You are here

climate finance

Are Developed Nations Falling Short on Their Climate Finance Commitments?

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.

Methodology and Database—Public Financing Instruments to Leverage Private Capital

Focus on Multilateral Agencies

These documents explain the methodology WRI employed for its research and provide a listing of the projects considered in its working paper, Public Financing Instruments to Leverage Private Capital for Climate-Relevant Investment: Focus on Multilateral Agencies. The methodology may serve as a...

4 Ways the Green Climate Fund Can Support "Readiness" for Climate Finance

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.

Mobilizing Climate Investment

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...

How Can We Pay for Green Growth? New Report Provides Answers

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.

Where Is Climate Adaptation Funding Going? A New Project Aims to Find Out

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.

Farewell, 2012. You Taught Us Much.

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.

Unlocking Climate Finance: How Can Multilateral Agencies Better Leverage the Private Sector?

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.

Pages

Stay Connected

Sign up for our newsletters

Get our latest commentary, upcoming events, publications, maps and data. Sign up for the weekly WRI Digest.