What is Climate Finance ?

Facilitator Name, Group

Date

in collaboration with the Institute for Policy Studies and the Heinrich Boell Foundation

Objectives

• Understand the variety of definitions of climate finance and their implications

• Develop individual/organizational definition of climate finance

• Understand the basic flows and architecture of international climate finance institutions

• Understand the main proposals for raising climate finance, develop criteria to evaluate fairness and effectiveness of proposals

Introductions

• Name

• Country/region

• Affiliation (movement, organization, etc.)

• What are the climate-related fights, projects, policies or institutions that you work on?

• Additional objectives for today?

Guiding questions• What is climate finance? What are the main frameworks and

definitions?

• What do we think are the important principles that should guide climate finance?

• How do these principles influence what we think should ‘count’ as climate finance in a political, ethical and/or legal sense?

• What are existing climate finance flows and institutions, and how do they measure up to our principles?

• Who can – and should be able to – access climate finance and how?

What does climate change look like locally?

• How is climate change impacting your community?

• How are people in your community dealing with climate change?

What does climate finance pay for?

What is climate finance?La Mata & La Ventosa Wind Park

•A flagship climate finance project in Oaxaca, Mexico

•The project received $140 million in loans from development finance institutions

•Its 27 wind turbines will generate up to generate 67.5MW of electricity per year, all of which will go to Walmart

La Mata & La Ventosa Wind Park

La Mata & La Ventosa Wind ParkImplications of financial flows

• Misleading “leveraging” claims to give World Bank’s Clean Technology Fund and leverage model credibility

• Non-additionality of Clean Development Mechanism credits means more total emissions

La Mata & La Ventosa Wind Park

“With the pretext of advancing renewable energy, big corporations are occupying our land with windmills. Agriculture, particularly corn plantations, is the essence of our region, andwill be completely displaced by the wind farm projects”

- Bettina Cruz Velázquez

Climate FinancePURPOSE

“Mitigation”Shifting to sustainable

(and equitable and democratic)

development pathways

“Adaptation”Dealing with the impacts and

effects of climate change

BillionsUSD$

$15

The Need: How much will climate change cost in developing countries?

Framework climate finance obligations

What is climate debt?

Climate Debt

The basic idea…

Emissions Debt

• Assuming all peoples have equal right to access the atmosphere, developed countries have polluted more than their fair share with GHGs

Compensation:• reduce emissions and lower existing

concentrations of greenhouse gases• ensure atmospheric space for development in

poorer countries

Development Debt

• Developing countries entitled to opportunities for development, providing basic services, and economic independence

• Need access to technologies and funding for R&D and implementation -according to their worldview- to achieve development within restricted atmospheric space

Adaptation Debt

• Impacts have real-world economic and development impacts

• Responsibility to compensate all damages• Full compensation for the negative impacts

and opportunity costs• Investment (with funding and technology) in

the prevention of major impacts

Migration debt

• People forced to migrate because of physical and economic dislocation cause by climate change

Compensation:• Drop restrictive migration policies, receiving

climate migrants with dignity• Recognize human and cultural rights of

migrants

Climate debt = Compensation

Compensation for climate debt should be done in multiple, complementary ways:

• Reduce and reabsorb GHG emissions• Transfer of technology and knowledge• Changing immigration laws to offer new

homes for climate migrants• Financing – not aid or charity model

Framework for Climate Finance ObligationsUNFCCC – Article IV

“Developed country parties shall provide such financial resources, including for the transfer of technology, needed by the developing country Parties to meet the agreed full incremental costs of…”

• implementing measures to reduce emissions• management and conservation of sinks• preparing for adaptation• integrating climate change into other national policies• promote cooperative research, exchange of information and

education and awareness-raising• developing inventories and reporting on emissions and sinks

Framework for Climate Finance ObligationsUNFCCC – Article IV

The extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources (with economic and social development and poverty eradication as priorities)

Framework for Climate Finance ObligationsUNFCCC

Enhanced action on the provision of financial resources and investment means:

• Adequate, predictable and sustainable financial resources and support

• New and additional resources• Official and concessional funding• Incentives for implementation of national mitigation strategies and

adaptation action• Innovative funding (especially for adaptation)• Mobilization of public and private sector funding and investment• Financial and technical support for capacity-building in the

assessment of the costs and financial needs

Bali Action Plan (2007)

Defining “climate finance”

Given the need, frameworks and obligations, how should we – from a climate justice movement perspective – define climate finance in our demands and advocacy?

