Submission of Member State reports, and technical guidance on financial and technology support for climate action provided to developing countries

Ref. Ares(2023)4519801 - 29/06/2023 EUROPEAN COMMISSION DIRECTORATE-GENERAL CLIMATE ACTION Brussels CLIMA.D.3/NPJ Subject: Submission of Member State reports, and technical guidance on financial and technology support for climate action provided to developing countries, under Regulation (EU) 2018/1999 Your Excellency, I am writing regarding the submission of relevant information on financial and technology support provided to developing countries in the year 2022 in accordance with Article 19 of Regulation (EU) 2018/999 of the European Parliament and of the Council1 and Article 6 and Annexes III, IV and V of Commission Implementing Regulation (EU) 2020/12082. In 2021, the Commission and the Member States have agreed on technical guidance to ensure the robust and reliable reporting of climate finance, and to enable a correct aggregation of information from EU and Member State contributions. Building on the guidance document from 2022 and using the experience and feedback acquired through previous reporting under the Governance Regulation, the Commission has issued an updated technical guidance document to further facilitate and improve the reporting on climate finance and technology support. Please note that the reporting deadline is 30 September 2023. The timely provision of data is of great importance, in order to comply with the due date enshrined in the Governance Regulation, and for enabling the review of the Member States reports, the subsequent aggregation of figures and the endorsement by the Council, of the EU overall figures. The figures will be communicated before the 28th session of the Conference of Parties under the UNFCCC (COP 28), showcasing the leading role of the EU and Member States when it comes to international support for climate action. Of similar importance is the completeness of reporting information on both financial bilateral and multilateral support committed and provided to developing countries, as laid down in the provisions of the Governance Regulation and the Implementing Regulation. I thank you for your cooperation. Yours sincerely, (e-signed) Kurt VANDENBERGHE 1 REGULATION (EU) 2018/1999 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 11 December 2018 on the Governance of the Energy Union and Climate Action, amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013 of the European Parliament and of the Council. 2 COMMISSION IMPLEMENTING REGULATION (EU) 2020/1208 of 7 August 2020 on structure, format, submission processes and review of information reported by Member States pursuant to Regulation (EU) 2018/1999 of the European Parliament and of the Council and repealing Commission Implementing Regulation (EU) No 749/2014 Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111  Enclosure: Technical guidance document on reporting financial and technology support to developing countries in 2022, under Regulation (EU) 2018/1999 Electronically signed on 29/06/2023 16:51 (UTC+02) in accordance with Article 11 of Commission Decision (EU) 2021/2121 Saatja: [email protected] <[email protected]> Saaja: [email protected], [email protected], [email protected], [email protected], ZEVGOLIS Dimitrios, [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], ULVILA Ismo, [email protected], [email protected], [email protected], [email protected], LANGENDORFF Julius, [email protected], MIOLA Apollonia, [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], Andrus Säälik (Rahandusministeerium), [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], Krista Tõnisson (KeM), [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], Esindus EL juures üldaadress, [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], [email protected], JELER Narcis Paulin, [email protected], Anne Siemons, MIOLA Apollonia Teema: Submission of Member State reports, and technical guidance on financial and technology support for climate action provided to developing countries, under Regulation (EU) 2018/1999 - Ares(2023)4519801 Dear colleagues Please find attached the letter on "the submission of Member State reports", as well as a technical guidance on financial and technology support for climate action provided to developing countries, under Regulation (EU) 2018/1999, which has been shared with the Member States earlier today. Best regards, Claire Braeckman Administrative Assistant [cid:[email protected]] DG Clima, Unit D3 Climate Finance B-1049 Brussels/Belgium [email protected]<mailto:[email protected]> DISCLAIMER "The views expressed are purely those of the writer and may not in any circumstances be regarded as stating an official position of the European Commission." Tiiu Noobel From: CLIMA D03 ARES <[email protected]> Sent: neljapäev, 29. juuni 2023 16:57 To: (Permanent Representation of Austria = Représentation permanente de l'Autriche); (Permanent Representation of Belgium = Représentation permanente de la Belgique); (Permanent Representation of Bulgaria = Représentation permanente de la Bulgarie); (Permanent Representation of Croatia = Représentation permanente de la Croatie); (Permanent Representation of Cyprus = Représentation permanente de Chypre); (Permanent Representation of Denmark = Représentation permanente du Danemark); Esindus EL juures üldaadress; (Permanent Representation of Finland = Représentation permanente de la Finlande); (Permanent Representation of France = Représentation permanente de la France); (Permanent Representation of Germany = Représentation permanente de l'Allemagne); (Permanent Representation of Greece = Représentation permanente de la Grèce); (Permanent Representation of Hungary = Représentation permanente de la Hongrie); (Permanent Representation of Ireland = Représentation permanente de l'Irlande); (Permanent Representation of Italy = Représentation permanente de l'Italie = Rappresentanza Permanente d’Italia presso l’U...; (Permanent Representation of Latvia = Représentation permanente de la Lettonie); (Permanent Representation of Lithuania = Représentation permanente de la Lituanie); (Permanent Representation of Luxembourg = Représentation permanente du Luxembourg); (Permanent Representation of Malta = Représentation permanente de Malte); (Permanent Representation of Netherlands = Représentation permanente des Pays-Bas); (Permanent Representation of Poland = Représentation permanente de la Pologne); (Permanent Representation of Portugal = Représentation permanente du Portugal); (Permanent Representation of Romania = Représentation permanente de la Roumanie); (Permanent Representation of Slovakia = Représentation permanente de la Slovaquie); (Permanent Representation of Slovenia = Représentation permanente de la Slovénie); (Permanent Representation of Spain = Représentation permanente d'Espagne); (Permanent Representation of Sweden = Représentation permanente de Suède); (Permanent Representation of the Czech Republic = Représentation permanente de la République tchèque) Subject: Submission of Member State reports, and technical guidance on financial and technology support for climate action provided to developing countries, under Regulation (EU) 2018/1999 - Ares(2023)4519801 Attachments: 2023_Letter_to_MS_technical_guidance_climate_finance_reporting.pdf; Technical_guidance_document_climate_finance_reporting_2023.pdf Message sent on behalf of Mr Kurt VANDENBERGHE, DG CLIMA Your excellency, Please find attached a letter on the submission of Member State reports, as well as a technical guidance on financial and technology support for climate action provided to developing countries, under Regulation (EU) 2018/1999. Best regards, Claire Braeckman 1 Administrative Assistant [email protected] 2 Ref. Ares(2023)4519801 - 29/06/2023 Reporting financial and technology support to developing countries under Regulation (EU) 2018/1999 Technical guidance document _____________ European Commission - DG CLIMA June 2023 1 INTRODUCTION This document provides guidance to EU Member States in view of facilitating and improving their reporting on climate finance and technology support on the basis of the requirements set out in Regulation (EU) 2018/1999 (‘Governance Regulation’) and the Implementing Regulation (EU) 2020/1208. Information on support provided to developing countries is reported under various regimes: In the context of the UNFCCC and the Paris Agreement  Biennial Reports (BRs) under the UNFCCC, the last reports were submitted in 2022. Reporting guidelines are contained in UNFCCC decision 2/CP.171, as well as the Common Tabular Format (CTF) for reporting established by decision 19/CP.182 as revised by decision 9/CP.21 and its Annex 3.  Biennial Transparency Reports (BTRs) under the Paris Agreement, in principle as from 2024. At COP 26 in Glasgow in November 2021, Parties to the Paris Agreement reached final agreement on reporting tables (Common Tabular Formats (CTFs) to implement those reporting obligations.4 At EU level  Reporting under Article 19 of the Governance Regulation (Regulation (EU) 2018/1999 (GR)) as well as Article 6 and Annexes III, IV and V of Commission Implementing Regulation 2020/1208 (‘Implementing Regulation’), from 2021 onwards.5 To the OECD  Reporting on Official Development Aid (ODA) by EU Member States6 in the context of the OECD Development Assistance Committee (DAC)7. This data is collected in the OECD Creditor Reporting System (CRS) database. In their reporting, DAC members are requested to indicate for each development finance activity whether the activity supports the objectives of the ‘Rio conventions’ on the basis of a three-value scoring system (Rio markers and coefficients). 1 Decision 2/CP.17 on the Outcome of the work of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention contained in FCCC/CP/2011/9/Add.1. 2 Decision 19/CP.18 on a Common tabular format for ‘UNFCCC biennial reporting guidelines for developed country Parties’ contained in FCCC/CP/2012/8/Add.3, p. 3. 3 Decision 9/CP.21 on Methodologies for the reporting of financial information by Parties included in Annex I to the Convention contained in FCCC/CP/2015/10/Add.2, p. 15. 4 Common tabular formats (CTF) for the electronic reporting of the information on financial, technology development and transfer and capacity-building support provided and mobilized, as well as support needed and received, under Articles 9–11 of the Paris Agreement, included in decision 5/CMA.3 (Guidance for operationalizing the modalities, procedures and guidelines for the enhanced transparency framework referred to in Article 13 of the Paris Agreement), see https://unfccc.int/documents/460951. 5 The Annexes to the Implementing Regulation build on a draft of the CTF referred to in footnote 4 above. 6 This does not apply to EU Member States that are not OECD members. 