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Sources of Financing to Address Climate Change. TACC Training Module 7. Overview. Section 1: Introduction to Financing a Green Economy and Climate Change Action Section 2: Mobilizing Finances to Address Climate Change at the Sub-national Level

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Overview
Overview

  • Section 1: Introduction to Financing a Green Economy and Climate Change Action

  • Section 2: Mobilizing Finances to Address Climate Change at the Sub-national Level

  • Section 3: International Sources and Support to Access Climate Change Financing

Territorial Approach to Climate Change - Phase 1


Financing a transition towards a green economy
Financing a Transition towards a Green Economy

  • A Green Economy can generate as much growth and employment as a brown economy (more in the medium and long term)

  • Need to combine smart public policy and innovative financing mechanisms

  • Need to address the misallocation of capital in public finance and spendingby subsidy reforms

Territorial Approach to Climate Change - Phase 1


Challenges and opportunities of climate change financing
Challenges and Opportunities of Climate Change Financing

  • Addressing the global climate change challenge requires major reorientation of investment flows

  • Required additional investment and financial flows by 2030 (UNFCCC)

    • 0.3-0.5 % of global domestic product

    • 1.1-1.7 % of global investments

  • New and innovative financing opportunities are emerging

  • Opportunities for countries to pursue low carbon and climate resilient development paths

Territorial Approach to Climate Change - Phase 1


Estimates of costs and investment requirements adaptation
Estimates of Costs and Investment Requirements: Adaptation

Territorial Approach to Climate Change - Phase 1


Estimates of costs and investment requirements mitigation
Estimates of Costs and Investment Requirements: Mitigation

Territorial Approach to Climate Change - Phase 1


No regret options in climate change adaptation and mitigation
No-regret Options in Climate Change Adaptation and Mitigation

  • No-regret options are Negative-cost or No-cost measures …

    • ...that reduce climate change risks…

    • …and create conditions that enable net economic benefits

  • Examples of no-regret options include

    • Disaster risk management

    • Improving emergency response system

    • Improving efficiency standards

    • Improving water and energy pricing to encourage more efficient consumption

Territorial Approach to Climate Change - Phase 1


Overview of sources to finance climate change action
Overview of Sources to Finance Climate Change Action Mitigation

  • National and Sub-national Budgets

  • Multilateral Funds and Official Development Aid (ODA)

  • Market-Based Mechanisms/Carbon Financing

  • Private Funds

Source: Fotolia

Territorial Approach to Climate Change - Phase 1


National and sub national budgets
National and Sub-national Budgets Mitigation

  • Funding of basic infrastructure development

    (e.g. transport)

  • Tax incentives to promote certain investments

  • Support for research and development

    (e.g. for new technology)

  • Loan guarantees for private investment

  • Etc.

Territorial Approach to Climate Change - Phase 1


Multilateral funding and official development aid
Multilateral Funding and Official Development Aid Mitigation

  • Official Development Assistance encompasses all government-contributed aid

  • Traditionally linked to specific projects

  • Recent trend to provide increasingly sector budget support

  • Important source for least developed countries (1-7% of GDP)

  • Relevant sources to address climate change include

    • GEF Administered (UNFCCC and Kyoto Protocol)

    • Multi-lateral Development Banks (MDBs)

    • UN Funds and Programmes

    • Bilateral Development Aid

Territorial Approach to Climate Change - Phase 1


Relative contribution of oda in different groups of countries
Relative Contribution of ODA in Different Groups of Countries

Territorial Approach to Climate Change - Phase 1


Market mechanisms and carbon markets
Market Mechanisms and Carbon Markets Countries

  • Carbon Financing Schemes under the UNFCCC/Kyoto Protocol

    • Clean Development Mechanism

    • Joint Implementation & Emissions Trading

  • Gold Standard

    • Community-focused Micro-scale Scheme Launched, May 2010

    • streamlined procedures and lowered transaction costs for poor community-focused micro-scale project activities; LDCs, LLDCs and SIDS

  • Carbon Financing Schemes under the Voluntary Market

Territorial Approach to Climate Change - Phase 1


Reaping the potential of the clean development mechanism cdm
Reaping the Potential of the Clean Development Mechanism (CDM)

Territorial Approach to Climate Change - Phase 1

CDM allows emission-reduction projects in developing countries to earn certified emission reductions (CERs)

More than 4880 registered CDM projects in 81 developing countries

CDM projects must lead to sustainable development in the host developing country

Projects must be voluntary and approved by the National CDM Authority

http://cdm.unfccc.int/


Cdm project cycle
CDM Project Cycle (CDM)

Territorial Approach to Climate Change - Phase 1


Private funds
Private Funds (CDM)

  • Bank loans

  • Private equity funds

  • Venture capital

  • Insurance schemes

  • Etc.

