A dynamic climate finance allocation mechanism reflecting the Paris Agreement

Abstract

Abstract Reaching the goal of the Paris Agreement requires substantial investment. The developed country parties have agreed to provide USD$100 billion in climate finance annually from 2020 to 2025. Ongoing negotiations on post-2025 commitments are likely to exceed that sum and include a broader scope of parties. However, there is no guidance regarding the allocation of contributions. Here, we develop a dynamic mechanism based on two conventional pillars of a burden sharing mechanism: emission responsibility and ability to pay. The mechanism adds dynamic components that reflect the Paris principle to ‘ratchet-up’ ambition; it rewards countries with ambitious mitigation targets and relieves countries with a high degree of climate vulnerability. Including developed country parties only, we find that ten countries should bear 85% of climate finance contributions (65% if all parties to the Paris Agreement are included). In both scopes, increasing climate ambition is rewarded. If the EU increased its emission reduction target from 40% to 55% by 2030, member states could reduce their climate finance contributions by up to 3.3%. The proposed mechanism allows for an inclusion of sub-, supra- or non-state actors. For example, we find a contribution of USD$3.3 billion annually for conventionally excluded emissions from international aviation and shipping.