7 For applicable reporting rules (CRS Reporting Directives) see DCD/DAC/STAT(2020)44/FINAL: https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DCD/DAC/STAT(2 020)44/FINAL&docLanguage=En. 2 2 GUIDANCE FOR REPORTING UNDER THE GOVERNANCE REGULATION 2.1 Reporting through Reportnet 3 Background Since 2021, reporting is implemented through Reportnet 3, the EEA’s e-Reporting platform for reporting environmental and climate data.8 Experiences with reporting in 2022 The use of Reportnet 3 improved the reporting process significantly compared to earlier years. Particularly, the use of harmonised reporting tables, automated data checks through Reportnet 3 and the provision of aggregated data from Reportnet 3 greatly facilitated data aggregation process. Recommendations It is highly recommended to continue using the Excel template provided in Reportnet 3 to report the quantitative information referred to in Art 6.1 (Annex III) of Commission Implementing Regulation 2020/2018. This ensures that quality checks can be run on submitted data thus improving overall reporting quality. It will also make the post-reporting data treatment more reliable and quicker and will enhance consistency and comparability of reported data across Member States. Please submit your reports before the reporting deadline of 30 September 2023, preferably even earlier to allow sufficient time for aggregation and validation of the data. Information shall be reported at the level of individual activities/programmes/projects. Technical issues for entering information in Reportnet 3  Please ensure that English style decimals/ thousand separators are used (e.g., 1400.45 and not 1.400,45) and therefore that cells containing financial data are formatted as numbers rather than text.  Please do not include ‘Total’ or ‘Subtotal’ rows in the reporting template.  Please do not include line breaks in cells. Please do not make any other modifications to the reporting template. 2.2 Reporting sufficiently granular information on specific contributions Background In reporting on climate finance, it is important to provide sufficiently detailed information on the contributions provided to recipient countries (i.e., indicating the recipient country, the title as well as providing a short characterisation of the activity/programme/project). The tables in Annex III of the Implementing Regulation require Member States to report detailed information on bilateral support provided in several regards, including:  Three columns “channel”, “recipient” and “title” to describe an activity; 8 A video recording of a training session on how to use Reportnet 3 is available in Reportnet 3 from the “Data flow help” button in the “Support to developing countries – GovReg” reporting obligation. Member States can also link to the recording without logging into Reportnet 3 here: https://www.youtube.com/watch?v=X8Oq_xEM5zw. Any questions about Reportnet 3 can be sent to [email protected]. 3   Reporting on committed and provided amounts;  Reporting on grant equivalents (as available);  Identification of activities addressing technology transfer and/or capacity building (as available);  More pre-defined entry options to specify sectors (as well as sub-sectors, as available). Experiences with reporting in 2022 In 2022, for some contributions the recipients were not specified (Member States used entries such as “global”, “developing countries, unspecified” etc.). Additionally, the column “additional information” was not filled in for all contributions. It was not always straightforward to relate certain activities and sectorial categories reported by Member States to climate finance (e.g., contributions to conferences taking place in industrialised countries or projects in the health sector). A number of Member States used other sectors than those included in the pre-defined lists of the reporting template. Some Member States also used unclear sectoral categories such as ‘multisector/cross-cutting’, ‘other multisector’ or ‘unallocated, unspecified’. Some Member States reported support provided to (ODA-eligible) Annex I Parties (e.g., Turkey and Ukraine), or to countries that were not included in the latest list of ODA recipients (e.g., Chile, the Seychelles or Uruguay)9. Recommendations To meet their reporting obligations under the Governance Regulation in a transparent way and to improve comparability it is recommended that Member States:  Report contributions provided through bilateral, regional, and other channels in the most specific way possible. Wherever possible, report on the basis of recipient countries (or, where applicable, group of countries). If this is not feasible, indicate the recipient sub-region or region. The use of terms such as ‘global’, ‘developing countries, unspecified’, ‘bilateral, unallocated’ or ‘other’ in the column ‘recipient’ should be avoided to the extent possible. Wherever possible, contributions going to various recipients should be disaggregated according to specific countries/regions.  Provide information on the title of the project in the ‘title’ column and give a short project description in the ‘additional information’ column (where deemed useful a link to more detailed project information can be added, but this should not replace short project descriptions).  Report on the basis of the ‘sector options’ listed in the tables in Annex III of the Implementing Regulation.10 If projects are related to several sectors, list the sectors concerned (e.g., ‘transport’ and ‘energy’) and use the category ‘cross-cutting’ only in those cases where this is not feasible. Whenever possible, avoid using the ‘other (specify)’ category. 9 See https://www.oecd.org/dac/financing-sustainable-development/development-finance- standards/historyofdaclistsofaidrecipientcountries.htm. 10 The 6 specific sectors listed (energy, transport, agriculture, forestry, industry, water and sanitation) are categories in the OECD DAC purpose codes as well. For the OECD DAC codes see: https://www.oecd.org/dac/financing-sustainable-development/development-finance- standards/dacandcrscodelists.htm 4   Use the 5-digit OECD CRS codes to provide information on sub-sectors (see footnote 9).  Only report support provided to developing countries, i.e., those countries that are eligible to receive Official Development Aid11 (this applies to OOF as well).  