Source: Flickr

Territorial Approach to Climate Change - Phase 1


Green climate fund gcf
Green Climate Fund (GCF) (CDM)

  • COP 18, endorsed decision of the GCF Board for Songdo, Incheon,  Korea to host GCF

  • GCF was established at COP 16 (2010) and its governing instrument approved at COP 17 (2011)

  • A fully operational GCF to disburse up to US$100 billion per year by 2020 to support mitigation and adaption efforts of developing countries

Territorial Approach to Climate Change - Phase 1


Possible elements of a future financial framework under the unfccc
Possible Elements of a Future Financial Framework under the UNFCCC

Territorial Approach to Climate Change - Phase 1


Questions and challenges
Questions and Challenges UNFCCC

  • How can sub-national authorities generate revenue to support climate change action?

  • How can sub-national authorities access multi-lateral and ODA finances?

  • What strategies and capacities need to be put in place to access external financing?

Territorial Approach to Climate Change - Phase 1


Overview1
Overview UNFCCC

  • Section 1: Introduction to Financing a Green Economy and Climate Change Action

  • Section 2: Mobilizing Finances to Address Climate Change at the Sub-national Level

  • Section 3: International Sources and Support to Access Climate Change Financing

Territorial Approach to Climate Change - Phase 1


Examples of adaptation measures requiring financing
Examples of Adaptation Measures Requiring Financing UNFCCC

  • Addressing observed climate

    change impacts (e.g. reconstructing

    an area devastated by a storm)

  • Climate proofing of socio-economic

    activities (e.g. elevating a road in an

    area at risk of flooding)

  • Building adaptive capacity to deal with future risks (e.g. research on resilient crops)

  • Etc.

Source: dfid.gov.uk)

Territorial Approach to Climate Change - Phase 1


Strategic areas of adaptation funding
Strategic Areas of Adaptation Funding UNFCCC

Territorial Approach to Climate Change - Phase 1


Financial sources to support adaptation
Financial Sources to Support Adaptation UNFCCC

Territorial Approach to Climate Change - Phase 1


Examples of mitigation measures requiring financing
Examples of Mitigation Measures Requiring Financing UNFCCC

  • Promotion of clean energy sources (e.g. solar panels in villages)

  • Phasing out energy intensive industrial production

  • Reforestation and avoidance of forest degradation

  • Etc.

Source: UNFCCC

Territorial Approach to Climate Change - Phase 1


Financing sources to support mitigation
Financing Sources to Support Mitigation UNFCCC

Territorial Approach to Climate Change - Phase 1


The role of public private funding in promoting new technology
The Role of Public-Private Funding in Promoting New Technology

Territorial Approach to Climate Change - Phase 1


Financial instruments from research to commercial maturity
Financial Instruments: From Research to Commercial Maturity Technology

Territorial Approach to Climate Change - Phase 1


Overview2
Overview Technology

  • Section 1: Introduction to Financing a Green Economy and Climate Change Action

  • Section 2: Mobilizing Finances to Address Climate Change at the Sub-national Level

  • Section 3: International Sources and Support to Access Climate Change Financing

Territorial Approach to Climate Change - Phase 1


Sources of multilateral and oda funding
Sources of Multilateral and ODA Funding Technology

  • GEF Administered Funds under the UNFCCC and Kyoto Protocol

  • Multi-lateral Development Banks

  • UN Funds and Programmes

  • Bilateral Funds

Source: Flickr

Territorial Approach to Climate Change - Phase 1


Global environment facility
Global Environment Facility Technology

  • Established in October 1991 to assist in the protection of the global environment and to promote environmental sustainable development

  • Provides grants for projects related to six focal areas: biodiversity, climate change, international waters, land degradation, the ozone layer, and persistent organic pollutants

  • Each GEF country member has designated an officer responsible for  GEF activities, known as GEF Operational Focal Point , who plays a key role in assuring that  GEF projects are aligned to meet the needs and priorities of the respective country

    http://thegef.org/gef/gef_projects_funding

Territorial Approach to Climate Change - Phase 1


Proposals for gef grants
Proposals for GEF Grants Technology

Territorial Approach to Climate Change - Phase 1

  • To be taken into consideration, a project proposal has to fulfil the following criteria:

    • It is consistent with national priorities and programmes

    • It addresses one or more of the GEF Focal Areas, improving the global environment or advance the prospect of reducing risks to it

    • It involves the public in project design and implementation

    • It is endorsed by the government of the country in which it will be implemented

      Before drafting a project proposal, the applicant should contact the

      Country Operational Focal Point and verify that the proposal complies

      with the criteria mentioned above


Gef administered unfccc kyoto protocol funds
GEF Administered UNFCCC/Kyoto Protocol Funds Technology

Territorial Approach to Climate Change - Phase 1


Multilateral development banks
Multilateral Development Banks Technology

  • Finance institution created by a group of countries

  • MDBs provide financing and professional advice to support development

  • Memberships include developed donor countries and developing borrower countries

  • Project financing in the form of long-term loans at and below-market rates and through grants

Territorial Approach to Climate Change - Phase 1


Multilateral development banks cont
Multilateral Development Banks (cont.) Technology

