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Putting the Pieces Together for Good Governance of REDD+

An Analysis of 32 REDD+ Country Readiness Proposals

This working paper presents positive trends and overarching gaps in how countries designing programs to reduce emissions from deforestation and forest degradation (REDD+) are proposing to address governance challenges. It can serve as a starting point to help governments, donors, and civil...

This is the first installment of our blog series, Climate Finance FAQs. The series explores the often nebulous world of climate finance, providing clarity on some of the key terms and current issues. Read more posts in this series.

Surprising as it may sound, there is no standard definition of climate finance. In fact, there are many differing views on what type of funding constitutes climate finance, how it should be delivered, and how much money developing nations will need to mitigate climate change and adapt to its impacts. This vortex of information can be confusing to navigate. Here, we'll do our best to break down all of the components that define “climate finance.”

Defining Climate Finance: Broadly to Narrowly

In its broadest interpretation, climate finance refers to the flow of funds toward activities that reduce greenhouse gas emissions or help society adapt to climate change’s impacts. It is the totality of flows directed to climate change projects—the same way that “infrastructure finance” refers to the financing of infrastructure, or “consumer finance” refers to providing credit for purchases of big-ticket household items.

The term is most frequently used in the context of international political negotiations on climate change. In this context, climate finance—or international climate finance—is used to describe financial flows from developed to developing countries for climate change mitigation/adaptation activities, like building solar power plants or walls to protect from sea level rise. This interpretation builds off the premise that developed countries have an obligation to help developing countries transform their economies to become less carbon-intensive and more resilient to climate change.

The rapid expansion of natural gas development in the United States has been a double-edged sword. While natural gas supporters are quick to point out its economic benefits and green attributes—natural gas produces roughly half the carbon dioxide emissions of coal during combustion—this isn’t the whole story. Natural gas comes with environmental consequences, including risks to air and water quality.

One risk is “fugitive methane emissions,” potent greenhouse gases that escape into the atmosphere throughout the natural gas development process. This methane—which is 25 times more potent than carbon dioxide over a 100-year timeframe—contributes to global warming and undercuts the climate advantage that cleaner-burning natural gas has over coal and diesel. (Learn more about fugitive methane emissions in our recent blog post.)

Despite the controversy surrounding natural gas development, energy forecasts suggest that natural gas is here to stay. Fortunately, several pathways are available to limit the climate impacts associated with its development. WRI just released a working paper, Clearing the Air: Reducing Upstream Greenhouse Gas Emissions from U.S. Natural Gas Systems, which outlines a number of state and federal policies and industry best practices to cost-effectively reduce fugitive methane emissions. We find that with the right amount of reductions, natural gas does offer advantages from a greenhouse gas (GHG) emissions perspective over coal and diesel.

Clearing the Air

Reducing Upstream Greenhouse Gas Emissions from U.S. Natural Gas Systems

This working paper focuses primarily on evaluating and reducing upstream methane emissions in the natural gas sector. We outline a number of state and federal policies and industry best practices to cost-effectively reduce fugitive methane emissions.

Six years after the release of the landmark Stern Review on the Economics of Climate Change, Lord Nicholas Stern revealed yesterday the most challenging hurdle ahead for international climate action. Overcoming this obstacle is not a matter of figuring out the scientific or policy pathways needed to curb climate change—nor is it determining what technologies to adopt or what investments must be made. “What’s missing is the political will,” said Stern.

The famed economist elaborated on this problem during an address yesterday hosted by WRI and the International Monetary Fund (IMF), “Fostering Growth and Poverty Reduction in a World of Immense Risk.” Dr. Andrew Steer, WRI’s president, and Christine Lagarde, managing director of the IMF, provided opening remarks, articulating the serious economic and human risks climate change poses. Stern focused on the main hurdle to mitigating these risks—political will.

The problem, according to Stern, reflects a lack of understanding in three main areas: climate change’s real risks, the benefits of an alternative pathway, and the need for collaboration and mutual understanding.

Natural gas is booming in the United States. Production has increased by 20 percent in the last five years, fueled largely by technological advances in shale gas extraction. Other countries--including China--are now studying our experience with this abundant new resource.

But the growing role of natural gas in the U.S. energy mix hasn’t come without controversy. Natural gas development poses a variety of environmental risks. In addition to habitat disruption and impacts on local water and air quality, one of the most significant concerns is the climate impact resulting from the “fugitive methane emissions” that escape into the atmosphere from various points along the natural gas supply chain.

So what are fugitive methane emissions, and how big of a problem are they? How do emissions from natural gas compare to those from coal? And are there ways to mitigate them? The answers to these questions will help us better understand how natural gas development will affect climate change.

New data from the U.S. Energy Information Administration (EIA) reveals a troubling trend: Coal-fired power generation—and its associated greenhouse gas emissions—were on the rise as 2012 came to an end.