Aim to make evident that there is a clear relevance of the reported flows to climate mitigation or adaptation, and that they are clearly linked/targeted to developing countries. To ensure credibility of EU climate finance, double- check the eligibility and relevance of all flows reported. 2.3 Reporting different financial instruments Background Climate finance can be provided in the form of various financial instruments including grants, concessional and non-concessional loans, equity, guarantees, insurance and others. As of 2019, reporting ODA to the OECD (DAC) takes place on the basis of the ‘grant equivalent’ (rather than ’flow’) method which measures the grant equivalence of concessional loans.12 As per tables 1-3 of Annex III of the Implementing Regulation Member States shall report on:  The financial instrument used per commitment and disbursement;  The ‘grant equivalent’ of financial instruments (as available, and as reported to the UN or the OECD in accordance with any internationally agreed information). Experiences with reporting in 2022 Until 2022 comprehensive information on grant equivalence was not available and Member States reported on the grant equivalent in different ways. Therefore, it is not straightforward to report comprehensive data on the grant equivalence as part of the total climate finance provided. For example, some Member States counted the grant equivalent as zero or left the field blank when their climate finance only consisted of grant financing, while the accurate way of reporting should be to report the full value of the grant (as the grant equivalent is 100%). Some Member States have wrongly used the “grant equivalent” column to specify grant equivalents related to their core multilateral contributions when their climate-specific contribution is given as zero. Also, Member States reported on “other instruments”, but the precise nature of the respective financial instrument remained unspecified. 11 See https://www.oecd.org/dac/financing-sustainable-development/development-finance- standards/DAC-List-of-ODA-Recipients-for-reporting-2022-23-flows.pdf; correspondingly, flows to Chile, the Seychelles, Uruguay, the Cook Islands, Antigua and Barbuda, Palau and Panama should not be included in reporting. 12 See https://www.oecd.org/dac/financing-sustainable-development/modernisation-dac- statistical-system.htm as well as chapters 3.III (paras 154-156) and 5.II of the OECD DAC CRS Reporting Directives (https://one.oecd.org/document/DCD/DAC/STAT(2020)44/FINAL/en/pdf) and module D, Annex 15 of https://one.oecd.org/document/DCD/DAC/STAT(2020)44/ADD2/FINAL/en/pdf A calculator to determine the grant equivalent is available at https://www.oecd.org/dac/financing-sustainable-development/development-finance- standards/Concessionality%20calculations%20-%20adjusted.xls. To date, OECD members have only reached agreement on the grant-equivalent method for loans. Other financial instruments – including private sector instruments, such as equities and guarantees, and debt relief – will for the time being continuing to be measured on a flow basis. 5 Recommendations It is recommended that Member States:  Explain how they define the various financial instruments applied (and include a description of ‘other’ financial instruments) in Annex IV table 1 (6), taking account of OECD DAC definitions.13 Member States that provide loans or other financial instruments are requested to explain the methodology used (e.g., gross flows, net flows etc.). If the ‘other’ category is used, please specify what it includes.  Report on the grant equivalent of grants and concessional loans following the OECD methodology. In the reporting template, the full amount of the grant equivalent should be entered in EUR in the respective column (and not a percentage rate).  Report on the grant equivalent of disbursements in line with the OECD reporting directives (see footnote 11).  Exclude the grant equivalents of core contributions of which the climate-specific contribution is given as zero. 2.4 Applying the Rio Markers Background The ‘Rio markers’, introduced in 1998, identify activities supporting the implementation of the 1992 ‘Rio Conventions’ (on climate change, biodiversity and desertification). They form part of the OECD’s statistical system monitoring ODA.14 Rio markers should be applied to bilateral ODA, but not to multilateral contributions.15 Building on the OECD approach the European Commission applies the following methodology to estimate climate finance flows using the Rio markers:  If an aid activity is marked as ‘principal’ for mitigation or adaptation, 100% of the support is reported as climate finance;  If an activity is marked as ‘significant’ for mitigation or adaptation, 40% of the support is reported;  For an activity that does not target climate change mitigation or adaptation in any significant way 0% is reported;  To avoid double counting, any single activity can only be counted once (as 100%, 40% or 0%). Under the Governance Regulation Member States shall provide information on the ‘application of Rio markers (coefficients)’ as part of the reporting table in Annex IV of the Implementing Regulation. Experiences with reporting in 2022 13 See paras 30-51 of the OECD DAC CRS Reporting Directives (OECD/DAC/STAT(2020)44/FINAL) 14 https://www.oecd.org/dac/environment- development/Revised%20climate%20marker%20handbook_FINAL.pdf. 15 As explained in the OECD Rio Marker Handbook (see footnote 13) “multilateral contributions should not be marked by members individually; instead international organisations report on the actual allocation of their funds (“multilateral outflows”) and the climate-related share of their portfolio is determined on that basis.” 