Defining “climate finance”No agreed definition but is commonly understood as covering the

financial resources used to mitigate climate change and support adaptation to climate change impacts in developing countries.

Contentious issues: • Geographical scope • Types of sources and instruments • Scope of activities • Incremental cost vs. investment capital • Gross vs. net flows • Additionality

A useful distinction? climate-specific vs. climate-relevant finance

Defining “climate finance”

• Transfer of public resources from North to South to cover the costs of dealing with the long-term impacts of climate change. - IPS Glossary Climate Finance Terms

• Article 4.3 commits “annex II” countries to provide “new and additional financial resources” for the “full incremental costs” of addressing climate change. – UNFCCC

• Covers additional costs and is a catalyst to leverage private and public resources, open economic opportunities, and enhance development policy and finance. – World Bank

Defining “climate finance”

• ‘Climate-specific finance’: capital flows that target low-carbon or climate resilient development, both international public or private financing flows, also domestic;‘Climate-relevant finance’: broader set of capital flows (public or private) that will influence (positively or negatively) emissions and/or vulnerability to climate change in developing countries. – Climate Policy Initiative

• Describes funding that can be used to support climate change mitigation and adaptation activities. – German Ministry of Economic Cooperation & Development

Defining “climate finance”• Funds that will be transferred to developing countries to

cover their investments in mitigation and adaptation. – Global Economic and Governance Program, Oxford University

• An effort to support developing countries by providing funding from the developed world to assist these countries in mitigation and adaptation, and to embark on green development paths, specifically those monies under discussion in the UNFCCC. – Conservation International

• Born of the ‘polluter pays principle,’ the idea that industrialized countries have contributed the most to global warming and should therefore compensate developing nations for the costs they face as a result of climate change. – Transparency International

Defining “climate finance”

• How would you/r organization define ‘climate finance’?

• What are some principles that climate finance should follow?

• Given the obligations and principles, what do you think should (and shouldn’t) ‘count’ as climate finance?

Climate justice principles

• Obligatory, automatic, predictable public funding• New and additional resources• No loans or debt-creating instruments • No conditionalities or ‘tied aid’• Obligatory – recognizes historical responsibility according to

“Polluter Pays Principle”• Transparent and accountable• Uphold the right of peoples and countries of the South to

determine the allocation and use of climate funds• Equity and non-discrimination of allocation across and within

countries • Peoples participation and right to information

Climate finance flows

Challenges to tracking climate finance

• Complex, lack of common definitions

• Lack of common framework for measuring, reporting and verifying climate finance

• Gaps in data and limited coordination in data gathering

• Different goals of tracking efforts

Climate FinanceFLOWS

South CountriesDEVELOPING COUNTRIES

PRIVATEMULTILATER

ALWorld Bank, ADB

etc

BILATERAL as part of

ODA

within the context of

UNFCCCDOMESTICALLOCATIONS

Climate finance flows

$97bn – but not to be confused with the $100bn of the Copenhagen Accord

– Not all additional – includes some developing countries and domestic

money – includes public and private sources – includes incremental costs and capital investment

Source: Climate Policy Initiative

Climate finance flows

• Private funding: $55bn direct, $20bn ‘leveraged’ ($75bn)

• Public finance: from national budgets ($21bn)

• Voluntary carbon markets, philanthropic contributions: < $3bn

Source: Climate Policy Initiative

Climate finance flows

$93bn out of $97bn is used for mitigation measures; only a very small share goes to adaptation efforts

• Adaptation: public funds ($4.1bn)• Mitigation: private sector ($57bn), public

funds ($25bn)

Source: Climate Policy Initiative

Climate FinanceFLOWS

South CountriesDEVELOPING COUNTRIES

PRIVATEMULTILATER

ALWorld Bank, ADB

etc

BILATERAL as part of

ODA

within the context of

UNFCCCDOMESTICALLOCATIONS

South CountriesDEVELOPING COUNTRIES

Green Climate Fund

GCF“Fast Start Finance”

