Training Module
Climate Change Finance
Module 1 – Financing Climate Change
Ms Isabelle Mamaty
Senior Expert
Climate Support Facility
An initiative of the ACP Group of States funded by the European Union

 Climate change and sustainable development linkages
 Mainstreaming climate change into national development planning and budgeting
 Financing climate change
 External sources of climate change
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Climate change and sustainable development linkages?
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Climate change
Both adaptation and mitigation support more sustainable development
Biophysical effects
Environment
Socio-economic impacts
Social dimension
Sustainable development
Economy
In turn, the pursuit of sustainable development enhances society’s response capacity
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Eradicate extreme poverty & hunger
( Goal 1) e.g. Adverse effects on food security
Improve maternal health
(Goal 5) e.g. Higher incidence of anaemia resulting from malaria
Reduce child mortality
(Goal 4) e.g. Increased incidence of waterborne diseases
Promote gender equality & empower women (Goal 3)
Potential impacts on
MDGs
Combat major diseases (Goal 6)
Ensure environmental sustainability (Goal 7) e.g. Dependence on livelihoods put at risk by CC e.g. Heat-related mortality & illnesses
Source: OECD (2009a) 5 e.g. Increased stress on ecosystems and biodiversity

 Adaptation and mitigation measures should be considered as opportunities to development cobenefits towards a green growth
 Mitigation should be compatible with adaptation policies and instruments, rely on environmentally sustainable practices while adaptation should take account of emissions.
… then this helps moving to climate-resilient development and low- emissions development
… only if climate change is mainstreamed into policymaking and planning
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Mainstreaming climate change into national development planning and budgeting
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 There is a strong case for mainstreaming climate change into all development planning
 There are entry points for mainstreaming climate change at all stages of the policy cycle
 Mainstreaming climate change at strategic planning levels supports more integrated, effective, efficient and sustainable responses o But top-down and bottom-up approaches to adaptation are complementary and mainstreaming is also justified at local level
 Evidence supports both the engagement of key actors and the development of a communication and advocacy strategy
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 Climate-related policies and measures can impact the national budget in multiple ways
 There are entry points for mainstreaming climate change at practically all stages of the budgetary process including at the stage of ex post evaluation (PERs)
 It is recommended to set up systems to keep track of adaptation- and mitigation-related expenditures
 Multiple sources of funding exist to support adaptation and mitigation – focus on eligibility and objectives
 Where conditions are met, budget support is a suitable modality for supporting CC mainstreaming efforts
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 Many developing countries have now submitted their NAPAs (& NAMAs) to the UNFCCC o NAPAs = national adaptation programmes of action
 Help LDCs build national capacities and identify priority adaptation projects with developmental benefits o NAMAS = nationally appropriate mitigation actions
 These voluntary mitigation measures are consistent with a country ’s development strategy, and are meant to put it on a more sustainable development path
 These are a good starting point for addressing the climate challenge without compromising development objectives
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Financing climate change
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 165 nations signed the 1992 United Nations
Framework Convention on Climate Change
(UN-FCCC) at Rio de Janeiro
 The Convention divides countries into two main groups Annex I (developed) & non-
Annex I (developing)
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 Annex I (Developed Countries) agreed to reduce their
GHGs by 5.2 % below 1990 levels in 1st commitment period
2008 – 2012
 Convention hinges on three principles: o Common but differentiated responsibility o Precautionary approach o Sustainable Economic Growth and Development
 Commitment by developed countries to provide funding for the “ agreed full incremental costs ” of climate change in developing countries under Article 4.3: Convention, Kyoto
Protocol, successive COP agreements and decisions
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 1991 - Creation of the Global Environment Facility (GEF) hosted at the World Bank.
 1992 - Rio Earth Summit- Decision to restructure GEF
 1994 - GEF becomes a permanent, separate institution and the financial mechanism of the following conventions:
UNFCC, Convention on Biodiversity, Montreal Protocol on
Ozone, Stockholm Convention on persistent Organic
Pollutants and UN Convention to Combat Desertification.
 1995 - COP 1 Berlin – discussion on Kyoto Protocol
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 1997-COP 3 - Kyoto – Adoption of Kyoto Protocol
(binding commitment on emissions reduction)
 2001-COP 7- Marrakesh Accords- Rules of implementation for the Kyoto Protocol, new funding and planning instruments for adaptation and establishment of technology transfer framework
 2005- Kyoto Protocol into force
 2006- Adoption of Nairobi action plan on adaptation to assist all
Parties (in particular LDCs and SIDs in improving and assessing impacts of CC and information on practical adaptations actions
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 2007- COP13- Bali Road Map: launching of the Adaptation
Fund
 2009- COP 15- Copenhagen: Copenhagen Accord – Short term-finance = 30 billion USD for 2010-2012 (Fast start) +
Mobilisation of 100 USD billion a year by 2020 to address developing countries needs.
 2010- COP 16- Cancun – Cancun Agreements:
Establishment of a Green Climate Fund to scale –up long term Finance for developing countries.
 2011-COP 17 Durban: agreement to move into a second commitment period for the Kyoto protocol in 2013
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 GEF is since 1994 the financial mechanism of the following conventions: o UN Framework Convention on Climate Change(UNFCC), o Convention on Biodiversity, o Stockholm Convention on persistent Organic Pollutants o UN Convention to Combat Desertification.