6 Member States used a variety of approaches with respect to Rio markers. Some followed the Commission’s (100%-40%-0%) methodology, others used alternative coefficients. Some Member States did not mention coefficients at all. Recommendations To increase transparency and comparability of reporting it is recommended that Member States:  Apply the Commission’s ‘100%, 40% or 0%’ approach to ‘translate’ Rio marked data into estimated climate finance flows as a default methodology. In case different coefficients are nonetheless applied, Member States should provide an explanation in Annex IV about the coefficients used and why. Only mark an activity as ‘cross-cutting’ if it is attributed the same coefficient for mitigation and adaptation (i.e., only if both mitigation and adaptation are considered ‘principal’ or ‘significant’). In these cases, an explanation regarding the share of adaptation and mitigation activities could be included in the column “additional information”. In other cases, the highest coefficient should determine the marking of an activity as mitigation or adaptation.16  To determine the type of support, the use of the Rio markers is sufficient and no further methodologies are necessary. Please follow the guidance included in the OECD handbook on Rio markers (see footnote 14).  Ensure that ‘mitigation’, ‘adaptation’ and ‘crosscutting’ are reported as mutually exclusive categories.  Only report climate-related Rio markers. To avoid double or triple counting activities to support implementation of the Convention on Biological Diversity and the Convention to Combat Desertification should not be reported. 2.5 Reporting commitments and disbursements Background Contributions to recipient countries are reported on the basis of commitments and disbursements. The OECD defines a commitment as a ‘firm written obligation by a government or official agency, backed by the appropriation or availability of the necessary funds, to provide resources of a specified amount under specified financial terms and conditions and for specified purposes for the benefit of a recipient country or a multilateral agency.’ A disbursement is ‘the placement of resources at the disposal of a recipient country or agency, or in the case of internal development-related expenditures, the outlay of funds by the official sector.’ 17 In order to ensure the compliance with article 19(3) of the Governance Regulation laying down the obligation to report information on financial support committed and provided to developing countries, the tables in Annex III to the Implementing Regulation require Member States to report both committed and provided (disbursed) amounts, in separate columns. It is crucial to receive complete data on both points of measurement from all Member States. For 2023, the Commission and the Member States decided that the aggregate EU’s public climate finance figures that will be published shall be based on multilateral disbursements, bilateral commitments. Experiences with reporting in 2022 16 It is acknowledged that for multilateral reporting, it would be important that multilateral organisations differentiate more stringently between adaptation and mitigation in their reporting. 17 For more details see paras 140-149 of the OECD DAC CRS Reporting Directives (DCD/DAC/STAT(2020)44/FINAL). 7 In 2022, all Member States provided information on both commitments and disbursements for multilateral support. For bilateral support, all but one Member State provided information on disbursements, while reporting on commitments was complete. Recommendations When reporting committed and provided (disbursed) amounts it is recommended that Member States take the following approach:  All Member States have to provide full information on commitments and disbursements.  Commitments should be reported as the full amount, regardless of the time needed to complete disbursements. Thus, if Member States commit an (overall) amount for a specific activity in year X, the entire amount should be reported in that year.  Disbursements should be reported for the year(s) in which they are completed (e.g., X+1, X+2 etc.).  Any modifications to initial commitments in subsequent years (e.g., due to a change in the scope of projects) should be flagged in the ‘additional information’ column.  Enter “0” in a field in the reporting template if there are no commitments or disbursements made in that year to avoid confusion.  Make sure to correctly distinguish between commitments that are reported in Annex III Tables 1 and 2 and planned support that has not yet been committed in Annex V. 2.6 Reporting climate-related multilateral finance Background Funding provided through multilateral institutions such as MDBs and UN bodies can be specifically earmarked for climate purposes (‘climate-specific’ funding) or be in the form of un-earmarked support to the general budget of relevant organisations (‘core’ funding). Several MDBs provide estimates concerning the climate-related share within their portfolio, and attribute this back to DAC members, based on a pro-rata share of their core multilateral ODA disbursements in a given year. On this basis, the OECD publishes a list of imputed multilateral shares for climate-related finance provided by these multilateral organisations each year.18 The OECD does not provide the imputed multilateral shares for all potential multilateral contributions from Member States, but only for a limited number of international organisations and banks. The remaining organisations do not provide outflow data to the OECD that are required for calculating the imputed multilateral shares. Currently, imputed multilateral shares are calculated for about 20 agencies per year, which account for about 90 percent of donors’ multilateral ODA.1920 As per table 2 in Annex III