This document maps the types of financial instruments used by various development financial institutions, export credit agencies, and climate funds to support their operations. It can serve as a useful reference for public sector decision-makers evaluating the broad toolkit of options available...
Research shows that developing countries will need about $531 billion of additional investments in clean energy technologies each year in order to limit global temperature rise to 2° C above pre-industrial levels, thus preventing climate change’s worst impacts. While developed countries have pledged to provide $100 billion of climate finance per year, this amount is well below what’s needed to help developing nations mitigate and adapt to climate change.
So how can countries bridge this funding gap? The answer lies in part on how well developing countries implement “readiness” activities, as well how effectively developed nations and international institutions like the Green Climate Fund (GCF) can mobilize finance to support them.
The Need for Readiness
To attract investments on the scale required, developing country governments must provide an attractive investment climate—one that encourages public and private sector investors to put their money into climate-friendly projects like solar and wind energy. On their end, developed countries need to offer financial and technical support for “readiness” activities that create the right conditions for said investments. Readiness includes any activity that makes a country better positioned to attract investments in climate-friendly projects or technologies. A few examples include: developing a policy to promote energy efficiency in industry; passing a law that gives a new or existing institution the mandate to promote renewable energy; conducting an assessment of a country’s wind energy resources; or strengthening a bank’s capacity to lend to small businesses in low-carbon sectors. International institutions such as the GCF can play a big role in supporting readiness activities, thereby helping developing nations attract the investments that will help them transition onto a low-carbon, climate-resilient development path.
The Role of International Climate Finance in Creating Readiness for Scaled-Up, Low-Carbon Energy
Limiting global temperature rise to 2°C above pre-industrial levels will require billions of dollars in investments each year to mitigate greenhouse gas emissions and shift to low-emissions development pathways. This report draws on the experiences of six developing countries to examine how...
This is the first in a series of three issue briefs, based on a three-day workshop held by WRI and the DOEN Foundation in March 2012. Through the workshop and subsequent interviews, WRI brought together the experiences of 25 socially oriented energy enterprises, organizations, and financiers who...
In a little more than one generation—by the time your grade-schoolers will be seeing their own kids off to school—our planet will be home to 9 billion people. This will create an unprecedented demand for water, food, and energy--and stress the supporting infrastructure required for life in the 21st century. How are we to meet this demand while respecting planetary boundaries? And importantly, how will we pay for it?
A recent publication by the Green Growth Action Alliance (G2A2), aims to provide some answers. WRI and others provided guidance, case studies, research, and data to the publication, The Green Investment Report: The ways and means to unlock private finance for green growth. The findings were discussed widely at the recent World Economic Forum meeting in Davos.
Under current OECD growth projections, the world will need to invest $5 trillion annually until 2020 in the water, agriculture, telecommunications, power, transport, buildings, industrial, and forestry sectors. However, solely delivering this investment to maintain “business-as-usual” economic growth will not lead the world onto a sustainable growth path. We need to find ways to “green” our growth to cope with resource scarcity and alleviate risks from climate change and environmental degradation. Greening this investment will require a mix of appropriate policies and capital. The lion’s share will need to come from the private sector, given the scale required.
The “Green Investment Report” estimates that an additional $700 billion will be needed annually to green the business-as-usual investment in the global economy. This is a large sum, but relatively insignificant compared to the cost of inaction as negative environmental impacts increasingly take their economic toll.
Experts say that developing nations could require more than $100 billion for adaptation each year. Developed countries say that they have already delivered more than $33 billion so far towards this climate adaptation funding.
However, some question whether these funds are going to the right places and meeting real needs. Is adaptation finance being directed towards the nations that need it the most? Is it being used to support projects that will allow people to adapt to climate change’s impacts?
We currently don’t have adequate answers to these questions—but we hope to soon. At the recent UN climate change negotiations in Doha, Qatar, Oxfam, the Overseas Development Institute (ODI), and WRI launched the Adaptation Finance Accountability Initiative to help civil society organizations find out where adaptation finance is really going.
The Question Is: Where Should Adaptation Finance Go?
The easy answer is that adaptation finance should go to activities that strengthen the resilience and reduce the vulnerability of countries most susceptible to climate change’s impacts. People in developing countries will likely be hit hardest by global warming.
This year has been one of those worst-of-years and best-of-years. In its failures, there are signs of hope.
An unprecedented stream of extreme weather events worldwide tragically reminded us that we’re losing the fight against climate change. For the first time since 1988, climate change was totally ignored in the U.S. presidential campaign, even though election month, November, was the 333rd consecutive month with a global temperature higher than the long-term average. A WRI report identified 1,200 coal-fired power plants currently proposed for construction worldwide. The Arctic sea ice reached its lowest-ever area in September, down nearly 20 percent from its previous low in 2007. And disappointing international negotiations in June and December warned us not to rely too much on multilateral government-to-government solutions to global problems.
But 2012 was also a year of potential turning points. A number of new “plurilateral” approaches to problem-solving came to the fore, offering genuine hope. A wave of emerging countries, led by China, embraced market-based green growth strategies. Costs for renewable energy continued their downward path, and are now competitive in a growing number of contexts. Bloomberg New Energy Finance reports that global investment in renewable energy was probably around $250 billion in 2012, down by perhaps 10 percent over the previous year, but not bad given the eliminations of many subsidy programs, economic austerity in the West, and the sharp shale-induced declines in natural gas prices. And the tragedy of Hurricane Sandy, coupled with the ongoing drought covering more than half of the United States (which will turn out to be among the costliest natural disasters in U.S. history) may have opened the door to a change of psychology, in turn potentially enabling the Obama Administration to exhibit the international leadership the world so urgently needs, as many of us have advocated.
The Doha negotiations that just concluded earlier this month have again drawn attention to the urgent need for climate adaptation and emissions reductions. Government representatives, civil society stakeholders, development aid organizations, and corporates agree that the world must make big strides—soon—if we are to have any hope of keeping global average temperatures to 2 degrees Celsius above pre-industrial levels.
One problem, though, is how to generate enough finance to fund these activities. A new WRI working paper aims to address this challenge by examining the role multilateral agencies can play in mobilizing private sector finance for climate change adaptation and mitigation.
Leveraging the Private Sector to Bridge the Climate Finance Gap
Developing countries—those most vulnerable to climate change’s impacts—will need $300 billion annually by 2020 and $500 billion annually by 2050 for mitigation activities alone. The newly established Green Climate Fund (GCF), meant to channel $100 billion annually into climate-relevant investments starting in 2020, is a significant first step, but does not fill the gap of what’s needed.
The public sector cannot tackle this challenge alone, and indeed, the GCF already envisions funding from a mix of public and private sources. The key, then, is to mobilize the private sector to create new investment opportunities and new markets.
This piece was written with analysis from Athena Ballesteros, Edward Cameron, Yamide Dagnet, Florence Daviet, Aarjan Dixit, Heather McGray, and Clifford Polycarp.
Expectations were low for this year’s UNFCCC climate negotiations in Doha, Qatar (COP 18), which concluded last week. It was scheduled to be a “finalize-the-rules” type of COP, rather than one focused on large, political deals that went into the early hours of the morning. Key issues on the table included finalizing the rules for the Kyoto Protocol’s second commitment period; concluding a series of decisions on transparency, finance, adaptation, and forests (REDD+); and agreeing on a work plan to negotiate a new legally binding international climate agreement by 2015. The emissions gap was also front-and-center, as the new UNEP Gap Report showed that countries are further away than even a year ago from the goal of keeping global average temperature rise below two degrees C.
Here’s a look at what happened across nine key issues that were on the table: