International funding for climate action in developing countries covers only a fraction of their anticipated needs. To address this looming financing gap, developed countries committed under the Copenhagen Accord (December 2009) and the Cancun Agreements (December 2010) to provide new and additional resources for adaptation and mitigation activities in developing countries. This approaches US$30 billion for the period 2010–12 (Fast-Start Finance) and US$100 billion per year by 2020, drawing on a wide range of sources, public and private, bilateral and multilateral, including alternative sources.
It is increasingly important to track and report financial flows that support climate change mitigation and adaptation, to build trust and accountability with regard to climate finance commitments and monitor trends and progress in climate-related investment. Yet there is currently no precise internationally-agreed definition of climate finance and current efforts to track climate finance lack transparency, comparability and comprehensiveness.
Multilateral Development Banks (MDBs) – which play a key role in mobilizing and leveraging resources for climate action – are in the process of harmonizing their climate finance tracking systems. MDBs have recently finalized a joint approach for mitigation finance reporting and have just released the Joint MDB Report on Mitigation Finance 2011. They are engaged in a parallel effort to develop a joint approach for adaptation finance tracking to be disclosed at the 2012 UN Climate Change Conference in Doha (Qatar) at the end of the year. Experience with this process will support global efforts to improve the tracking of climate finance.
Mitigation still a focus for many funds
The bulk of available and emerging resources relates to mitigation, mainly through transactions under the Clean Development Mechanism (CDM) in the carbon market and through World Bank administered carbon funds and facilities, including Climate Investment Fund (CIF) programmes like the Clean Technology Fund (CTF) and the Scaling Up Renewable Energy Program in Low Income Countries (SREP). The Global Environment Facility (GEF) has been the largest source of grant financing for energy efficiency and renewable energy projects.
REDD+ and Adaptation finance increasing
With progress in the negotiations and initiatives burgeoning, reducing emissions from deforestation and forest degradation (REDD) as well as through sustainable forest management (REDD-Plus) is gaining considerable momentum. Major multilateral initiatives include the Forest Investment Program (FIP, under the CIF), the Forest Carbon Partnership Facility (FCPF), the UN-REDD Programme and the recently established Interim REDD+ Partnership. Though a priority for most developing countries, resources for adaptation are just being mobilised in modest proportion, mostly through bi- and multi-lateral donor funds, such as the UNFCCC GEF-administered Least Developed Country Fund (LDCF), the Special Climate Change Fund (SCCF), the Pilot Program for Climate Resilience (PPCR, under the CIF) and through the UNFCCC Adaptation Fund.
Climate Finance Trackers
The following websites provide information on international climate finance flows, either in relation to Fast-Start Finance or more broadly. The UNDP/WB Climate Finance Options Platform does not analyse the figures compiled on these sites; however we provide this information in order to keep our audience informed of the latest developments in a field in expansion.
Climate Funds Upate: Climate finance data analysed by Overseas Development Institute (ODI) [click here]
UNFCCC: Finance Portal details the agreements and milestones regarding climate finance stemming from the negotiations process, including Fast-Start Finance & Green Climate Fund [click here]
World Resources Institute: FSF tracking from an independent NGO [click here]