of the Implementing Regulation Member States shall report both ‘core’ and ‘climate specific’ contributions to multilateral institutions. In those cases where ‘climate specific’ amounts have been calculated on the basis of core contributions 18 Available at https://www.oecd.org/dac/financing-sustainable-development/development- finance-topics/climate-change.htm. 19 See http://www.oecd.org/dac/financing-sustainable-development/development-finance- standards/oecdmethodologyforcalculatingimputedmultilateraloda.htm. 20 In order to enable Member States to use the OECD imputed multilateral shares – and thus be consistent and coherent in their reports – the scope for further harmonisation efforts with organisations and banks that currently are not on the OECD list of IMCs could potentially be explored with OECD. To this effect, Member States could support the OECD Secretariat’s efforts in relevant fora to increase coverage. 8 following the OECD imputed multilateral shares this shall be indicated. In other cases, the earmarked amounts themselves shall be reported as climate specific. It is worth noting that Member State support to a given multilateral organisation may be in the form of core and climate-specific contributions at the same time (several finance flows covering contributions to the core budget and various earmarked activities). Experiences with reporting in 2022 Member States take diverging approaches in reporting and determining the climate-related share of core funding provided to multilateral banks and multilateral organisations:  Several Member States reported in Annex III Table 2 climate-specific contributions to those multilateral organisations which are included in the OECD’s list of imputed multilateral shares for calculating climate-related development finance. The majority of Member States indicated that they used the most recent data on imputed multilateral shares published by OECD DAC (2019-2020 average).  Other Member States that reported climate-specific contributions to those multilateral organisations which are included in the OECD’s list of imputed multilateral shares did not explain on which basis they calculated climate- specific amounts.  Some Member States explained in Annex IV that they calculated climate- specific multilateral finance by using their own methodology; some explained that they did so only if data by the OECD was not available.  Some Member States only reported core contributions for organisations for which imputed multilateral shares are available without indicating the climate specific amounts. This means that such flows are not included in the aggregated figures even though they are eligible.  Some Member States reported core contributions to other organisations for which no imputed multilateral shares are available from the OECD without indicating climate-specific amounts in Annex III Table 2. This again means that such flows are not included in the aggregated figures even though they are eligible. Recommendations It is recommended that Member States:  Report core and related climate-specific contributions (i.e., contributions calculated on the basis of imputed multilateral shares) in one row. Any additional climate-specific contributions (i.e., earmarked contributions not imputed from core contributions) should be reported in a separate row. Grant equivalents (of climate-specific loans) should be reported for each row separately. To calculate climate-specific shares from un-earmarked flows to multilateral institutions’ core budget, use the latest imputed multilateral shares provided by the OECD where these shares are available.21  For multilateral institutions not included in the OECD list of imputed multilateral shares, explain the methodology used to calculate climate-specific contributions in Annex IV of the implementing regulation (qualitative methodological information). 21 As the imputed multilateral shares for the year 2022 are not yet available, it is recommended to calculate climate-specific amounts of core contributions on the basis of the average of the imputed multilateral shares for 2020 and 2021 – see: https://www.oecd.org/dac/financing-sustainable-development/development-finance- topics/climate-change.htm. 9   Clearly identify the multilateral institutions to which contributions are made. Reporting contributions to ‘other’ institutions should be avoided.  Report multilateral contributions as comprehensively as possible, while ensuring that flows are climate relevant and ODA eligible.  Only fill in the column “imputed multilateral contributions” in Annex III Table 2 with “yes” in case the OECD imputed multilateral shares have been applied. 2.7 Differentiating climate-related bilateral and multilateral finance Background Under the OECD methodology22, flows are classified as multilateral if multilateral organisations have the unqualified right to allocate these resources within their mandates. In contrast, the OECD classifies flows as bilateral if they are provided directly from a donor to a recipient country using terms agreed between the countries involved in the cooperation. Under the OECD a third category is available for flows where countries provide resources to a multilateral organisation that implements specific projects or program on behalf of the donor country (“earmarked,” “non-core,” or “multi-bi” contributions). Further, contributions to international organisations such as NGOs which are not multilateral agencies are also classified as bilateral finance. Relying on the OECD classification of flows is a possible way to consistently differentiate between multilateral and bilateral flows. Accordingly, only those flows would be marked as multilateral where multilateral organisations have the unqualified