 Supports activities on management of chemical products under the Montreal Protocol on Ozone o Manages two funds under the UNFCCC o Special fund for climate change (SCCF) o Least developed countries fund (LDCF)
 Secretariat of the Adaptation Fund
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 GEF provides grants to programmes embedded in national planning in eligible countries :
 they meet eligibility criteria established by the relevant COP; and
 are eligible to borrow from the World Bank (IBRD and/or IDA);
 and/or they are eligible recipients of UNDP technical assistance through country programming related to climate change, international waters, land degradation, the ozone layer, biodiversity, and persistent organic pollutants).
 Resources for the GEF Trust Fund are replenished every four years: current replenishment period is the GEF fifth replenishment - GEF-5 for period 2010-2014
 Country allocation is provided under the new System for Transparent
Allocation of Resources (STAR) that replaces the former Resource allocation Framework (RAF) system under GEF-4 period
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 STAR covers biodiversity, climate change and land degradation
 Allocation is given to individual country taking account of their vulnerability
 Minimum Allocation floor (threshold): o $ 2 billion for climate change o $1.5 billion for biodiversity o $0.5 billion for land degradation
 Maximum allocation (cap):11% of total funds for climate change and
10% for biodiversity and land degradation
 However STAR provides flexibility for countries : o below the threshold to use the total of their allocations across all and any STAR focal areas during the GEF-5 cycle o with a total allocation of up to $7 million to allocate these $7 million in any or all of these focal areas without having to respect the proportions o To be able to use more than 50% of their indicative allocations during the first two years (elimination of the GEF-4 fifty percent rule)
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 Annex I (Developed Countries) agreed to reduce their GHGs by 5.2 % below 1990 levels in 1st commitment period
2008 – 2012
 Kyoto Protocol is a legally binding agreement for emissions reductions by industrialised countries through three marketbased mechanisms: o Emissions trading “carbon market” o Clean development mechanism (CDM) o Joint implementation (JI)
 184 Parties of the Convention have ratified its Protocol to date.
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Emission trading (Art. 17 of Kyoto Protocol):
Parties under Kyoto Protocol (Annex B Parties) have committed targets for limiting or reducing CO
2 expressed as levels of allowed emissions or « assigned » amounts over
2008-2012 period. The allowed emissions are expressed as
« assigned amount units » (AAUs) which can be traded by parties that have not used them to parties that are over their targets.
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Other traded units under Kyoto are:
 A removal unit (RMU) on the basis of land use, land-use change and forestry (LULUCF) activities such as reforestation
 An emission reduction unit (ERU) generated by a joint implementation project (article 6 of the Kyoto Protocol) : a country of
Annex B party to Kyoto Protocol is allowed to earn emission reduction (ERUs) from an emission –reduction or emission removal project in another Annex B Party.
 A certified emission reduction (CER) generated from a clean development mechanism project activity (article 12 of Kyoto
Protocol). A annex B country Parties to Kyoto Protocol is allowed to earn saleable CER from an emission-project in developing countries.
 Transfers and acquisitions of these units are compiled in the registry systems under the Kyoto Protocol
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 Copenhagen Accord 2009: priority of funding for adaptation to
LDCs, SIDs and Africa
 COP 2010 adoption of Cancun Adaptation Framework: commitment for support to developing countries for adaptation action under the National Adaptation Programs of Action
(NAPAs)
 Cost of adaptation: public versus private finance
 Majority of International climate funding instruments are ODA transfers
 Finance through dedicated adaptation funds: 21% of total climate finance approved in 2011
 Uneven distribution: poorest countries received less
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 Copenhagen COP 2009: commitment to mobilise $100 billion per year in climate finance by 2020
 Green Climate fund (GFC): Cancun COP 2010
 2/3 of total climate change since 2008, primarily in renewable energy technologies activities (Asia Pacific region)
 GEF projects seek to support rural electrification using renewable energy technologies to reach the poor (exp.
Scaling Renewable Energy Program of the CIFs
 Need for transformation in policy and regulatory frameworks to address mitigation
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 The estimates of climate change financing needs of developing countries are as follow: o mitigation : $500 billion to 1100 billion/year
(UNFCC, 2009; World Bank report 2010;
UNDESA (WESS, 2010) o Adaptation : 100$ billion to $ 450 billion/year
(UNFCC 2007; World Bank 2010; Parry et al.
(2009)
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External sources of climate change finance
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 Public funding (multilateral/bilateral funds)
 National climate funds
 Private-public partnership initiatives (e.g.
GEEREF)
 Marketbased instruments (« market carbon »): Compliance market (CDM/ EU emissions trading scheme)/voluntary market
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Public funding (multilateral/bilateral funds)
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Source of funding
Development cooperation programmes
Activities supported
Adaptation and mitigation with a focus on development
Preparation and implementation of NAPAs Least Developed Countries Fund
Special Climate Change Fund Adaptation (priority objective), technology transfers, mitigation in high-potential sectors
GEF Trust Fund’s climate change focal area Mitigation projects, adaptation demonstration projects and ‘enabling activities’
Adaptation Fund Projects and programmes that reduce the vulnerability of communities and sectors to CC
Green Climate Fund
(operations not yet started)
Clean Technology Fund
Strategic Climate Fund (SCF) - Pilot
Program for Climate Resilience
Channel for future multilateral funding for adaptation and mitigation
Demonstration, deployment and transfer of lowemission technologies
Climate risk and resilience mainstreaming in

