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Climate Finance:
the international context
Neil Bird
Overseas Development Institute
Topics of this presentation
1. What is climate finance?
2. Climate finance availability
– Some current initiatives
– East Africa’s engagement
Defining ‘climate finance’
Preamble: There is no internationally agreed definition of ‘climate finance’
Climate finance (‘climate-specific finance’):
– capital flows that target low-carbon or climate resilient development –
where GHG mitigation or adaptation are explicitly stated objectives or
outcomes
– both international public or private financing flows, in practice also
domestic and South-South flows
– Focus is on international public finance (both N-S and S-S emerging
donors important)
Climate-relevant finance:
– a much broader set of capital flows (public or private) from developed
to developing countries that will influence (positively or negatively)
emissions and/or vulnerability to climate change in developing countries
– flows that support development and economic growth in key emitting
sectors or to sectors affecting vulnerability to climate change
Defining ‘climate finance’
Increasing difficulty in attributing climate
change impact
Increasing prominence of development objectives as the
primary purpose for the expenditure
Mitigation
- energy
Mitigation
- forests
Adaptation
– narrowly
defined
Adaptation –
broadly defined
Climate finance: an uncertain
trajectory
?
100
90
80
USD
billion/
year
70
60
50
40
30
20
10
0
2010
2012
2014
2016
2018
2020
2022
2024
Climate finance: complexity of
sources, agents and channels
Sources – origin
(country)
Public
finance
Publicprivate
Private
finance
Intermediaries
Instruments
NorthSouth
bilateral
climate and
investment
policies
SouthSouth
multilateral
offset
finance
domestic
…
…
grants
concession
al loans
capital
…
Recipients
adaptation /
mitigation
(or relevant
sectors)
specific uses
(e.g. sector
endpoint,
project type)
Climate finance: complexity of
sources, agents and channels
Climate change funds and
developing countries:
current initiatives
• Over past 5 years there has been a proliferation of funding
initiatives, both bilateral and multilateral
• Funding initiatives appear for the most part uncoordinated;
alignment is questionable
• Vast majority of support comes from voluntary contributions,
with support from government ODA budgets
• Scale of international voluntary public contributions will not be
enough for developing countries to adapt or mitigate
• Less than half of the pledged funds have been committed,
and a much, much smaller percentage actually disbursed.
22 international climate change
financing initiatives
International climate financing
initiatives
• Funds administered by the Global Environment
facility (the GEF)
• The Climate Investment Funds
• Other climate financing initiatives
• Forest sector initiatives
GEF Funds - 1
The GEF Trust Fund
The GEF Trust Fund is the common funding resource of the Global
Environment Facility (GEF). Climate Change is one of the six focal areas
supported by the GEF Trust Fund. The objective of this part of the fund
is to help developing countries to contribute to the overall objective of
the United Nations Framework Convention on Climate Change
(UNFCCC).
Regional presence
USD 12.4 million grant finance to Tanzania in support of 5 projects
implemented through several multilateral agencies
USD 44.2 million grant finance to East Africa in support of 9 projects
implemented through UNEP
Project Name
GEF
Agency
Project Type GEF Grant
(USD)
Cofinancing
Total
Project
Status
Enabling Activities for the
Preparation of Initial
UNEP
Communication Related to
the UNFCCC
Enabling
Activity
254,000
Transformation of the Rural
UNDP
Photovoltaic (PV) Market
Full Size
Project
2,250,000
Expedited Financing for
(Interim) Measures for
UNEP
Capacity Building in Priority
Areas (Phase II)
Enabling
Activity
100,000
Tanzania Energy
Development and Access
Project (TEDAP)
IBRD
Full Size
Project
Under
6,500,000 32,300,000 Implementa
tion
Mini-Grids Based on Small
Hydropower Sources to
Augment Rural
Electrification
UNIDO
Full Size
Project
3,350,000
50,000
Project
Closure
4,734,071 IA Approved
0
7,200,000
IA Approved
Council
Approved
12,454,000 44,284,071 5 Projects
GEF Funds - 2
The Special Climate Change Fund (SCCF)
The SCCF was created in 2001 to address the needs of all developing
countries under the UNFCCC. The overall objective of the fund is to
implement long-term adaptation measures that increase the resilience
of national development sectors to the impacts of climate change.
Regional presence
USD 1.0 million received by the government of Tanzania in 2007-2010
for implementation of the project ‘Mainstreaming climate change in
integrated water resources management in the Pangani river basin’
USD 6.5 million received by the government of Kenya in 2009 for
implementation of the project ‘Adaptation to climate change in arid
lands’
GEF Funds - 3
Least Developed Countries Trust Fund (LDCF)
The LDCF, created in 2002, aims to address the special needs of
the Least Developed Countries (LDCs), which are especially vulnerable
to the adverse impacts of climate change. This includes preparing and
implementing National Adaptation Programmes of Action (NAPAs).
Regional presence
USD 200,000 grant for Tanzania’s NAPA preparation was made in 2003.
USD 3.2 million project grant for the implementation of the project
‘Developing Core Capacity to Address Adaptation to Climate Change in
Productive Coastal Zones approved in 2009 (implementation status
unclear, not thought to be disbursed).
CIF Funds - 1
The Clean Technology Fund (CTF)
The Clean Technology Fund (CTF), which was operationalised in 2008,
is one of the two (along with the Strategic Climate Fund) multi-donor
Trust Funds within the Climate Investment Funds (CIFs). The CTF aims
to support the rapid deployment of low-carbon technologies on a
significant scale, with the objective of cost-effective reductions in the
growth of greenhouse gas emissions.
