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This post originally appeared on the Climate Development and Knowledge Network's (CDKN) website.

Having recently left the bustling streets and warm hospitality of Addis Ababa, Ethiopia, I’m taking a moment to reflect on all that I have learned at CDKN’s workshop on “Climate Finance in East Africa.” Representatives of government departments and research institutes from Ethiopia, Kenya, Rwanda, Tanzania, and Uganda--as well as members of the donor community and international think-tanks--reflected on their experiences and the challenges faced in mobilizing and effectively deploying climate change finance.

I was inspired by the sense of optimism and confidence among participants as they discussed the ways in which their countries are tackling the climate change challenge. And I was struck by the effort and considerable progress that these East African countries have already made, despite limited resources and numerous obstacles.

Climate Action in East Africa

For example, last month Kenya launched a holistic national climate change action plan, following a comprehensive planning process that brought together all key government ministries, subnational governments, civil society, the private sector, and development partners.

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.


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