Source of funding
SCFForest Investment Program
SCF - Program for Scaling Up Renewable
Energy in Low-Income Countries
Activities supported
REDD- related activities, sustainable forest management
Deployment of renewable energy sources
REDD+ (various streams of funding incl.
UN-REDD, which promotes the mainstreaming of REDD strategies in national development)
Prototype Carbon Fund
BioCarbon Fund
Preparation, pilot implementation and deployment of national strategies for reducing emissions from deforestation/forest degradation
Pioneering approaches to mitigation that contribute to sustainable development
Carbon sequestration projects in forests and agroecosystems
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Source of funding
Forest Carbon Partnership Facility
Carbon Partnership Facility
Global Energy Efficiency and Renewable
Energy Fund
Global Climate Change Alliance
MDG Achievement Fund, ‘environment and climate change’ thematic area
Clean Development Mechanism
Voluntary carbon markets
Activities supported
Preparation of national REDD strategies, pilot financial transfers based on verified emission reductions from REDD
Long-term, post-2012 mitigation projects
Energy efficiency and renewable energy projects
Mainstreaming of CC in poverty reduction and national development strategies
Adaptation, DRR, participation in REDD/CDM
Mainstreaming of environmental issues in national and sub-national policies, planning and investment frameworks
Mitigation projects in developing countries

