Abstract:

The current global financial system fails to effectively drive financial resources to support climate action, as evidenced by the order of magnitude gap between the scale of global climate finance and the financing needs aligned with the temperature rise goals under the Paris Agreement. For many years the climate finance negotiations under the United Nations Framework Convention on Climate Change (hereinafter referred to as “the Convention”) have revolved around developed countries’ funding for developing countries, yet at the 27th Conference of the Parties (COP27) to the Convention in 2022, in addition to the three “funding” issues of long-term climate finance, new collective quantified goal, and funding for loss and damage, all of which resulted in standalone decisions, the Conference also opened a window for discussion on Article 2.1 (c) of the Paris Agreement, echoing the reform of the global financial system. This marks an expansion of the connotation of climate finance under the Convention to climate finance in a broad sense and systemic solutions, i.e., how to mobilize more climate finance globally to respond to the urgent needs of poor and climate-vulnerable countries, as well as the broader financing needs aligned with the Paris Agreement. As it stands, this shift threatens to both blur the focus of negotiations on finance issues under the Convention and the principle of common but differentiated responsibilities, and to further generalize the content of negotiations on finance issues beyond the Convention, closely linked to issues such as debt relief for developing countries and reform of the global financial system. In response to the ongoing changes, China should actively prepare for the negotiations on the issues relating to Article 2.1 (c) of the Paris Agreement, seize the significant opportunity of the transformation of the global financial system, and actively participate in the discussion of the new financial mechanism and the formulation of international standards and rules.

Key words: Global climate governance, Financial mechanism, COP27, Article 2.1 (c) of the Paris Agreement, Global financial system transformation