right to allocate these resources within their mandates. Experiences with reporting in 2022 Member States took diverging approaches to bilateral and multilateral finance as well and reported multilateral finance in different ways. The new reporting tables make these differences more visible by documenting the “channel,” “title” and “recipient” of contributions of multilateral finance. Particularly, Member States reported climate-specific contributions to multilateral organisations for which no imputed multilateral shares are available as multilateral climate finance (e.g. the Mekong River Commission, the International Solar Alliance, UNESCO; UNIDO; UNEP; UNDP; WMO), they reported contributions to international NGOs like Conservation International, as well as other types of organisations, e.g. Climate Risk Insurances, or IRENA as multilateral climate finance and they reported contributions to specific bilateral programmes channelled through multilateral organisations as multilateral climate finance. In all of these cases, the contributions could be reported as bilateral finance according to the OECD methodology. Recommendations In order to consistently differentiate between multilateral and bilateral flows, it is recommended that Member States:  Build on the OECD guidance23 for differentiating between multilateral and bilateral flows.  Report the flows as multilateral only if multilateral organisations have the unqualified right to allocate these resources within their mandates.  Flows that should be classified as bilateral include: 22 OECD (2021). Multilateral Development Finance 2020, see https://www.oecd.org/dac/financing-sustainable-development/development-finance- standards/annex2.htm. 23 See https://www.oecd-ilibrary.org/docserver/e61fdf00- en.pdf?expires=1638958660&id=id&accname=ocid56027324&checksum=827F8F7E4EAACE 61C4C39610351BA574 and https://www.oecd.org/dac/financing-sustainable- development/development-finance-standards/annex2.htm. 10  a. Flows that are provided directly from a donor to a recipient country using terms agreed between the countries involved in the cooperation. b. Contributions to other international organisations such as NGOs which are not multilateral agencies. c. Climate-specific contributions channelled through multilateral organisations which target specific purposes/recipients or implement projects on behalf of the donor country (“earmarked,” “non-core,” “trust fund aid” or “multi-bi” contributions). The column “channel” should be used to indicate which flows were channelled through a multilateral organisation and which were provided to developing countries directly. 2.8 Methodologies to report ‘private finance mobilised’ Background Contributions to the ‘USD 100 billion per year’ goal come from a wide variety of sources including private finance mobilised through public funding. The OECD has developed a methodology to measure private finance mobilised through public interventions for seven types of instruments.24 DAC members – including EU Member States – already use this methodology to report on private finance mobilised as part of the Creditor Reporting System (CRS). Annex III of the Implementing Regulation includes a reporting table requiring Member States to report information on financial support mobilised through public interventions (Table 3). In case Member States are not able to fill in the figures on private finance mobilised in this table, they can use the template included in Annex III. Including data on private finance mobilised will broaden the climate finance landscape in the EU and show that beyond climate finance provided by public actors, additional funds are mobilised to achieve climate objectives. For 2023, the Commission and the Member States decided that the EU’s aggregate climate finance figure on private finance mobilised shall be published for the first time. Experiences with reporting in 2022 Not all Member States provided information on private finance mobilised in 2022. Meaningful aggregation of the total private finance mobilised figure remains difficult. Firstly, Member States’ reports do not include information at the project level as requested by the Implementing Regulation which would be necessary for interpreting and aggregating the data at EU level. Secondly, Member States do not report any details on how the methodologies were applied or they report the information in different fields. Thirdly, some Member States report to the OECD on private climate finance mobilised but not under the Governance Regulation, or the other way around. As a result, to date private finance mobilised has not been included in the aggregation of climate finance figures at EU level. Recommendations To enhance and improve reporting (e.g., in terms of ‘causality’, ‘attribution’, definition of private finance and avoidance of double counting) it is recommended that Member 24 Guarantees, syndicated loans, direct investment in companies, shares in Collective Investment Vehicles (CIVs), credit lines, standard loans and grants in simple co-financing arrangements and complex project finance structures involving multiple actors and instruments. For reporting instructions see: Module B, Annex 6 of https://one.oecd.org/document/DCD/DAC/STAT(2020)44/ADD1/FINAL/en/pdf The OECD has also published a template to collect data on private finance mobilised for the different financial instruments (‘Rationalised template for collecting supplementary data on amounts mobilised from the private sector’ (OECD, 2019)). 11 States use the OECD methodology to measure private finance mobilised (see footnote 23) and build upon the figures reported to the OECD for reporting under the Governance Regulation. Annex III table 3 should be used to report on private finance mobilised at project level to enable quality checks. Only in case it is not possible to report in the table, e.g., because reporting on the activity/project/programme level is not possible, Annex III template 1 can be used. In any case, only the table or the template should be filled in to report the same figures, not both the table and the template. Further qualitative methodological information could be provided in Annex IV (e.g., box 9 and others). 2.9 Other aspects Technology transfer/capacity building Please indicate in Tables 1 and 2 of Annex III whether the reported activities are relevant for technology transfer and/or capacity building. The reporting on these aspects should be seen in the light of Article 10 (technology development and transfer) and 11 (capacity-building) of the Paris Agreement. For further information on the concepts please see:  https://unfccc.int/topics/climate-technology/the-big-picture/what-is- technology-development-and-transfer  https://unfccc.int/topics/capacity-building/the-big-picture/capacity-in-the- unfccc-process. The OECD DAC (2023) published a draft guidance document with a proposed methodology to identify and label climate-related capacity building activities and climate-related technology transfer activities in the CRS. 25 This methodology could form a starting point for improving the identification and tracking of technology transfer and capacity building activities under the Governance Regulation. Moreover, the database developed by the UNFCCC Climate and Technology Centre26 could be useful to identify projects that are relevant for technology transfer. If the contribution of a project to capacity development, technology development and transfer has not been assessed (yet), the reporting field in the table should be marked with ‘0’. N/A must only be used for ‘Not applicable’ (i.e., when the project did not include any component relevant to capacity building/technology transfer). In Annex IV, Member States should explain their approach for determining which contributions are relevant for technology transfer and/or capacity building (e.g., boxes 18 and 19 in Annex IV). Qualitative methodological information (Annex IV) In addition to the aspects outlined above, Member States may also wish to take account of the following suggestions also: Point 1 – Climate finance Member States may wish to define climate finance as financing that is drawn from public, private and alternative sources and that seeks to support mitigation and adaptation actions to address climate change. Point 2 – New and additional 25 See https://one.oecd.org/document/DCD/DAC/STAT(2023)24/en/pdf. 26 See http://www.ctc-n.org. 12  There is no universally agreed definition of what should be considered ‘new and additional’ and Member State reports under the previous Monitoring Mechanism Regulation and the current Governance Regulation reflect a variety of approaches (‘new and additional’ in terms of new and additional funding committed/disbursed compared to the previous reporting year; funding going beyond ODA commitments etc). Member States may wish to refer in their Governance Regulation reporting to how they define new and additional in their Biennial Reports to the UNFCCC. Point 3 – Developing country It is suggested to refer to countries that are eligible to receive Official Development Aid (see section 2.2 above). Point 7 – Funding source Member States may wish to refer to chapters 1.I.2 (paras 17-28) and chapter 2 of the OECD DAC CRS Reporting Directives (DCD/DAC/STAT(2020)44/FINAL) that describe the main categories of flows used in reporting. Point 20 This point should read as follows: ‘Information on challenges [instead of ‘channels’] and barriers encountered, lessons learned and measures to taken to overcome them’, Planned provision of support (Annex V) Please note that this is about information on any planned but not yet committed activity. All committed activities are to be reported under Annex III. It is recommended to avoid reporting multi-year periods and instead report annual amounts separately. Only support provided to developing countries should be reported in Annex V. Please use the table in Annex V and only revert to the template if using the table is not possible. Providing any additional information Any additional information/examples should as far as possible be included in Annex IV (all methodological information) and, where appropriate, in the ‘additional information’ column of the tables in the Annexes. If need be, additional information in the form of files can be uploaded in a specific space created for that purpose in Reportnet 3. __________ Electronically signed on 29/06/2023 16:51 (UTC+02) in accordance with Article 11 of Commission Decision (EU) 2021/2121 13 Saatja: Webdesktop <[email protected]> Saadetud: 30.06.2023 17:05 Adressaat: <[email protected]>; <"MKM info">; <"RAM Info"> Koopia: <[email protected]>; <[email protected]> Teema: Webdesktop: Submission of Member State reports, and technical guidance on financial and technology support for climate action provided to developing countries Manused: 601_2023_Letter_to_MS_technical_guidance_climate_finance_reporting.pdf; 601_Technical_guidance_document_climate_finance_reporting_2023.pdf; 601_ekiri.pdf; 601_ekiri_eksperdid.msg Tere! Edastan Komisjoni kirja. Palun saatke vajadusel edasi. Msg failis on näha kõik EE eksperdid, kes on otse KOMlt selle saanud. EV AEEL juures reg. number: 10.2-11/601 Reg. kuupäev: 30.06.2023 Sisu: Submission of Member State reports, and technical guidance on financial and technology support for climate action provided to developing countries, under Regulation (EU) 2018/1999 -- Heade soovidega Tiiu Noobel sekretär, EV alaline esindus EL juures +32 2227 4337