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● Apr / 2013, Issue 04 ●
● Author ● Arindam Basu ●
Climate Finance – Part 1 (Public Funds)
Climate finance can be broadly understood as funds made
Green Climate Fund (GCF):
available to developing countries to help them reduce their
At COP 16, the UNFCCC established the GCF as a financial mechanism
emissions and adapt to climate change. This finance can be
to support projects, programmes, policies and other activities in
sourced either from the developed countries in the form of
developing country tackle climate change. The GCF is headquartered
‘Official Development Assistance’ (ODA) or in the form of new and
in Incheon, South Korea and aims to generate USD 100 billion
additional finance, or obtained from capital markets and private
annually by 2020. The potential sources of revenue shall be a mix of
investors and in case of the “larger developing economies”
public sources, bank loans, carbon markets and the private sector.
sourced domestically through budget allocation.
The modalities of the fund are currently being discussed and shall be
Fig 1: Overview of Climate Finance
elaborated in an exclusive bulletin once more information is made
available. For current information visit: http://gcfund.net/home.html
Funds from
Industrialized Countries
Funds from
Capital markets
Funds allocated in
Domestic Budgets
Global Environment Facility (GEF):
The GEF operational since 1991, focuses on seven main areas, namely,
Development
Agencies
Bilateral
Finance
Multilateral
Finance
biodiversity, climate change (mitigation and adaptation), chemicals,
Private
Sector
UNFCCC
international
waters,
land
degradation,
sustainable
forest
management and ozone layer depletion. The UNDP, UNEP, and World
ODA
‘Voluntary’ funding by
Industrialized countries
New Climate
Funds
Carbon
Markets
Emission reduction
obligations
Bank were the three initial partners implementing GEF projects and
has provided “USD 11.5 billion in grants and leveraged USD 57 billion
Foreign direct
investment
in co-financing for over 3,215 projects in over 165 countries”.2 The GEF
Climate Finance available for mitigation, adaptation and REDD efforts
has been further restructured to become the financial mechanism for
several other conventions such as the UNFCCC. For current
Adapted from: http://upload.wikimedia.org/wikipedia/commons/3/30/Financial_flows_for_climate_change_mitigation_and_adaptation_in_developing_cou ntries.jpg
Official Development Assistance:
information visit: http://www.thegef.org/gef/home
Official Development Assistance (ODA) is a form of financial aid
Climate Investment Funds (CIF):
given by governments of industrialized nations to support the
The CIF consists of two distinct funds: the Clean Technology Fund and
economic, environmental, social and political development of
the Strategic Climate Fund (SCF). The SCF is an overarching fund to
developing countries. It is distinguished from humanitarian aid by
support three targeted programs, namely FIP (Forest Investment
focusing on alleviating poverty in the long term, rather than a short
Program), PPCR (Pilot Program for Climate Resilience) and the SREP
term response. The financial aid provided may be ‘Bilateral’, i.e.
(Scaling Up Renewable Energy Program) in low income countries.
directly between a donor country and a recipient country or
‘Multilateral’ where the donor country makes finance available to
international development agencies such as the UNDP or World
The FIP aims to support the efforts of developing countries to reduce
emissions from deforestation and forest degradation. The objective
of PPCR is to pilot and demonstrate ways to integrate climate risk and
Bank, who then makes it available to developing nations.
resilience into core development planning, while complementing
Multilateral Funds in the context of Climate Change:
other ongoing activities. The SREP is aimed at demonstrating the
While the estimates for actual climate finance needs vary, at the
social, economic, and environmental viability of low carbon
COP 15 in Copenhagen industrialized nations came together “to
development pathways in the energy sector.
provide new and additional resources, including forestry and
The Clean Technology Fund focuses on large-scale, country-initiated
investments, approaching USD 30 billion for the period 2010-12”1
renewable energy, energy efficiency and transport projects with a
under Fast Start Finance. Apart from encouraging developing
significant potential for long-term greenhouse gas emissions savings.
countries take immediate action, the funding was expected to
The fund is backed by the World Bank and implemented by
provide an important learning experience for the more ambitious
multilateral development banks such as the Asian Development Bank.
Green Climate Fund. The two other important sources of
The total amount pledged to the CIF is USD 6.5 billion. For current
multilateral funds are the Global Environment Facility and the
information visit: https://www.climateinvestmentfunds. org/cif/home
Climate Investment Funds.
1
Source: UNFCCC - http://www3.unfccc.int/pls/apex/f?p=116:13:499826467475863
2
Source: GEF - http://www.thegef.org/gef/whatisgef
● Developed in Collaboration with
Denmark ●