According to the data, which was released yesterday, natural gas prices have risen significantly since April of 2012, prompting a rise in coal-fired electric generation (see figure below). This increase marks a dramatic change from the trends we’ve seen in the United States over the past several years. U.S. energy-related carbon dioxide (CO2) emissions from the power sector had been falling, mostly due to more electricity being generated by renewables, slowed economic growth, and a greater use of low-cost natural gas, which produces roughly half the CO2 emissions of coal during combustion.

The new uptick in gas prices and coal use suggests that we cannot simply rely on current market forces to meet America’s emissions-reduction goals. In fact, EIA projects that CO2 emissions from the power sector will slowly rise over the long term. To keep emissions on a downward trajectory, the Administration must use its authority to prompt greater, immediate reductions by putting in place emissions standards for both new and existing power plants.

Agriculture is a major actor in spurring global climate change. The sector is already responsible for at least 10-12 percent of global greenhouse gas (GHG) emissions, and agricultural emissions are expected to increase by more than 50 percent by 2030.

Mitigating agricultural emissions, then, could go a long way toward mitigating global climate change. The Greenhouse Gas Protocol is currently developing an Agricultural Guidance to help companies measure and reduce their agricultural emissions. We’ve just released a second draft of the Guidance for open comment period, which will run until May 31, 2013.

Key Challenges to Measuring Agricultural Emissions

Reporting agricultural emissions in GHG inventories is a decidedly complex endeavor, which can hinder reduction efforts. For example, agricultural emissions are strongly affected by weather and are therefore often calculated with a large amount of uncertainty. This ambiguity makes it challenging to set and track progress toward reduction targets. The carbon stored in biomass and soils can often be emitted into the atmosphere, making it imperative that companies do not over- or under-count the impact of farming practices on stored carbon. And companies vary widely in how they control different parts of agricultural supply chains—such as commodity production, processing, and retail —so it’s difficult to maintain consistency in how inventories are reported.

Now is a critically important time for the world to focus on climate finance. Developing nations—those least responsible for causing global warming but most vulnerable to its impacts—need funding to adopt clean energy, protect infrastructure from sea level rise, and engage in other adaptation and mitigation strategies. But these activities are costly—the world will need to figure out how to fund them now in order to protect countries from future climate change.

The problem is that it’s hard to draw attention to a topic that’s difficult to understand. The issue of climate finance is decidedly complex. Several entities--think-tanks, banks and other financial institutions, international institutions, governments, and public sector agencies--are involved in myriad activities related to climate finance. Understanding how they operate, interact, and contribute can be confusing. Even the vocabulary that defines climate finance can be inconsistent, abstract, and nebulous at times. These complexities make climate finance an issue that’s hard for people--even experts, sometimes --to wrap their heads around.

Introducing the Climate Finance FAQs Series

That’s where WRI’s new blog series, Climate Finance FAQs, comes in. Our experts will attempt to shed light on basic climate finance issues through a series of blog posts. By explaining these topics in plain language, we can make climate finance more accessible--and hopefully, draw broader attention to the pressing issue of how to pay for climate change mitigation and adaptation.

UPDATE 4/11/13: After this blog post was published, the OECD released updated figures for 2010 and 2011. The data still shows a decrease in commitments for adaptation, mitigation, and climate finance, as this blog post states. However, adaptation expenditures were 3 percent higher in 2011 than in 2010, as opposed to unchanged. (View updated figures.) The changes in the numbers are a result of donors entering new data for previous years or updating their old data. Preliminary data for 2012 shows that aid to developing countries continued to fall. Detailed figures for 2012 will be released in June 2013.

At the 2009 U.N. climate change conference in Copenhagen, developed nations committed to provide a collective $100 billion per year by 2020 to help developing countries mitigate greenhouse gas emissions and adapt to climate change’s impacts. Recently, the Organization for Economic Co-Operation and Development (OECD) released some surprising new data on this pledge. The figures indicate that developed nations’ recent climate finance contributions have fallen rather than risen toward the level of their 2020 commitment.

A Look at the New OECD Data

The OECD is a consortium of 34 wealthy countries. Among other joint initiatives, it provides a platform to monitor and share statistics on aid flows and climate finance contributed by its members. Most OECD members report both their climate finance expenditures and commitments using the “Rio Markers” (see text box), and the OECD secretariat periodically makes these numbers public. OECD members’ climate finance contributions represent a significant portion of the collective $100 billion commitment, so the numbers reported by the OECD give a good indication of developments in the climate finance field.

Surprisingly, new OECD numbers show that while adaptation expenditures in 2011 remained the same as in 2010, expenditures for mitigation activities decreased. Plus, the total commitment for climate finance decreased from $23 billion in 2010 to $17 billion in 2011.

While a “commitment” refers to the total amount of money a country will spend on an adaptation/mitigation project over a multi-year period—which is reported at the beginning of a project—an “expenditure” refers to the amount a country spends in a particular year on adaptation/mitigation activities. In January 2013, the OECD updated its data for 2011. It is difficult, of course, to predict or analyze trends based on only two years of data (the only data that’s currently available on OECD climate finance commitments). But given developed nations’ agreement to scale up climate finance significantly by 2020, this decrease is surprising—and could be concerning.

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