Split of overall funding by theme
Source: www.climatefundsupdate.org
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Fund
Adaptation Fund
Clean Technology Fund
Congo Basin Forest Fund
Forest Carbon Partnership Facility
Forest Investment Program
GEF Trust Fund - Climate Change focal area
(GEF 4: 2006 - 2010)
Pledged
254.95
4433.00
165.00
Disbursed
25.61
384.00
15.71
436.90
599.00
11.35
14.00
1032.92
915.70
GEF Trust Fund - Climate Change focal area
(GEF 5: 2010 - 2014)
1141.00
1.00
169.50

Fund
International Climate Initiative
Pledged
680.40
Disbursed
562.10
International Forest Carbon Initiative 216.27
47.60
Least Developed Countries Fund
MDG Achievement Fund – Environment and Climate
Change thematic window
Pilot Program for Climate Resilience
Scaling-Up Renewable Energy Program for Low
Income Countries
Special Climate Change Fund
UN-REDD Programme
Total:
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379.86
89.50
982.00
352.00
206.39
150.84
32719.05
107.71
83.30
55.00
6.00
86.10
117.90
2666.90

 NAPAs focus on immediate and urgent needs of the LDCs to adapt to cliamet change. Only 20% of NAPAs needs are being met from dedicated climate funds
 46 countries have developed NAPAs focusing on agricutlture food security and water projects
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 Internal difficulties in developing countries
 Problem in designing projects
 Sequencing
 Coordination
 Lack of absorptive capacity
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 Difficulties related to the funds
 Proliferation of funds runs contrary to the Paris
Declaration principles for aid effectiveness
 Complication of reporting, monitoring and verification of financial commitments
 Heavy administrative burden placed on recipient countries
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National climate funds
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 Several countries have now established a ‘national climate fund ’ (trust fund) to: o channel and manage external funding related to CC o leverage existing funds and initiatives (incl. those financed with national resources) o support the mainstreaming of climate-related programmes and projects into national development strategies
 Expected benefits: o Alignment of external funding with national priorities o Building of national capacities and institutions o Scaling up of the response to climate change
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Private-public partnership initiatives
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Many climate change responses, especially in relation to mitigation will involve the private sector (exp. Energy efficiency), therefore government should:
 Involve private sector representatives to the climate change task-force and/or other national committees/councils;
 Involve the private sector in setting amended national standards and codes to respond to the challenge of climate change;
 Assist the private sector to take up climate change responses by providing incentive schemes, and by initiating public-private partnerships
 Identify and seek the support of private enterprise in national climate change initiatives and in particular, the Clean Development Mechanism.
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Market-based instruments
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Compliance Market
JI & CDM
Kyoto compliance:
Annex1 countries
Australia, EU,
Canada, Japan,
New Zealand, USA
EU emissions
Trading
Scheme
Voluntary Market
Voluntary
NGOs
Retail
Pre-compliance
CSR

 Challenges in host countries:
 Lack of institutional capacity
 Lack of financing and information
 Perceptions of investment risk
 Small size (e.g. small volume) of emissions reductions

 Uncertainty over a second commitment period
(after 2012) for the Kyoto Protocol raises questions about the future of the CDM
 Private Public partnership : challenge in designing instruments to address private sector risk while ensuring public accountability for delivering impact and results (incl. developmental and social co-benefits)
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Turning words into action
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 Questions and answers

General discussion and sharing of experiences concerning the use of the existing climate change funds and market-instrument mechanisms and difficulties encountered by your organisation and/or country
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• Thank you
• Contact: Dr. Pendo MARO, ACP Secretariat pendomaro@acp.int or +32 495 281 494 www.gcca.eu/intra-acp