10 Things to Know about Climate Finance in 2015

10

THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015 Smita Nakhooda Charlene Watson Sam Barnard Liane Schalatek December 2015

odi.org

1

CLIMATE FINANCE COMMITMENTS ARE INCREASING

In 2015 many countries, particularly in Europe, pledged to increase climate finance.1 Multilateral development banks have also committed to increase funding for adaptation and mitigation. In addition, private investors, including Bank of America and Goldman Sachs, have committed to greater climate investment2 and the insurance industry has announced that it intends to double climate-smart investment this year.3 Despite these important steps, governments need to make more flexible, risk-tolerant finance available to speed up climate-compatible development.

SELECTED CONTRIBUTOR COUNTRIES

PLEDGED ANNUAL CLIMATE FINANCE SPEND BY 2020 $ billions

UK Germany France European Union World Bank African Development Bank Asian Development Bank Inter American Development Bank

SELECTED MULTILATERAL DEVELOPMENT BANKS 2

0

2

4

6

8

10

12

10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

14

16

1 2 3 4 5 6 7 8 9 10

2

THE FUNDING FOR PROGRAMMES IMPLEMENTED IS ALSO INCREASING

Approved funding continued to increase in 2015, with over $700 million coming from multilateral climate funds for new projects.

But reporting on the disbursement of funds remains limited – 36% of approved finance has been disbursed for project activities this year, compared to just 13% in 2014.

TOTAL APPROVALS

TOTAL DISBURSEMENTS

$ BILLION SINCE 2003

$ BILLION SINCE 2003

9.6

10.4

40% 46% No information on whether funding has been paid out or not 24% 40% Not yet paid out 36%

13%

2012 4

2015

Paid out

2014

2015

10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

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3

DEVELOPING COUNTRIES ARE EMERGING AS MARKET LEADERS IN RENEWABLE ENERGY

250

200

50

Average cost of renewable ene rgy ($ per m egaw att ho ur)

D

l eve

ope

ou dc

Developing c

2009 6

Developing countries are also driving costs down: Indian states have procured solar energy at less than half the average global cost. More than 60% of the $324 million of climate finance approved in 2015 has supported renewable energy transitions in developing countries.

APPROVED FUNDING FROM MULTILATERAL CLIMATE FUNDS IN 2015

150

100

Global costs for renewable energy are declining: solar is down 60% and wind 15% since 2009. Developing countries committed $131 billion to clean energy in 2014 and now outpace developed country investment.4

ya ntr

nnu

a

vestm l in

ountry annua

ent (

Renewable energy $207 m

$bn)

Energy efficiency $78 m

l inv

Transport $24 m

($bn) es tment

2014 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

Other $14 m 1 2 3 4 5 6 7 8 9 10

4

PROGRESS IN REDUCING DEFORESTATION HAS BEEN LIMITED

Protecting forests can yield social, economic and climate benefits. But after 8 years and approving more than $1.5 billion many funds have little impact to show. The Congo Basin Forest Fund and the Australian International Forest Carbon Initiative have been shut down.

The international community continues to search for and pilot successful models to combat this complex problem. Brazil’s Amazon Fund is a good example, rewarding national progress in reducing deforestation.

Number of funds reducing emissions from deforestation and forest degradation (REDD+)

FINANCE APPROVALS

$ billions

1.56 7

7

SELECT REPORTED IMPACTS

7

7

7 6

6

Forest Investment Programme

UN REDD+ Programme

115,000

9 REDD+ strategies completed

benefitting from climate compatible agricultural practices

5 Forest Carbon Partnership Facility

Amazon Fund

Preparatory activities underway in 35 countries

in deforestation rates since fund establishment

35%

1 8

2006

2015 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

1 2 3 4 5 6 7 8 9 10

40% OF ADAPTATION FINANCE IN 2015 SUPPORTED INFRASTRUCTURE RESILIENCE

5

Agriculture

$ millions

4

Climate data and Disaster Risk Reduction

4

Resilient urban development

5

Renewable energy*

SPENDING ON INFRASTRUCTURE

BY SUB-SECTOR

121 Infrastructure

16

$ millions

Transport*

40

No defined sub-sector

56

33 40 Multisector

10

To date climate funds have primarily supported existing infrastructure plans, meeting the up-front costs of upgrading or strengthening infrastructure. Adaptation finance can also make a difference in earlystage infrastructure planning and design, and to cover operational and maintenance costs associated with climate change impacts.

