Module 5

Introduction to Climate Change

Finance

One UN Training Service Platform

on Climate Change: UN CC:Learn
 Learning Objectives
2

1. Describe the overall 2. Identify main elements of

landscape of climate change national planning for climate
finance sources finance

By the end of
the module
participants will
be able to:
4. Discuss challenges and
3. Define key elements of the
opportunities for developing countries
international climate change
in terms of accessing and managing
finance architecture
climate finance

One UN Training Service Platform Module 5: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 Overview
3

OVERVIEW
Section 1 Section 2 Section 3

Introduction to National Climate International Climate

Climate Change Change Finance Change Finance
Finance

One UN Training Service Platform Module 5: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
4

Section Introduction to Climate

1 Change Finance

One UN Training Service Platform Module 5: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 What is Climate Finance?
5

 No internationally
agreed definition
 Often understood as
“new and additional”
public financial
assistance for
developing countries
 Other financing sources,
such as foreign direct
investments and regular Source: CDKN. Further info:
budgetary expenditures, WRI website

are also included.

One UN Training Service Platform Section 1: Introduction to Climate Change
on Climate Change: UN CC:Learn Finance
 Main Streams of Climate
Finance
6

International International
public private

National National
public private

One UN Training Service Platform Section 1: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 The Need for International
Climate Finance in
7
Developing Countries
Areas of
Developing need:
countries are mitigation,
the most adaptation,
vulnerable to technology
climate transfer,
change capacity
building
Developing Climate
countries finance is one
have limited of the key
resources to issues in the
ensure an climate
effective change
response negotiations

One UN Training Service Platform Section 1: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 Estimates of Current Annual

8
Climate Investments
Global public and private climate
investments in 2011

360 billion USD

Climate finance
provided by 10-20
developed billion USD
country (4%)
governments in Source:
World Resources Institute and
2011 Climate Policy Initiative 2013
One UN Training Service Platform Section 1: Introduction to Climate Change
on Climate Change: UN CC:Learn Finance
 Share of Public Finance in
Overall Climate Investments
9

Global public and private climate

investments in 2011

360 billion USD

135 billion USD

(38%)
Share of public
climate finance
(including
Source: Climate Policy Initiative 2013
domestic
investments)
One UN Training Service Platform Section 1: Introduction to Climate Change
on Climate Change: UN CC:Learn Finance
 Estimates of Annual
Investments Needed in
10
Clean Energy Only

1 trillion USD

Source: IEA 2012

One UN Training Service Platform Section 1: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 Growth of Private
Investment in Clean Energy
11

Billion
USD

Source: Pew Charitable Trusts (2011) in UNDP (2011), p19

One UN Training Service Platform Section 1: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 Global Landscape of
Climate Finance
12

Video: The Climate Policy Initiatives provides some key

numbers about global private and public climate finance
flows
URL: [Link]

One UN Training Service Platform Section 1: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
13

Section National Climate

2 Change Finance

One UN Training Service Platform Module 5: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 Climate Finance
“Readiness”
14

Capacities
to monitor,
Capacities Capacities report and
Capacities to access to deliver verify
to plan for different finance and financial
finance types of implement expenditure
finance activities s and
associated
results

One UN Training Service Platform

Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
 National Climate Financial
Frameworks
15

 Many countries are

already spending
considerable amounts
on climate change
through national
budgets, even though
the expenditures are not
labeled as such
 Countries are looking for
more comprehensive
approaches to
managing climate
finance taking into
account
on Climate all sources
One UN Training Service Platform
Change: UN CC:Learn
Section 2: National Climate Change Finance
 Government
Income/Revenues
16

Government can raise

revenues through
various instruments
A more in depth
Inspired by the discussion on carbon
“polluter pays” taxes can be found on
the IPCC website
principles

Objective: Incentivize
climate responsible
behaviours

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Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
 Government Spending:
Schematic Budget Process
17

Definition of Allocation of
Government Budget to
Priorities Ministries

Evaluation and Budget

Reporting Execution

One UN Training Service Platform

Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
 Climate Public Expenditure
and Institutional Review
18
(CPEIR)
Reviews climate
change policy
priorities and
strategies

Quantifies
Improves
climate
understandin
change
g of role and
related
responsibiliti
expenditures
es of
in the
institutions
national
involved
budget

One UN Training Service Platform

Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
 Better Use of Climate
Better Use of Climate Change Finance
Finance
19

Video by the UNDP Asia-Pacific Regional Centre

One UN Training Service Platform

Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
 Case Study: Thai
Climate Financial
20
Framework

Source: GIZ

One UN Training Service Platform

Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
 Leveraging Private
Investments through Public
21
Policy and Finance

Source: UNFCCC 2008, p8

One UN Training Service Platform

Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
 Instruments to
Incentivize/Redirect Private
22
Investment - Examples
Capacity and
Regulatory Financial and Market
Information Based
Instruments Based Instruments
Instruments
• Building climate • Standards (e.g. • Fiscal incentives
awareness of building (e.g. carbon taxes
decision-makers in codes/energy or phase out of
the private and performance fossil fuel subsidies)
public sectors requirements) • Early market
• Enhancing • Mandatory labelling development
technical skills (e.g. energy labels mechanisms (e.g.
required for green for refrigerators) project
and climate • Zoning laws (e.g. development
resilient land zoning to grants)
technologies protect climate • Environmental
• Changing sensitive market trading
consumption ecosystem mechanisms (e.g.
choices through services) carbon cap and
awareness-raising • … trade markets).
campaigns • De-risking
• … measures (e.g.
One UN Training Service Platform partial risk Climate Change Finance
Section 2: National
on Climate Change: UN CC:Learn
guarantees)
 “We should invest like
mad…”
23

Video: Lord Nicolas Stern talking about

opportunities and obstacles for incentivising
private investment.
URL: [Link]

One UN Training Service Platform Section 1: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 In Focus: UNEP Climate
Change Finance Page
24

One UN Training Service Platform

Section 2: National Climate Change Finance
on Climate Change: UN CC:Learn
25

Section International Climate

3 Change Finance

One UN Training Service Platform Module 5: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
 Internat. Financial Flows for
Climate Action in Developing
26
Countries

Source: Adapted from SEI 2009, p4

One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 The Financial Mechanism of
the UN Convention on
27
Climate Change

Source: Adapted from SEI 2009, p4

One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 Financial Mechanisms under
the COP of the UNFCCC
28

Source: Adapted from UNDP 2011,

p65
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 GEF Administered Trust
Funds
29

• Global Environmental Facility

GEF Trust Fund

SCCF • Special Climate Change Fund

• Least Developed Countries

LDCF Fund

AF • Adaptation Trust Fund

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on Climate Change: UN CC:Learn Finance
 Accessing Climate Funding
30

Directly Indirectly

Via accredited Via

national implementing
agencies agencies

Example:
Source: UNFCCC Example: GEF
[Link] Adaptation Fund

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on Climate Change: UN CC:Learn Finance
 The Green Climate Fund
31

Expected to
New generate
Board hosted
multilateral climate
by the
fund agreed finance of
Republic of
upon at COP USD 100
Korea
16 (2010) billion per
year by 2020

One UN Training Service Platform Section 3: International Climate Change

on Climate Change: UN CC:Learn Finance
 In Focus: UNFCCC
Finance Portal for Climate
32
Change

One UN Training Service Platform Section 3: International Climate Change

on Climate Change: UN CC:Learn Finance
 Multilateral and Bilateral
Funding for Climate Action
33

Source: Adapted from SEI

2009, p4
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 Examples of Multilateral &
Bilateral Sources
34

Examples of Examples of bilateral

multilateral sources sources
EU: Global Climate
Clean Technology Change Alliance (
Fund (CTF) Germany:
GCCA)
International
Climate Initiative (ICI
Strategic Climate )
Fund (SCF) UK: International
Climate Fund (ICF)

One UN Training Service Platform Section 3: International Climate Change

on Climate Change: UN CC:Learn Finance
 Example: Pilot Program for
Climate Resilience (PPCR)
35

Source: Pilot Programme For Climate Resilience

One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 In Focus: Climate
Funds Update
36

