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Climate Finance Gaps and Challenges
Yuqing Ariel YU
Senior Policy Researcher
Institute for Global Environmental Strategies
Regional Collaboration Centre for the Asia-Pacific Region
2
Regional Collaboration Centre for the AP region
• RCC Bangkok is a partnership between the United Nations Framework on
Climate Change (UNFCCC) Secretariat and the Institute for Global Environmental
Strategies (IGES).
RCC Bangkok Institute for Global
Environmental Strategies
604 SG Tower 6F, 161/1 Soi
Mahadlek Luang 3,
Rajdamri Road, Patumwan,
Bangkok 10330, Thailand
+66 2 651 8794
3
Synergy and difference between climate finance and SD finance
• Conventional development interventions (i.e., sustainable livelihoods, social
protection, disaster risk reduction) can strengthen resilience and adaptive capacity.
• The Busan Building Block on Climate Finance and Development Effectiveness (2011):
To ensure effectiveness of CF, its use needs to be led and owned by recipient countries and
recipient countries should be use the finance in line with their strategic priorities.
Climate change should be fully integrated into national and sectoral development plans
and be channeled into public financial management systems.
• The new and additional principle:
Funding should be additional to existing ODA commitments to avoid the diversion of
funding for development needs to climate change actions.
Existing aid classification indicators are insufficient to separate climate finance classified as
ODA from national contributions labelled as non-ODA.
4
Gap 1: Funding scale gap
• Cancun Agreements: mobilizing jointly USD 100 bn per year by 2020
• Flows to developing countries (SCF, 2014):
Through public institutions: USD35-50 bn
All financial flows (including both public and private flows): USD 40-
175 bn (close to the lower bound)
• INDC funding request by 2030 (UNEP-DTU, 2015):
Mitigation: USD 1.447 trillion
Adaptation: USD 1.4 trillion
5
Gap 2: Definitional gap
• UNFCCC does not have a definition of climate finance.
• Parties use different operational definitions for reporting.
Developed Parties: Common tabular format
Clarity on point-of-measurement (committed vs. disbursed)
Definition of multilateral climate fund (cc-specific vs. cc-related )
Clarity on core contribution
Definition and method of accounting private finance
Developing Parties: No common format
Receipt, types, and use of climate finance
Domestic strategies for scaling up climate finance and
enhancing the enabling environment
6
Gap 3: Data gap
• The lack of reliable project-level data for private investments beyond
renewable energy results in a heavy bias toward renewable energy in
the global landscape of climate finance.
CPI’s Global
Landscape
Governments
DFIs
Climate funds
Public
Methodology
Source &
intermediaries
Private Renewable energy Project
Result (USD bn)
Gov’t: 12-19
DFIs: 131
CFs: 2
RE: 243
=Total: 391 + EE: 90-365
(IEA, 2015;
HSBC, 2014)
Forestry: 4.2
Flow
?
7
Gap 4: High debt costs for climate/SD/green projects
1. High lending interest rates 2. Excessive reliance on internal funds
0 10 20
EAS
PAS
SAS
Lending interest rate [%]
OECD
a)
OECD
50 70 80 900 30 60 100
EAS
10
PAS
Share of internal funds[%]
SAS
b)
4020
Max75%Median25%Min
50 70 80 90 100
EAS
60
PAS
Requiring collateral [%]
SAS
OECD
c)
3. Heavy burden imposed by collateral requirements
150 180 240 270 30060 120 210 330 360
EAS
90
PAS
Value of collateral [%]
SAS
OECD
d)
Source: Enterprise Surveys (2014); World Bank Data (2014). Statistics refer to the year 2013 or the most recent year available.
8
Gap 5: Uneven thematic distribution of finance
• Adaptation finance ranges from 11% to 24% (SCF, 2014).
There is evidence that adaptation finance has been increasing.
The Climate Public Expenditure and Institutional Review (CPEIR)
notes that spending patterns have changed over the years. In fact,
while the greatest share of expenditure was initially tilting toward
adaptation in the countries assessed, the progressive trend is
toward mitigation (UNDP, 2015).
In July 2015, a group of MDBs and the International Development
Finance Club adopted the ‘Common Principles for Climate Change
Adaptation Finance Tracking’.
9
Gap 6: Uneven geographic distribution of finance
• The largest share (38% to 53%) of funding from multilateral CFs, FSF and
climate-related development assistance has been directed to the
countries of the AP region (SCF, 2014).
• The LDCs collectively represented 10% of the total finance received.
0.0
500.0
1000.0
1500.0
2000.0
2500.0
3000.0
3500.0
4000.0
4500.0
5000.0
Ind
ia
Ind
on
esi
a
Vie
tnam
Ph
ilip
pin
es
Ban
glad
esh
Thai
lan
d
Ch
ina
Pak
ista
n
Afg
han
ista
n
Nep
al
Cam
bo
dia
Sri L
anka
Lao
PD
R
Mo
ngo
lia
Bh
uta
n
Mal
div
es
Mya
nm
ar
Mal
aysi
a
USD
mill
ion
(cu
rren
t va
lue)
Source: CFU (2014); IGES et al. (2013)
• Renewable energy investments
mainly take place in China (USD
83.3 bn), Japan (USD 35.7 bn), and
India (USD 7.4 bn) (GTR, 2015).
• The other 10 AP countries
attracted USD 100 million in
renewable energy finance in 2014.
10
Gap 7: Institutional arrangement gap
• The Climate Public Expenditure and Institutional Review (CPEIR) is one
of the few known studies that review public spending on CC activities
and institutional responsibilities in selected developing countries.
Thailand
Source: UNDP (2012)
19 ministerial CCC;
11 non-ministerial
agencies
Under utilized
The mechanism that oversees
coordination on how resources
might be allocated and
effectively utilized among
gov’t agencies is missing.
11
INDC country map
• By 1 October, 119 INDCs were submitted, covering 146 countries and 85-88 per
cent of global GHG emissions in 2012.
Source: UNEP (2015)
12
INDC and emissions gap
• INDCs present a real increase in the ambition level. However, the submitted
INDCs are far from enough and the emission gap in 2025 and 2030 will be
significant and ambitions need to be enhanced urgently.
below3.5 ℃
<3-3.5 ℃
Source: UNEP (2015)
• Further actions for closing the gap:
Enhanced EE in industry, buildings and transport
Expanded use of renewable energy
International collaborative initiatives (i.e., C40 Cities): 0.75-2 GtCO2e in 2020
Forest-related actions: REDD+ theoretical potential up to 9 GtCO2/yr
13
A regional approach for CC cooperation and SD
• Climate specific regional initiatives: Asia Pacific Partnership on Clean Development
and Climate (APP); Asia Pacific Adaptation Network (APAN)
• Regional cooperation on energy: regional gas grids in East Asia; regional
cooperation on hydropower; the Pacific Appliance Labelling and Standards (PALS)
program in Pacific Island Countries
• Technology-focused CC cooperation: ASEAN+3 Energy Security Forum; APEC Energy
Working Group
• Regional hubs for technology cooperation: Asia Energy Efficiency and
Conservation Collaboration Centre (AEEC), the Asian and Pacific Centre for Transfer
of Technology (APCTT).
• Reginal cooperation could play an enhanced role, particularly if it explicitly
incorporates mitigation objectives in trade, infrastructure, and energy policies and
promotes direct action at the regional level (IPCC, 2014).