSF in this proposed project list, as this would substantially enhance stakeholder access to information on the FSF contribution and understanding of its objectives;
  • Compile all information on its climate finance contributions in one easily accessible format, and support access to supporting information on the individual projects that constitute the FSF spend;
  • Explain the eligibility criteria for the ODA and OOF flows that have been counted towards the FSF contribution;
  • Work in cooperation with other contributor countries and multilateral institutions to strengthen and harmonize bilateral and multilateral reporting on climate finance.

Image credit: Oxfam International, courtesy flickr

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