One UN Training Service Platform Section 3: International Climate Change

on Climate Change: UN CC:Learn Finance
 Traditional Development Aid
Versus “New and Additional”
37
Finance

Source: Adapted from SEI

2009, p4
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 Climate Financing and
Development – Friends or
38
Foes?
Climate finance supposed to be
additional to the official development
assistance (ODA) target of 0.7% of gross
national income (GNI)
Clima
ODA
te
Finan
ce
?
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 Carbon Markets
39

Further info:
Renewable
Energy World
Website

Source: Adapted from SEI 2009,

p4
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 The Kyoto Protocol Flexibility
Mechanisms
40

International Emissions
Trading

Clean Development
Mechanism (CDM)

Joint Implementation (JI)

Source:
[Link]
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 Example of a CDM Project
41

Case of a power utility in a developing

country:
 Needs to decide whether to invest
in coal-fired power plant or a wind
power plant.
 The costs of wind power is higher
than the cost of coal-fired power.
 However, wind power produces less
carbon than coal-fired power.
 Power utility chooses to invest in
wind power because it is
Source: UNFCCC
compensated for emission reduction
with carbon credits.
Can sell credits on the carbon
 UN Training Service Platform
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on Climate Change: UN CC:Learn
Section 3: International Climate Change
Finance
 Challenges for Carbon
Finance
42

 Low price for carbon credits and

allowances
 Uneven regional distribution of CDM
projects
(only 2.9% of projects located in African
region)
 CDM and JI focus on projects rather than
sectors
Further info: CDM Pipeline website

 Concerns with regards to non-

additionality and double-counting of
One UN Training Service Platform
on Climate Change: UN CC:Learn
Section 3: International Climate Change
Finance
 International Private Finance
for Climate Action
43

Source: Adapted from SEI

2009, p4
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
 Estimate of North-South
Private Climate
44
Investments

72 Billion USD

Source: OECD 2012

p9
One UN Training Service Platform Section 3: International Climate Change
on Climate Change: UN CC:Learn Finance
45

Annex Additional Resources

One UN Training Service Platform Module 5: Introduction to Climate Change

on Climate Change: UN CC:Learn Finance
Module Summary
 There is a need for additional funding for climate
related activities.
 Actually, private investments account for most of
climate finance.
 National institutions already spend a lot of money on
climate related activities, even though it is not usually
recorded as such. Procceding to a Climate Public
Expenditure and Institutional Review (CPEIR) can help
get a better view of climate-related expenses.
 A national government can provide incentives to
channel private investments into climate related
activities.
 Climate finance readiness is important to attract
One UNinternational
Training Service Platform
on Climate Change: UN CC:Learn
climate related funding. Additional Resources
Useful Links

UNEP Finance Ini UNDP MDG Carb UNFCCC Focus:

tiative on Finance

Climate Investm Climate Policy In Climate Funds U

ent Funds (CIF) itiative: Landsca pdate – Climate
pe of Climate Fi Finance Fundam
nance entals

UNEP Risoe CDM Multilateral and

/JI Pipeline Analy Bilateral Fundin
sis and Databas g Sources
e
One UN Training Service Platform
Additional Resources
on Climate Change: UN CC:Learn
 Recommended Readings
48

 UNDP (2011). Catalysing Climate Finance

 UNDP (2012). Readiness for Climate Finance
 CDDE and UNDP (2012).
Making Sense of Climate Finance
 UNDP UNFCCC (s.d.).
Fact Sheet: Financing Climate Change Action Invest
ment and Financial Flows for a Strengthened Respo
nse to Climate Change
 UNFCCC (2007).
Report on the Analysis of Existing and Potential Inv
estment and Financial Flows Relevant to the Develo
pment of an Effective and Appropriate International
Response to Climate Change
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Additional Resources
on Climate Change: UN CC:Learn
 Main References
49

 Stockholm Environment Institute (SEI) (2009).

Bilateral Finance Institutions and Climate Change: A
Mapping of Climate Portfolios
 UNDP (2011). Catalysing Climate Finance
 Climate Policy Initiative website
 World Resources Institute website

One UN Training Service Platform

Additional Resources
on Climate Change: UN CC:Learn