Regional presence
None.
CIF Funds - 2
The Pilot Program for Climate Resilience (PPCR)
The Pilot Program for Climate Resilience (PPCR) is part of the Strategic
Climate Fund, a multi-donor Trust Fund within the Climate Investment
Funds (CIFs) established in 2008. The overall objective of the program
is to provide incentives for scaled-up action and transformational
change in integrating consideration of climate resilience in national
development planning consistent with poverty reduction and
sustainable development goals.
Regional presence
None.
CIF Funds - 3
The Forest Investment Program (FIP)
The Forest Investment Program (FIP) is a program established in 2009
within the Strategic Climate Fund, a multi-donor Trust Fund within the
Climate Investment Funds. The FIP's overall objective is to mobilize
significantly increased funds to reduce deforestation and forest
degradation and to promote sustainable forest management, leading
to emission reductions and the protection of carbon terrestrial sinks.
Regional presence
None.
CIF Funds - 4
The Scaling-Up Renewable Energy Program for Low Income Countries
(SREP)
The Scaling-Up Renewable Energy Program for Low Income Countries
(SREP) is a third program established in 2009 under the Strategic
Climate Fund. Its overall objective, which is under development, is to
support investments in a small number of low income countries for
energy efficiency, renewable energy and access to modern sustainable
energy.
Regional presence
The first investment plan has been endorsed for Kenya in September
2011. No funds have yet been disbursed.
Other climate financing initiatives - 1
The Adaptation Fund (AF)
The Adaptation Fund is a financial instrument under the UNFCCC and
its Kyoto Protocol (KP) and was established to finance concrete
adaptation projects and programs in developing countries that are
Parties to the KP in an effort to reduce the adverse effects of climate
change facing communities, countries and sectors. It became
functional in 2009 (although was first proposed in 2001).
Regional presence
One UNEP project proposal for Tanzania has been submitted to the AF
Board in August 2011 on the implementation of adaptation measures
to ‘reduce vulnerability of livelihood and economy of coastal
communities of Tanzania’.
Other climate financing initiatives - 2
Global Climate Change Alliance (GCCA)
The Global Climate Change Alliance (GCCA) was proposed in 2007 as
an initiative of the European Union. Its overall objective is to build a
new alliance on climate change between the European Union and
developing countries that are most affected and that have the least
capacity to deal with climate change.
Regional presence
USD 120,000 has been disbursed (out of an approved project budget
of USD 3 million) to a project aimed at increasing the capacity of the
most vulnerable communities in Tanzania to engage in sustainable use
of their natural resources.
Other climate financing initiatives - 3
The International Climate Initiative (ICI) of Germany
The International Climate Initiative (ICI) is an innovative, international
mechanism for financing climate protection projects. It receives
funding from the sale of tradable emission certificates. The overall
objective of the fund is to provide financial support to international
projects supporting climate change mitigation, adaptation and
biodiversity projects with climate relevance.
Regional presence
USD 3 million of grant aid for the project ‘Conserving mountain
forests’ was provided to the Government of Tanzania in 2008.
Other climate financing initiatives - 4
The Global Energy Efficiency and Renewable Energy Fund (GEEREF)
GEEREF was proposed in 2006 by the European Commission and
became operation in 2008. It is a Public-Private Partnership (PPP)
designed to maximise the leverage of public funds. Structured as a
Fund-of-Funds, GEEREF invests in private equity funds (sub-funds) that
specialise in providing equity finance to small and medium-sized
project developers and enterprises (SMEs).
Regional presence
USD 13.4 million has been invested in DI Frontier Market Energy and
Carbon Fund in December 2010. DI is a private equity fund focusing on
investments in infrastructure projects in Eastern Africa. It invests in
renewable energy and energy efficiency infrastructure projects.
Forest Sector initiatives - 1
UN-REDD
Three UN Agencies – UNEP, UNDP and the FAO – collaborated to
establish the UN-REDD programme in 2008. This is a multi-donor trust
fund that allows donors to pool resources and provide funding with
the aim of significantly reducing global emissions from deforestation
and forest degradation in developing countries. Through its initial
country programme activities, the UN-REDD Programme supports the
capacity of national governments to prepare and implement national
REDD strategies with the involvement of all stakeholders.
Regional presence
USD 4.3 million was disbursed to Tanzania in 2010 to support a
National REDD Programme.
Forest Sector initiatives - 2
The Forest Carbon Partnership Facility (FCPF)
The Forest Carbon Partnership Facility (FCPF) is a World Bank
programme created in 2008 to assist developing countries in their
efforts to reduce emissions from deforestation and land degradation
(REDD). It has the dual objectives of building capacity for REDD in
developing countries, and testing a program of performance-based
incentive payments in some pilot countries.
Regional presence
Tanzania submitted its Readiness Preparation Proposal (R-PP) for
Formal Assessment in November 2010. No request for grant funding
has been made by Tanzania.
Estimate of international support to
Tanzania’s efforts to address climate
change
Fund
Approximate amount received
to-date (USD million)
GEF-4
12.4
SCCF
1.0
LDCF
0.2
CIFs (CTF, PPCR, FIP & SREP)
0.0
Adaptation Fund
0.0
GCCA
0.1
ICI
3.0
GEEREF
0.0
UN-REDD
4.3
FCPF
0.0
Total
21.0
(3.2?)
Some issues for East Africa
• Prioritise funding needs at national level
• Focus on increased access to funds
• Need to enhance response capacity to international
funds
• Equitable distribution of funds
• What is the most appropriate national mechanism to
manage international climate finance?