AEA report helps European Commission improve the measurement, reporting and verification of climate finance

Since these articles were published, AEA Technology plc’s business, operating assets and employees were acquired on the 8 November 2012 by Ricardo plc and transferred to a new subsidiary, Ricardo-AEA Ltd. All employees were transferred to Ricardo-AEA Ltd as part of the acquisition and remain available for the execution of all projects via the new company, as are the entire capability and resources previously represented by AEA Technology plc. All individuals remained at previous locations with all offices being retained. 

The European Commission has published a new report that sets out the possible approaches that could be taken to improve international measurement, reporting and verification (MRV) rules for fast-growing climate finance flows.

Written by Ricardo-AEA along with partners SEI, Ecosecurities (now Climatekos) and ITAD, the report shows that by integrating improvements into a comprehensive system, the EU can play an important role in improving the MRV of climate finance by sharing best practices, developing guidelines to inform the international system, and potentially by using the Monitoring Mechanism Decision (MMD) to harmonise EU practice. The report’s conclusions have helped the European Commission understand how far the EU is able to put forward existing best-practices from some Member States, consider new mechanisms to track climate finance and comply with new international MRV requirements when agreed upon.

Under the Copenhagen Accord, developed countries committed to considerably increase climate finance flows to reach $100 billion per year by 2020 to support climate change mitigation and adaptation actions in developing countries. At COP16 in Cancun, Parties agreed that there was an increasing requirement for financial flows to become more transparent to ensure fulfilment of commitments, successful outcomes on the ground and to maintain trust between developed and developing country partners.

The publication of the report coincides very well with the initial measures on climate finance announced at COP 17 in Durban. The launch of the Green Climate Fund was a notable success, the failure to provide clear signals on how long-term finance to support developing countries will be raised and mobilized was an important and disappointing setback. Parties agreed to provide more detail, but not under a common reporting format, on what information developed countries should include in their biennial reports on provision of climate finance – information that will subsequently be subject to a process of international assessment and review (IAR). In addition to these formal MRV provisions on finance, more specificity was provided around the information developed countries should submit to the Secretariat for inclusion in the registry on support available for developing country NAMAs. Our report will serve as a strong conceptual and empirical evidence base for meeting these above requirements.

In order to help the EU better understand climate finance and MRV issues, and plan an appropriate stance on international climate finance negotiations, the study mapped the current approaches taken in each Member State and investigated possibilities for greater harmonisation in the future. It also researched the various challenges that the MRV of finance might pose for Member States and the EU.

Applying Ricardo-AEA’s previous experience in implementing MRV in energy, CO2 emissions and emission trading schemes, and working with partners, the report specifically identified:

- A conceptual framework for MRV of climate finance, outlining key elements and requirements for “M, R and V”;

- Key EU data sources, methodologies, and existing systems on MRV of public and private climate finance flows by undertaking comprehensive stakeholder consultation involving all EU Member States, OECD, UNFCCC, UNEP FI, Climate Policy Initiative, International Chamber of Commerce, Bilateral Finance Institutions such as KFW in Germany and AFD in France, UNEP Risoe, EcoSystem and UNCTAD

- Key gaps, tracking issues and specific improvements to existing MRV frameworks in the European and international context; and

- Strengths, weaknesses, opportunities and constraints (SWOC) analysis for developing a harmonised, transparent and efficient MRV framework for climate finance.

Commenting on the report, Ricardo-AEA's Knowledge Leader in International Energy and Climate Change, Chris Dodwell (DECC’s former Head of International Climate Negotiations) commented: “Climate finance is the hot topic in the rapidly evolving climate-change-policy arena. Ricardo-AEA’s work will underpin future, compulsory MRV provision on climate finance and the project reflects efforts by the European Commission to display international leadership on climate change, demonstrating forward-thinking at EU level.”

 

For more information, contact Adarsh Varma.

Download the report here.