92

ADAPTATION FUNDING APPROVED Other

Climate finance should ensure that climate risk is reduced, rather than locked in. In 2015 $121 million of adaptation finance was approved for climate-resilient infrastructure projects.

Water and sanitation

* Renewable energy and transport projects included in the adaptation portfolio 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

1 2 3 4 5 6 7 8 9 10

FINANCE FOR SMALL ISLAND DEVELOPING STATES HAS INCREASED

6

While Small Island Developing States (SIDS) have historically struggled to access climate finance, approved funding for SIDS projects has increased in recent years. This has supported adoption and implementation of national climate change strategies, disaster risk reduction and energy diversification.

The Green Climate Fund was a particularly significant actor in 2015, contributing 50% of approved finance.

160

APPROVED CLIMATE FINANCE FOR SIDS

GREEN CLIMATE FUND 2015 PROJECT APPROVALS

$ millions

114

109

99

Fiji $ 31 million Maldives $ 23.6 million

50 35 17 1 2003 12

0.2

1

15

Green Climate Fund

71

50%

approvals

$ 55 million

2015 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

1 2 3 4 5 6 7 8 9 10

7

DEVELOPING COUNTRIES ARE INVESTING MORE IN CLIMATE ACTION

Developing countries are investing increasing amounts of domestic public budgets in responding to climate change: some countries such as Ethiopia spent more than 15% on climate related actions between 2008 and 2011.5, 6, 7 Additional international support, alongside these national efforts and enhanced policy and regulation, can increase the scale and scope of such efforts, strengthen resilience, and ensure that investments are directed away from high-carbon technologies.

NEPAL CAMBODIA

ETHIOPIA

$120m climate spend 3% national budget

$34m climate spend 1% national budget

$440m climate spend 14.5% national budget

SAMOA

$17m climate spend 7% national budget

CHILE*

$20m climate spend 0.03% national budget

ARGENTINA*

$126m climate spend 0.1% national budget

TANZANIA

$383m climate spend 5.5% national budget

UGANDA

$25m climate spend 0.9% national budget

*not total climate spend, calculated for specific sectors only

14

10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

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8

THE GREEN CLIMATE FUND IS WORKING FASTER THAN OTHER FUNDS

The Green Climate Fund (GCF) has approved $168 million for its first eight projects, with implementation supported by 20 national, regional and international organisations. The majority of projects support adaptation in the poorest countries and Small Island Developing States. The GCF must go on to demonstrate that the projects it finances are having a real impact in recipient countries.

By contrast, the Clean Technology Fund and Adaptation Fund had both approved only four projects in their first year after capitalisation.

GLOBAL ENVIRONMENT FACILITY 1991

CLIMATE INVESTMENT FUNDS 2009

ADAPTATION FUND 2010

PROGRESS OF KEY CLIMATE FUNDS IN THE FIRST YEAR OF IMPLEMENTATION BREAKDOWN

GREEN CLIMATE FUND 2015

MIT I

6

16

4

4

8

ION AT

ADAP TAT IO

N

G

PROJECTS APPROVED

$168 million

10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

1 2 3 4 5 6 7 8 9 10

CLIMATE FUNDS NEED TO REPORT THEIR IMPACT MORE TRANSPARENTLY

9 FUNDS

EXPECTED RESULTS Adaptation Fund

Adaptation for Smallholder Agriculture Programme Least Developed Countries Fund Special Climate Change Fund Pilot Programme for Climate Resilience Clean Technology Fund Scaling up Renewable Energy Programme Global Environment Facility 6 18

Funds are still not using the same metrics or methods to assess their impact, which makes evaluating collective efforts difficult. Climate funds must improve the timeliness and completeness of progress reporting to strengthen their effectiveness.

