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ISSUES IN THE NEGOTIATING PROCESS
Funding under
the Convention and the Kyoto Protocol
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Background
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The Convention specifies that Annex II Parties shall provide
financial assistance to developing countries to enable them to address climate
change and adapt to its adverse effects (Article 4.3 and 4.4). It establishes
a financial mechanism to channel such financial assistance to developing countries,
which is currently operated by the Global Environment
Facility.
The Kyoto Protocol specifies that the transfer of financial
resources from Annex II Parties to developing countries under the Kyoto Protocol
shall also take place through the operating entity of the Convention’s financial
mechanism. In a related provision, the Protocol stipulates that a "share
of the proceeds" from the clean development mechanism
under Article 12 shall be used to assist particularly vulnerable developing countries
in meeting the costs of adaptation to the adverse effects of climate change.
Issues relating to the financial mechanism were included in the "Buenos
Aires Plan of Action" adopted by COP 4 (Buenos Aires, November 1998).
At COP 6 (The Hague, November 2000), the President of the COP,
in his note dated
23 November 2000, proposed that, as part of a package of decisions under the
"Buenos Aires Plan of Action", a new adaptation fund and a new Convention
fund should be established under the GEF. Given that agreement could not be reached
on the envisaged package of decisions, the issue was referred to a resumed session
of COP 6.
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Latest developments
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At COP 6 part II (Bonn, July 2001), Parties adopted the Bonn
Agreements on the Implementation of the Buenos Aires Plan of Action, registering
political agreement on key issues, including on funding under the Convention and
the Kyoto Protocol. Parties also concluded work on two detailed decisions on funding
under the Convention and the Kyoto Protocol, based on the Bonn Agreements. These
decisions were forwarded to COP 7 (Marrakesh, October/November 2001) for adoption.
The Bonn Agreements and related decisions provide for the establishment of
three new funds: a special climate change fund and a least developed countries
fund under the Convention, and an adaptation fund under the Kyoto Protocol. All
three funds will most certainly be managed by the entity which operates the financial
mechanism of the Convention.
The special climate change fund will finance activities relating to climate
change in the areas of adaptation; technology transfer; energy, transport, industry,
agriculture, forestry and waste management; as well as activities to assist developing
countries whose economies are highly dependent on income generated from fossil
fuels in diversifying their economies. The least developed countries fund will
support a work programme for LDCs. The adaptation fund, operating under the Kyoto
Protocol, will be financed from the "share of the proceeds" on the clean
development mechanism and other sources of funding. Several Annex II Parties have
already pledged to collectively contribute US$410 million a year to the funds
by 2005.
Also as part of the Bonn Agreements, Annex II Parties must report on their
financial contributions under the Convention on an annual basis, and Annex I Parties
that intend to ratify the Kyoto Protocol must likewise report annually on their
financial contributions under the Protocol.
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Next steps
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The completed decisions on funding under the Convention and the
Kyoto Protocol will be presented to COP 7 for adoption.
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Documents for the upcoming session
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FCCC/CP/2001/5/Add.1
Completed decisions on funding under the Convention and funding
under the Kyoto Protocol
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Key decisions
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Decision
1/CP.6
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Implementation of the Buenos Aires Plan of Action. Annex: Note
by the President dated 23 November 2000
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Key documents for earlier sessions
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FCCC/CP/2001/2/Add.1
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Consolidated negotiating text proposed by the President for COP
6 part II
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See also the Note by the President dated 23 November 2000 annexed
to decision 1/CP.6.
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This agenda item is supported by the Non-Annex
I Sub-Programme
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