Financing for climate change – meeting the challenge

Mirey Atallah Cairo, November 2010

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The Global Climate Change Financial Architecture

National Implementin

g entities

Innovative Climate Finance

(sources and governance under

negotiation

Multilateral

Cooperation

Bilateral Cooperatio

n

CSOs/NGOs

Official Development

Assistance

‘New and additional’

climate finance

Industrialised countries

ODA commitmen

t

Industrialised countries

commitments to ‘new and additional’ finance for

climate change

Total finance available for climate change mitigation and adaptation initiatives

Industrialised countries emission reduction

obligations

Foreign Direct

Investment

Government Cooperation

Budgets

Private Sector

Domestic Budget

Carbon Markets

CDM Levy funding the

Adaptation Fund

Bilateral Finance

Institutions

UNFCCC

Multilateral Finance Institution

s

Source: Adapted from SEI 2009

Private Cooperation Finance Capital Markets

National Financial

Institutions

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New Financial Investment by Region, 2002-2008,$ billionsGlobal Trends in Sustainable Energy Investment 2009

Source: New Energy Finance, UNEP SEFINew investment volume adjusts for re-invested equity. Total values include estimates for undisclosed deals

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Mitigation and Adaptation: Complementary Risk Management Strategies or Two Sides of the Same

Coins?

Cost of abatement (marginal cost) rises

Benefit of abatement (marginal benefit) falls

Optimal abatement path necessary

Economically optimal timing

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Estimated costs of adapting to climate change

Assessment by Annual cost $ bn In

UNDP (2007) 86 2015UNFCCC (2007) 28-67 2030World Bank (2006) 9-41 2008Oxfam (2007) >50 2008Stern Review (2006) 4-37 2008

• 20-40% of ODA and concessional finance are subject to CC risks;

• Cost of addressing this risk would be $1-8billion/year

Source: World Resources Institute, 2007

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Catalyzing Environmental FinanceGlobal Environment Trust Funds

• GEF Trust Fund •Montreal Protocol Multilateral Fund

•SCCF, LDCF, Adaptation Fund

Market based & Innovative Sources of Financing

•Carbon Finance (CDM/JI, VC, sectoral credit + financing)•Insurance + other risk financing

•Innovative mechanisms (e.g. IFIs, air levies etc…)

UN/UNDP E&E Trust Funds (TF)•MDG Spanish Fund, E&E TF

Multi/bi lateral funds•WB: CIF, FCPF, CPF

•Japan CEP, Norway CFI, Germany ICI, Australia IFCI

Institutional & Corporate Finance• Private equity funds

•Green bonds

New UNFCC Related Funds•REDD fund (s)

•Fast Start Funds (s) •COP green climate fund (M/A , REDD, TT, CD)

•Technology mechanisms

$6 - 8 billion

$ Amounts available in developingcountries (2010-2014)

$15 billion

$400 billion

$200-500

million

$80 billion

$75-150 billion

Foundations/Private Coorperation• UNF, Packard, Gates, Rockefeller

$4 billion

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Potential Sources of Climate Change Financing

Public finance from climate sources•Phase out of regressive fossil fuel subsidies•AAU auction proceeds•Emission Trading Schemes (ETS) auction proceeds•Carbon taxes•Marine and aviation/bunker fuel levies•Offset leviesPublic finance from non-climate sources• ‘Tobin’ tax, taxing revenues from financial transactions•Leveraging of IMF Special Drawing RightsCarbon marketsOther international financing proposals•Debt for clean energy swap• International Lottery

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GEF CLIMATE CHANGE MITIGATION - more transformational impact, programmatic approaches and sectoral issues

GOAL: support developing countries and economies in transition toward a low-

carbon development path

Promote demonstration, deployment, and transfer of advanced low-carbon technologies

Promote market transformation for energy efficiency in industry and buildings

Promote investment in renewable energy technologies

Promote energy efficient, low-carbon transport and urban systems

Conserve and enhance carbon stocks through sustainable management of land use, land-use change, and forestry (LULUCF)

OBJECTIVES

Enabling Activities and Capacity BuildingDirect access

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Under the convention

Nationally Appropriate Mitigation Action National Adaptation Plans

Sectoral approaches: REDD and REDD+Energy Transport Insurances

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THANK YOU