REPORTED RESULTS

90+ early warning systems in place

Not reported

1.5 million hectares under improved land management

Not reported

13.3 million more resilient to climate change

1.1 million more resilient to climate change

4.1 million people with vulnerability reduced

1.5 million people less vulnerable

30 million people supported to cope with climate change impacts

0.9 million supported to cope with climate change impacts

860 million tCO2e reduction in GHGs by 2042

20 million tCO2e reduction in GHGs

15 million people with new or improved clean energy access

Not reported

460 million tCO2e reduction in GHGs

Not reported 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

Adaptation Mitigation Mitigation and adaptation 1 2 3 4 5 6 7 8 9 10

10

IMPLEMENTING CLIMATE ACTION REQUIRES RAPID MOBILISATION OF INVESTMENT

D EV

) i es MI X ( 6 3 ED cou nt r

IA

I ND

NO I NDC* (45 countr ies)

P ED E LO

C OU N TR

IES

CLIMATE A (29 coun CTION t r i es) UN CO ND ITI ON

UNCONDITIONAL 35.7 %

ORT L SUPP IONA NAT INA ER CH INT ON AL

29.6 %

20

Very few developing country offers of climate action are wholly contingent on international support, including those of the biggest emitters, such as India and China.8 Implementing these actions will require shifting trillions of dollars towards more viable low-emission and climate-resilient development projects.

53.2 %

EMISSIONS COVERED BY INDCS AND RELIANCE ON INTERNATIONAL SUPPORT (2012 emissions, MtCO2eq.)

NO INDC

CLIMATE ACTION CONDITIONAL ON MIXED INTERNATIONAL SUPPORT (21 countries)

If all countries are to meet or exceed the targets set in the offers of climate action (Intended Nationally Determined Contributions- INDCs) that they have submitted to the United Nations Framework Convention on Climate Change (UNFCCC), governments must immediately mobilise finance from public and private sources.

10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

*As of November 1st 2015 1 2 3 4 5 6 7 8 9 10

REFERENCES 1. UNFCCC (2015). Overview of announced climate finance pledges ahead of Paris. UNFCCC Newsroom. Online, available at: http://newsroom.unfccc.int/financial-flows/climate-finance-building-ahead-of-paris-overview-ofrecent-announcements/ 2. Climate Finance Advisors (2015). On the road to greening finance. Climate Finance Advisors. Online, available at: http://climatefinanceadvisors.com/2015/11/on-the-road-to-greening-finance/ 3. G7 (2015). G7 Leaders Declaration. G7 Summit Germany, 7-8 June 2015. Online, available at: https://www. g7germany.de/Content/EN/_Anlagen/G7/2015-06-08-g7-abschluss-eng_en.pdf?__blob=publicationFile&v=3 4. UNEP and Bloomberg New Energy Finance (2015). Global Trends in Renewable Energy Investment 2015.

Frankfurt School-UNEP Collaborating Centre for Climate and Sustainable Energy Finance and Bloomberg New Energy Finance. Frankfurt, Germany.

5. Bird, N. (2014). Fair share: climate finance to vulnerable countries. ODI, London, UK

NORTH AMERICA

6. UNDP (2015). Climate Public Expenditure and Institutional Review Database. Online, available at: http://www. climatefinance-developmenteffectiveness.org/CPEIR-Database 7. GFLAC (2014). Groupo de Financiamento Climatico LAC. Online, available at: http://gflac.org/informes/ 8. Open Climate Network (2015). CAIT Climate Data Explorer. Open Climate Network and the World Resources Institute. Online, available at: http://cait.wri.org/indc/

ACKNOWLEDGEMENTS The authors would like to thank Marigold Norman, Graham Banton, Nella Canales-Trujillo (ODI) and Alexis Durand (HBS) for their inputs as well as Jessica Brown (CPI) for helpful review comments.

CFU is a joint initiative of the Overseas Development Institute (ODI) and Heinrich Bรถll Stiftung (HBS). Since 2009, we have monitored dedicated public climate funds from the point when donors pledge support, through to the actual disbursement of finance for projects in developing countries.

climatefundsupdate.org

10 things to know about climate finance in 2015

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