Addis Ababa Financing for Development Conference confirms $100 billion climate finance target

On Thursday (July 16) ended the Third Financing for Development Conference in Addis Ababa, a four-day event of extensive negotiations that involved 95 ministers and vice ministers discussing how to achieve the sustainable development goals (SDGs) set by 2030. Upon the conclusion of the event, it was published an Action Agenda outlining the outcomes of the conference that is meant to constitute an important contribution to and support the implementation of the post-2015 development agenda.

The Addis Ababa Action Agenda constitutes an agreement between the 193 UN Member States on the means to provide global economic prosperity and environmental protection. In support of implementation of the SDGs, the document contains more than 100 measures aimed at addressing all sources of finance, and promoting cooperation on a range of issues including technology, science, innovation, trade and capacity building. In the document developed countries reaffirmed their pledge to provide $100 billion a year by 2020 to finance climate change measures for the developing world. The importance of this commitment stems from the fact that a solid agreement concerning climate finance for developing countries is seen as a necessary step ahead to secure a global climate deal for the Paris COP 21 in December. However, this announcement is a restatement of commitments previously made that does not add significant measures for their practical implementation. UK-based think tank ODI conducted a study assessing the degree of achievement of the SDGs under a business-as-usual scenario and concluded that current finance mobilization falls largely behind what is needed to meet the 2030 goals. There is also much perplexity about the lack of clarity regarding the inclusion of current foreign aid measures in the $100 billion count. Jean-Paul Adam, finance minister of the Seychelles, argued that, should the finance pledge be reached using existing overseas aid, the commitment will not be sufficient to achieve the SDG targets.

An important issue that the Action Agenda addresses is fossil fuel subsidies removal. In the draft is included a recommendation to rationalise fossil fuels subsidies, despite initial opposition from oil-exporting countries. Energy subsidies, in addition to being a burden for the government budget, distort market competition and disincentivise low carbon technologies.

In order to ease technology transfer of clean and environmentally sound technology to developing nations, a Technology Facilitation Mechanism is going to be set under the supervision of the United Nations. Through an annual forum in the Economic and Social Council, the UN is also responsible for the process’ review and follow-up.

What the deal is not including is a global-scale agreement to combat tax evasion, which is perceived as a critical point to make finance for development effective. Tax evasion in developing countries amounts to $100 billion a year, preventing governments to have more funds for public spending for development and making them rely on foreign aid to finance it. Although a compromise to strengthen the capacity of the United Nations Committee of Experts on International Cooperation in Tax Matters was reached, commentators described the failure of creating a UN body to review global tax arrangements as a missed opportunity.

Among stakeholders it is received wisdom that this is a timely moment to discuss climate finance issues, as SDGs will be formally agreed in September during the UN General Assembly.

(Image: Third Financing for Development Conference, Addis Ababa, July 2015. Photo credit: UNECA/Flickr)