Perspectives from countries in the Latin America and the Caribbean (LAC) region on Article 2.1C

The importance of securing funding for climate action is clearly emphasized in Article

2.1(c) of the Paris Agreement. To gain a comprehensive understanding of Article 2.1(c),

and its relationship with Article 9, it is crucial to consider diverse perspectives from the

public, private, and non-governmental financial sectors. This inclusive approach is key

to improving our understanding of how financial flows can be effectively aligned with the

Agreement's goals. Collaboration among these actors is instrumental in combining

expertise and resources to address the complex challenges posed by climate change

and reaffirm the global commitment to tackling this pressing issue.

In contrast to other parts of the Paris Agreement, the operationalization of Article 2.1(c)

is still in its early stages, with varying interpretations among the Agreement's signatory

Parties. Despite the adaptable nature of this article, recognizing the unique financial and

economic circumstances of each country, governments have the primary role in

translating Article 2.1(c) into action. They are responsible for providing guidance to

stakeholders, facilitating progress through four strategic avenues: i) financial policy and

regulation, ii) fiscal policy tools, iii) public finance mechanisms, and iv) information

resources, as highlighted by AILAC (2021). Governments can adapt their existing public

financial management (PFM) strategies to align them more closely with climate-related

objectives.

Article 2.1(c) of the Paris Agreement is particularly relevant to the Latin American and

Caribbean (LAC) region, which faces economic disparities and social vulnerabilities

while striving for sustainable development and poverty reduction. LAC confronts various

climate challenges, including rising temperatures, extreme weather events, sea-level

rise, coastal erosion, biodiversity loss, increasing greenhouse gas emissions, reliance

on fossil fuels, and vulnerabilities in climate-sensitive sectors. Thus, addressing the

climate crisis in LAC requires significant annual investments in infrastructure and

solutions to address social challenges.

This document aims to present perspectives from LAC countries, including case studies,

insights, and policy recommendations related to climate funding and technical assistance

within the multilateral process.

LAC countries have adopted a range of measures that may be associated with the

implementation of Article 2.1(c), such as carbon taxes, emission trading schemes, the

issuance of sovereign green bonds, green fiscal incentives, and taxonomies. Some

countries have also reduced fossil fuel subsidies and offered environmental tax

exemptions, particularly in the energy and transport sectors. Price-based mitigation

policies (PBMP) have seen limited adoption in LAC, with only a few countries, such as

Argentina, Chile, Colombia, and Mexico, implementing carbon taxes at relatively lower

rates compared to the global standard.

Several factors stood out to the authors in relation to the implementation of Article 2.1(c):

the lack of up-to-date and disaggregated data to track the Paris alignment of financial

flows; the continued existence of large financing gaps, especially for adaptation; the

importance of creating fiscal space to respond to climate challenges; the importance of

bilateral and multilateral support; and LAC's potential for becoming a hub for climate

financing.

Authors:

Ana Carolina Díaz

Laura Ruiz

Germán Romero

20231104 Policy paper with perspectives from countries in the LAC.pdf

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