  • MDBs include

    • World Bank

    • Regional Development Banks

      • African Development Bank

      • Asian Development Bank

      • European Bank for Reconstruction and Development

      • Inter-American Development Bank Group

Territorial Approach to Climate Change - Phase 1


Mdb funds to support action on climate change
MDB Funds to Support Action on Climate Change Technology

Territorial Approach to Climate Change - Phase 1


The pilot programme for climate resilience world bank
The Pilot Programme for Climate Resilience (World Bank) Technology

  • First targeted program under the Strategic Climate Fund (SCF), a multi-donor Trust Fund within the World Bank’s Climate Investment Funds

  • The objective of the PPCR is to pilot and demonstrate ways to integrate climate risk and resilience into core development planning

  • Pilot programs implemented under the PPCR:

    • are country led

    • build on National Adaptation Programs of Action and other relevant country strategies

    • are strategically aligned with the Adaptation Fund and other donor funded activities

    • take into account poverty reduction and sustainable development goals

  • Pilot countries include Bangladesh, Bolivia, Niger, Saint Lucia, Tajikistan, Tonga, and Zambia

Territorial Approach to Climate Change - Phase 1


Un funds and programmes
UN Funds and Programmes Technology

  • Most UN agencies are engaged in providing support to address climate change

  • UN Chief Executive Board for Coordination (CEB) provides coordinating framework

  • Some agencies have established dedicated funds and support initiatives, e.g.

    • UNDP/Japan Adaptation Programme in Africa

    • UNEP Green Economy Advisory Services

    • UN REDD

  • At the national level, United Nations Country Teams (UNCT’s) provide coordination

Territorial Approach to Climate Change - Phase 1


Un funds and programmes cont
UN Funds and Programmes (cont.) Technology

Territorial Approach to Climate Change - Phase 1


The case of the undp mdg carbon facility
The Case of the UNDP MDG Carbon Facility Technology

  • Launched in 2007 with the goal to offer an innovative means of harnessing resources of the carbon market for developing countries

  • Offers technical assistance and a comprehensive package of project development services to develop emission reduction projects

  • Operates within the framework of the Clean Development Mechanism and Joint Implementation of the Kyoto Protocol

Territorial Approach to Climate Change - Phase 1


Main objective of the undp mdg carbon facility
Main Objective of the UNDP MDG Carbon Facility Technology

Territorial Approach to Climate Change - Phase 1


Bi lateral development aid
Bi-lateral Development Aid Technology

  • Aid provided from one country directly to another country

  • Supports the economic, social and political development in partner countries

  • Different from short-term humanitarian aid by focusing on alleviating poverty in the long term

  • Usually bi-lateral agreements are negotiated between the two partners

  • Paris Declaration provides overarching guiding principle for effective development aid

Territorial Approach to Climate Change - Phase 1


Bilateral climate change funds
Bilateral Climate Change Funds Technology

  • Dedicated funds established by a country/group of countries to support Non-Annex 1 countries in implementing the global climate change regime

  • Usually managed directly by the country which provided the financing

Territorial Approach to Climate Change - Phase 1


Overview of bi lateral climate change funds
Overview of Bi-lateral Climate Change Funds Technology

Territorial Approach to Climate Change - Phase 1


The global climate change alliance gcca eu
The Global Climate Change Alliance - GCCA (EU Technology)

  • Aims at supporting the poorest and most vulnerable countries with respect to their capacity to adapt to the effects of climate change

  • Platform for dialogue and regular exchange between the EU and these countries

  • Regional level dialogues (e.g. with African, Caribbean and Pacific States, the African Union and SIDS

Territorial Approach to Climate Change - Phase 1


The global climate change alliance gcca eu cont
The Global Climate Change Alliance - GCCA (EU) (cont.) Technology

  • Five priority areas:

    • Implementation of measures to adapt to climate change

    • Reducing emissions from deforestation in developing countries

    • Enhancement of participation in the Clean Development Mechanism (CDM)

    • Promotion of disaster risk reduction (DRR)

  • Integration of climate change into poverty reduction strategies and programmes

  • More resources of about €200 million under the intra-ACP programme in the area of climate change, the environment and disaster risk prevention, will be made available

Territorial Approach to Climate Change - Phase 1


The cool earth partnership japan
The Cool Earth Partnership (Japan) Technology

  • Initiative of the Government of Japan which commenced in 2008

  • Provides assistance to developing countries to achieve climate compatible growth

  • Up to US$ 10 billion for mitigation in the form of loans with preferential interest rates

  • Supporting institutions include

    • Japan Bank for International Cooperation (JBIC Asia and Environment Facility)

    • Nippon Export Investment and Insurance

    • New Energy and Industrial Technology Development Organization

  • Up to US$ 2 billion for adaptation in the form of grant aid, technical assistance and aid

  • Adaptation component implemented through international organizations

Territorial Approach to Climate Change - Phase 1


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