10THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

Smita Nakhooda Charlene Watson

Sam Barnard Liane Schalatek

December 2015

odi.org

SELECTEDCONTRIBUTORCOUNTRIES

PLEDGED ANNUALCLIMATE FINANCE SPEND

BY 2020$ billions

UK

SELECTED MULTILATERALDEVELOPMENT BANKS

World Bank

Germany

France

European Union

African Development Bank

Asian Development Bank

Inter American Development Bank

1614121086420

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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.

2 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

TOTAL DISBURSEMENTS$ BILLION SINCE 2003

No informationon whether funding has been paid out or not

Paid out13%

36%

24%

40%

40%

46%

Not yet paid out

TOTAL APPROVALS $ BILLION SINCE 2003

2012 2015 2014 2015

9.610.4

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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.

4 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

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250

200

150

100

502009 2014

Average cost of renewable energy ($ per megawatt hour)

Developing country annual investment ($bn)

Developed country annual investment ($bn)

Renewableenergy

$207 m

Other$14 m

Energyefficiency

$78 m

Transport$24 m

APPROVED FUNDING FROM MULTILATERALCLIMATE FUNDS IN 2015

3 DEVELOPING COUNTRIES ARE EMERGING AS MARKET LEADERS IN RENEWABLE ENERGY

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

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.

6 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

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

FINANCEAPPROVALS

$ billions

2006 2015

SELECT REPORTED IMPACTS

UN REDD+Programme

9 REDD+strategiescompleted

ForestInvestmentProgramme

115,000bene�tting from

climate compatibleagricultural

practices

Forest CarbonPartnership Facility

Preparatoryactivities underway

in 35 countries

Amazon Fund

35% in deforestationrates since fundestablishment

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1

5

7 7 7 7 7

6 6

1.56

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.

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ADAPTATIONFUNDING

APPROVED$ millions

SPENDING ONINFRASTRUCTURE

BY SUB-SECTOR$ millions

* Renewable energy and transport projects included in the adaptation portfolio

4

92

33

40

121

Other

Agriculture

Climate dataand Disaster

Risk Reduction

Multisector

Infrastructure

Water andsanitation

No defined sub-sector

Transport*

Renewableenergy*

Resilient urbandevelopment4

5

16

40

56

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5 40% OF ADAPTATION FINANCE IN 2015 SUPPORTED INFRASTRUCTURE RESILIENCE

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.

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 early-stage infrastructure planning and design, and to cover operational and maintenance costs associated with climate change impacts.

10 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

GREEN CLIMATE FUND2015 PROJECT APPROVALS

50%approvals

$ 55million

2003 2015

109

71

99

114

50

35

1517

10.21

160

Gree

n Cl

imat

e Fu

nd

Fiji$ 31

million

Maldives$ 23.6million

APPROVED CLIMATE FINANCE FOR SIDS $ millions

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FINANCE FOR SMALL ISLAND DEVELOPING STATES HAS INCREASED

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.

6

12 10 THINGS TO KNOW ABOUT CLIMATE FINANCE IN 2015

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NEPAL$120m climate spend3% national budgetCAMBODIA

$34m climate spend1% national budget

UGANDA$25m climate spend0.9% national budget

SAMOA$17m climate spend7% national budget

TANZANIA$383m climate spend5.5% national budget

ARGENTINA*$126m climate spend0.1% national budget

CHILE*$20m climate spend

0.03% national budget

*not total climate spend, calculated for specific sectors only

ETHIOPIA$440m climate spend

14.5% national budget

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.

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PROGRESS OF KEY CLIMATEFUNDS IN THE FIRST YEAR

OF IMPLEMENTATION

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GREENCLIMATE FUND BREAKDOWN

ADAPTATIONFUND

CLIMATEINVESTMENT FUNDS

GLOBALENVIRONMENT FACILITY

8446

2015201020091991

PROJECTS APPROVED

$168million

ADAPTATION

MITI

GATION

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.

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REPORTED RESULTSFUNDS EXPECTED RESULTS

Adaptation Fund 90+ early warning systems in place

1.5 million hectares under improved land management

30 million people supported to copewith climate change impacts

460 million tCO2e reduction in GHGs

13.3 million more resilient to climate change

860 million tCO2e reductionin GHGs by 2042

15 million people with new orimproved clean energy access

4.1 million people with vulnerability reduced

Not reported

Not reported

0.9 million supported to copewith climate change impacts

Not reported

1.1 million more resilient to climate change

20 million tCO2ereduction in GHGs

Not reported

1.5 million people less vulnerable

Adaptation for SmallholderAgriculture Programme

Least DevelopedCountries Fund

Special ClimateChange Fund

Pilot Programme forClimate Resilience

Clean Technology Fund

Scaling up RenewableEnergy Programme

Global EnvironmentFacility 6 Mitigation and adaptation

MitigationAdaptation

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9 CLIMATE FUNDS NEED TO REPORT THEIR IMPACT MORE TRANSPARENTLY

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.

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DEVELOPED COUNTRIES

CHINA

CLIMATE ACTION UNCONDITIONAL ON INTERNATIONAL SUPPORT N

O IN

DC*

IND

IA

MIX

EDCLIMATE ACTIONCONDITIONAL ONINTERNATIONAL

SUPPORT(21 countries)

MIXED

NO INDCUNCONDITIONAL

29.6%

53.2%

35.7%

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

*As of November 1st 2015

(63

coun

tries)

(29 countries) (

45 c

ount

ries)

10 IMPLEMENTING CLIMATE ACTION REQUIRES RAPID MOBILISATION OF INVESTMENT

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.

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.

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REFERENCES1. 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-of-recent-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

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/

ACKNOWLEDGEMENTSThe 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.

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climatefundsupdate.org

CFU is a joint initiative of the Overseas Development Institute (ODI) and Heinrich Böll 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.

10 things to know about climate finance in 2015

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