Article 2.1c, the third long-term goal of the Paris Agreement, recognises the full effort needed to finance climate change adaptation and mitigation. It seeks to both scale up finance for climate action, and scale down finance for high-emitting and resilience eroding actions. Despite being established in 2015, the lack of a shared understanding of what this climate-consistent finance goal entails, how to measure it, or how responsibility for its achievement will fall on nation states or private actors has hindered discussions on how to turn this goal into practice, as well as how climate finance mobilised and provided by developed countries can support developing countries to pursue this objective of the climate-consistency of all finance flows with low-emission, climate-resilient development pathways.

This working paper seeks to identify concrete ways in which the objectives of Article 2.1c, the climate consistency of finance flows, form part of the New Collective Quantified Goal (NCQG) on climate finance, which will be set at the end of 2024 and for which dialogues are already underway. It outlines the challenges to operationalising Article 2.1c, as well as suggestions for how to overcome them. Finally, it proposes five options for including climate consistency in the new climate finance goal deliberations and decisions. With two years remaining of the NCQG technical expert dialogues, this working paper is intended to stimulate discussion that will evolve as deliberations and wider guidance on the operationalisation of Article 2.1c progresses.

Key Insights

• The nationally driven spirit of the Paris Agreement will likely mean that climate-consistent finance flows will be determined by countries based on their national circumstances and priorities.
• Developing countries have raised concerns that efforts to integrate Article 2.1c into the NCQG discussion risks distracting from the provision and mobilisation of climate finance in favour of domestic policy and finance flow shifts, or add conditionalities to climate finance that is provided. There is also a fear of double-standards in the pursuit of Article 2.1c as many high-income countries continue to support high-emitting sectors and activities, both domestically and internationally.
• Despite challenges, there are options to embed Article 2.1c in the NCQG decisions where it includes reassurances on the continued provision and mobilisation of climate finance from developed to developing countries. Moreover, it offers support to engage in financial strategies, plans and taxonomies, but without making this a precondition for wider climate finance access. The roles of UNFCCC-linked climate funds and ecosystem of actors could also be signaled in the NCQG process, while official links to other processes that tackle Article 2.1c would reduce the requirement for the NCQG to serve the need for all countries and institutions to make finance flows consistent with climate objectives.

Paper by the Overseas Development Institute