Transcript Climate finance additionality: where are we now and what

Financial transfer mechanisms:
resources for developing countries
International Parliamentary Conference on Climate Change
Jessica Brown
Research Officer, ODI
14 July 2010
Financial transfer mechanism
• Parties assigned operation of the financial mechanism to the
Global Environment Facility (GEF)
• Financial mechanism is accountable to the COP, which decides
on its climate change policies, programme priorities, eligibility
criteria for funding.
• In addition to GEF guidance, Parties have established three
special funds: Special Climate Change Fund (SCCF), Least
Developed Countries Fund (LDCF), under the Convention,
and Adaptation Fund (AF), under the Kyoto Protocol.
• Funding for climate change activities also available through
bilateral, regional and multilateral channels.
Description and status of funds
GEF Trust Fund:
• Earmarked for national communication processes, adaptation assessment,
capacity building for adaptation, etc.
• Disbursed: US$ 2.6 billion to Climate Change projects, as of 3rd November 2009 and
since the start of GE Trust Fund (all 4 replenishment periods – since 1994, averaging
~$175k per annum).
Special Climate Change Fund (SCCF)
• Established to finance the special needs of developing countries in
adaptation, tech transfer, and climate sensitive sectors
• US$ 120 mn pledged, of which US$100 has been deposited and $91 disbursed to
projects
Least Developed Countries Fund (LDCF)
• Created to support preparation and implementation of NAPAs. These
NAPAs provide a prioritized list of immediate adaptation projects.
• Approved projects as of November 2009: US$ 111.86 million
For more detailed information on funds, including bi- and multilateral funds, please visit
www.climatefundsupdate.org
Description and status of
funds (cont’d)
Adaptation Fund
• Established by the Parties to the Kyoto Protocol of the UNFCCC to
finance adaptation projects and programmes in developing countries
that are Parties to the Kyoto Protocol.
• Funding is derived from proceeds of the 2% levy on transactions
under the CDM (although it may also be complemented with other
sources of funding).
• Offers a unique model for CC funding governance
• Four projects just approved (Nicaragua, Pakistan, Senegal,
Solomon Islands) for total value of USD 21.8 million
• Senegal first country to exercise Direct Access - using an NGO as
National Implementing Entity (NIE)
What is the future of climate change
finance under the Convention?
Climate finance post-Copenhagen
In the Copenhagen Accord:
“The collective commitment by developed countries is to provide new and
additional resources, […] through international institutions, approaching
USD 30 billion for the period 2010 – 2012. […] [D]eveloped countries
commit to a goal of mobilizing jointly USD 100 billion dollars a year by
2020 to address the needs of developing countries. This funding will come
from a wide variety of sources, public and private, bilateral and
multilateral, including alternative sources of finance.”
Issues with Copenhagen Accord
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Unclear how ‘additionality’ is being defined
Unclear how this money will be managed, and by whom
Unclear how funding will be secured, or where will it come from
Unclear who will pay for what
No distinction between public and private finance
The Need for Climate Finance
•
There is currently a gap in the scale of climate finance needed for
developing countries to mitigate and adapt to climate change
Need (between 2010-2012)
USD 16-35
billion
•
However, there is currently no means of assessing either the actual
demand for funding or the absorption capacity. Can create mistrust
between developed and developing nations, which can hamper
progress on tackling climate change.
‘New and additional’ funds difficult
to estimate, but significantly less
than pledges made
Source: Project Catalyst draft presentation, April 2010
1. Past money pledged but not paid in to climate funds until XXX 2009 based on climatefundsupdate.org
2. OECD climate change commitments until 2008 multiplied by 3 to compare with 2010-2012 pledges
What is currently available?
Pledges of existing funds total roughly US$19 bn, only US$2 bn has been
deposited (most funds made operational in 2008)
Moving forward:
Possible solutions to securing
appropriate scale of finance
•
Create new and predictable resource mobilization mechanisms for
international public finance
– Budgetary contributions
– Carbon markets
– Various forms of taxation
– Others (bonds, CTT, etc)
•
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Engage the private sector by creating the right incentives
Concessional lending for mitigation and adaptation investments
Explore other incentives such as advanced market commitments, or more
generally using public sector financial instruments to mitigate private sector
investment risks
New finance coming in –
where do we need to focus?
• Maximise impact on mitigation and adaptation in face of constrained
resources and absorptive capacity
– Must therefore attract private funding
– Must therefore aim for biggest bang for the buck
– Must aim to fund longer term abatement projects which avoid
carbon ‘lock in’
• Therefore, in order to maximise impact, funding must be
– Coordinated across donors – focus on leveraging to get an
impact (not necessarily within one pot)
– Matched effectively to needs
– Disbursed rapidly
Thank you
Contact:
Jessica Brown
[email protected]
www.climatefundsupdate.org
How will future funds be managed
and delivered in the long term?
• Options for institutional arrangements:
– Institutions: New or Existing (e.g., GEF)?
– Coherence: Consolidated across other donors or
fragmented?
– Decision-making: Devolved to country or retained
by fund board?
– Approval: Centralised or decentralised?