How can climate finance be raised from a variety of sources at scale? How can this finance be delivered to where it is most needed with sufficient speed and in way that is nationally owned? A country-driven, multi-stakeholder climate finance framework is proposed to meet these objectives, built on four country-level mechanisms. It involves: 1) formulation of low-emissions, climate-resilient development strategies (to bring about bottom-up national ownership, incorporate human development goals, and take a long-term outlook); 2) financial and technical support platforms (to catalyse the required scale of finance and associated capacity; 3) National Adaptation Plan-type instruments (for balanced and fair access to international public finance); and 4) coordinated implementation and Monitoring, Reporting and Verification systems (to facilitate long-term, efficient results).
A number of proposals for mobilising climate finance have recently been suggested, as well as for possible governance structures for delivering these resources. The Copenhagen Accord suggests mobilising US$100 billion per year by 2020 to support climate change mitigation and adaptation activities in developing countries.
Climate change finance is unlikely to come from a single source. More than 50 international public funds, 60 carbon markets and 6,000 private equity funds already provide green finance. Each of these channels has different requirements. How they are combined will affect the capacity of countries to deliver money where it is most needed in an effective, efficient and accountable way.
The key challenges in climate finance revolve around generating the requisite sums of money and ensuring their effective use.
- National ownership is essential for effective action to combat climate change. Developing countries have questioned the effectiveness of donor vertical funds that channel resources in a top-down manner and which do not meet their unique national requirements.
- Ensuring balanced and fair access to climate finance is another challenge. Recent innovations such as export credits, green bonds, and weather derivatives have suffered from under-representation among developing countries and from market imperfections.
- Climate finance on a scale commensurate with the Copenhagen Accord will entail an unprecedented level of implementation and reporting complexity – over a number of decades, involving a variety of actors, actions and sources of finance.
To meet these challenges, a country-driven, multi-stakeholder climate finance framework is proposed. It will help developing countries to scale up efforts to address climate change in a way that advances national development priorities. Establishing this framework should be seen as an iterative, evolving process.
- Low Emissions, Climate Resilient Development Strategies (LECRDS) can help to chart a development trajectory resilient to a range of possible future climate scenarios. They can provide a roadmap for national climate change activities.
- In-country Financial and Technical Support Platforms can enable governments to better identify the optimum mix of regulatory and public financing instruments required to attract large financial flows to climate resilient development.
- A mechanism is needed to develop a systematic approach to the formulation of National Adaptation Plan (NAP) instruments, to foster access to international climate finance.
- A consolidated set of success indicators, inventory management systems, and financial management mechanisms is needed to ensure adequate Monitoring, Reporting and Verification systems.