Global Environment Facility (GEF)

Adaptation Fund (AF)Special Climate Change Fund

(SCCF)

LDC Fund

within the context of the

UNFCCCUN Framework Convention on Climate Change

Copenhagen Accord (2009)Climate Finance Commitments

Developed countries pledge– New and additional resources up to $30 billion 2010–2012

(Fast Start Financing)– Jointly mobilize $100 billion per year by 2020(variety of public, private, bilateral, multilateral, and ‘alternative’

sources)

Green Climate Fund – channel significant share of new multilateral funding for adaptation

South CountriesDEVELOPING COUNTRIES

Green Climate Fund

GCF“Fast Start Finance”

Global Environment Facility (GEF)

Adaptation Fund (AF)Special Climate Change Fund

(SCCF)

LDC Fund

within the context of the

UNFCCCUN Framework Convention on Climate Change

Fast Start Finance

Fast Start Finance

Fast Start Finance commitment - $30bn “new and additional” finance between 2009-2012, balanced between support for adaptation and mitigation activities.

• $28.22 billion pledged, $23.6 billion committed• Requested and/or budgeted = $16.23 billion• Delivered and implemented = not clear• Only 20% allocated for adaptation• Oxfam estimates <5% additional• Not prioritized for the most vulnerable developing countries• Mainly bilateral, not through international institutions• <50% in form of grants

Fast Start Finance

How do these examples of Fast Start Finance measure up when compared to our definition and principles of climate finance?

What other information would you need in order to assess these projects or programs?

South CountriesDEVELOPING COUNTRIES

Green Climate Fund

GCF“Fast Start Finance”

Global Environment Facility (GEF)

Adaptation Fund (AF)Special Climate Change Fund

(SCCF)

LDC Fund

within the context of the

UNFCCCUN Framework Convention on Climate Change

Green Climate FundEstablished at 2010 UN climate summit in Cancun,

Mexico under the guidance and accountable to the UNFCCC to deliver finance for low-emissions, climate-resilient sustainable development in developing countries.

Host country: South KoreaBoard: 24 members of the GCF board, half

developed/developing countries, accd to country groups

Sub-funds: Windows for mitigation and adaptation, Private Sector Facility

Green Climate Fund

Trustee: World Bank interim, competitive bidding process for permanent

Access: direct access for through national implementation entities working with National Designated Authorities; private sector also granted direct access

Active Observers: 2 active observers from CSOs and private sector organizations (South & North)

Sources: Fund does not have a fundraising role, and therefore will be ineffective without sufficient levels of financial flow, which have not yet been identified.

Green Climate FundPressing Issues

• Purpose - meet the needs of impacted communities, maximize profit/PS involvement, or maximize GHG reductions

• Channel for CPH $100bn? Civil society says all public, additional contributions to the Fund, no loans or investments with expected returns

• Business model – overemphasis on private/financial sector, governance structures, who benefits, will investments expect returns

• World Bank role - interim trustee, technical asst, capacity building

• Relationship with the UNFCCC

Green Climate FundPressing Issues

• Equitable and non-discriminatory allocation and disbursement of funds across countries

• Relationship to national structures - respect for sovereignty and self-determination of countries and peoples

• Civil society participation (esp impacted peoples) at all levels

• Compliance with international principles and standards on human rights, environment, rights of indigenous peoples, women and others

Sources of climate finance

Criteria for fair & effective climate finance sources

Sources of climate finance

Financial transaction taxCarbon tax Fossil fuel subsidy reallocationAviation fuel levyMaritime bunker fuel levyAssigned amount unit auctionsClimate special drawing rights

Big questions remain…

• How do we measure ‘effectiveness’ of the money that does flow?

• What makes an investment successful, replicable and scalable?

• What is the right role for public finance? When is private sector finance appropriate?

• What does this mean for our movements?

Wrap-Up & Evaluation

• Has this session created a useful space to reflect on what we want and want we need from climate finance?

• If not, what do you think is needed to get at these questions?

• Are there basic concepts about climate finance that you wanted to learn more about that didn’t get addressed here?

Thank you!