Discussions on climate financing have played a vital role in the last international climate negotiations resulting in the commitment that developed countries would spend funds of $30 billion of new and additional resources from 2010-2012 as ‘fast start funding’ and $100 billion per year by 2020 as long-term funding.
Finances to support climate change mitigation and adaptation are provided by a variety of sources. Among these agents are various multilateral financial institutions (e.g. regional development banks, the European Investment Bank, the Wold Bank and the International Finance Corporation), bilateral development cooperation agencies and finance institutions, the private sector, domestic budgets and United Nations Framework Convention on Climate Change (UNFCCC).
According to Buchner et al. (2011) a total of USD 97 billion climate finance is currently distributed annually to support mitigation and adaptation actions with the large majority of finances being used for mitigation. The study states that “the amount of private finance is almost three times greater than public finance”.
Financial flows for climate change mitigation and adaptation in developing countries (Source: Atteridge et al. 2009)
Funds under the United Nations Framework Convention on Climate Change (UNFCCC)
A high share of climate finances is related to the implementation of the United Nations Framework Convention on Climate Change (UNFCCC). As financial resources vary among the UNFCCC parties, developed countries (Annex II Parties) are required to provide financial support to assist developing countries in implementing the convention. To facilitate the provision of funds the Convention has established a financial mechanism that is operated by the Global Environment Facility (GEF) and accountable to the COP (Conference of Parties to the UNFCCC). The GEF Trust Fund mobilises a large share of financial resources for climate change and also manages two of the four special funds that have been established by the Parties - the Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF). The Green Climate Fund (GCF) which has been decided at COP 16 (Cancun 2010) and has been launched at COP 17 (Durban 2011) is designed by a Transitional Committee compromised of 40 UNFCCC Parties. The Adaptation Fund (AF) is under the Kyoto Protocol.
The UNFCCC Finance Portal gives an overview on the funds managed by the GEF. Furthermore, it informs about provision of financial resource by Annex II Parties as communicated in their national communications and about the "Fast-start Finance" commitments of the developed country Parties (based on an agreement at the COP 15, Copenhagen 2009) to provide new and additional resources (approaching USD 30 billion for the 2010-2012 period) for mitigation and adaptation.
Adaptation finance instruments
There are five dedicated multilateral climate funds that support adaptation in developing countries:
- Least Developed Countries Fund (LDCF) - primarily supports the preparation and the implementation of NAPAs; administered by GEF
- Special Climate Change Fund (SCCF) - support long-term adaptation measures for resilience of national development sectors to the impacts of climate change; administered by GEF
- Adaptation Fund (AF) - established under the Kyoto Protocol, the only multilateral adaptation finance mechanism funded by an automated funding source; direct access by recipient countries via a country-designated and accredited National Implementing Entity (NIE)
- Pilot Program for Climate Resilience (PPCR) - programme under the World Bank Climate Investment Funds (CIFs) administered by World Bank; provide incentives for integrating climate resilience into national development planning, and MDB programming; programmatic approach
- Global Climate Change Alliance (GCCA) - bilateral EU initiative, providing finance for climate change projects with a strong adaptation focus, mainly in support of sector-level activities
Finances for mitigation are much greater than for adaptation actions and originate from a wider range of sources.
Among the instruments are the following:
- Clean Development Mechanism (CDM), established by the Kyoto Protocol – aims to transfer finance and technology to developing countries to foster low carbon development opportunities
- Global Environment Facility (GEF) - public fund supporting mitigation since 1991
Additional funds since 2008 are for example:
- Clean Technology Fund (CTF) – investment in projects and programmes in emerging economies that contribute to the demonstration, deployment and transfer of low carbon technologies with significant potential for long-term greenhouse gas emissions savings and transformational change.
- Scaling-Up Renewable Energy Program (SREP) of the Climate Investment Funds (CIFs) - administered by the World Bank in partnership with Regional Development Banks - support investments in access to modern sustainable energy, energy efficiency and renewable energy
- The Global Energy Efficiency and Renewable Energy Fund (GEEREF) - Public-Private Partnership (PPP), launched by the European Commission in 2006 , structured as a “Fund-of-Funds”, investment in private equity funds that provide equity finance to small and medium-sized project developers and enterprises
An increasing amount of public finance for mitigation is provided by bilateral finance institutions, as for instance through Germany’s International Climate Initiative (ICI).
- ↑ 1.0 1.1 1.2 Buchner, B., Falconer, A., Hervé-Mignucci, M., Trabacchi C., and Brinkman, M. (2011): The Landscape of Climate Finance. A CPI Report, Climate Policy Initiative, Venice (Italy). http://climatepolicyinitiative.org/publication/the-landscape-of-climate-finance/fckLR[accessed 17 April 2013]
- ↑ UNFCCC (2011): Report of the Conference of the Parties on its seventeenth session, held in Durban from 28 November to 11 December 2011, http://unfccc.int/resource/docs/2011/cop17/eng/09a01.pdf#page=23 fckLR[accessed 17 April 2013]
- ↑ Atteridge, A., Kehler Siebert*, C., Klein, R., Butler, C. and Tella, P. (2009): Bilateral Finance Institutions and Climate Change: A Mapping of Climate Portfolios. Stockholm Environment Institute for the Climate Change Working Group for Bilateral Finance Institutions Submitted to the United Nations Environment Programme (UNEP) and the Agence Française de Développement (AFD), Stockholm Environment Institute. http://www.sei-international.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/bilateral-finance-institutions-climate-change.pdf [accessed 17 April 2013]
- ↑ Heinrich Böll Stiftung North America/odi (2011a): Climate Finance Fundamentals Brief 3 – Adaptation Finance, http://www.odi.org.uk/resources/docs/7469.pdf fckLR[accessed 17 April 2013]
- ↑ Heinrich Böll Stiftung North America/odi (2011b): Climate Finance Fundamentals Brief 4 – Mitigation Finance, http://www.odi.org.uk/resources/docs/7471.pdffckLR[accessed 17 April 2013]