Climate finance


The climate and development agendas are intertwined: sustainable progress in one is not possible without progress in the other – yet climate finance falls short of need.

 

Global climate finance reached US$359 billion in 2012, far below estimates of need

Total global climate finance, a mix of public and private flows from a wide variety of sources and instruments, equalled US$359 billion in 2012 – down from 2011. Total investment needed to mitigate climate change and/or minimise its impacts through adaptation is estimated at between US$4 billion and US$171 billion per year by 2030 for adaptation and between US$200 billion and US$1 trillion for mitigation.[i]

[i] Buchner et al. (2013), The Global Landscape of Climate Finance 2013, Climate Policy Initiative

Around half (51%) of global climate finance is invested in developing countries

Climate finance is sourced and invested unequally across the globe. Of the estimated US$182 billion invested in developing countries in 2012, 72% came from domestic sources. Finance flows from developed to developing countries represented just 12% of total global climate finance investments (around US$43 billion). Though climate-related ODA is small in comparison with wider flows, it remains essential for developing countries to address climate change and accounts for a significant proportion of cross-border climate finance. Climate-related ODA has grown since 2002.

Figure 7. Climate-related ODA 2002–2012

Global Context Briefing_fig 6

Source: Development Initiatives calculations based on OECD data. Note: Totals for adaptation and mitigation cannot be summed as projects can be marked as relevant to both adaptation and mitigation.

Climate finance plays a critical role in sustaining and protecting development

The effects of climate change disproportionately affect those with the weakest coping capacities. Around 86% of people in extreme poverty live in countries that are classified as environmentally vulnerable.[i] Support for these countries, particularly adaptation support, to increase resilience to the impacts of climate change is critical to end poverty and safeguard developmental progress. However, climate finance supports a plethora of projects and an estimated 94% of in 2012 was invested in mitigation projects, compared with just 6% in adaptation-related activities.

[i] Defined as highly vulnerable or extremely vulnerable in UNEP’s Environmental Vulnerability Index

Climate change requires multiple near- and long-term interventions

Climate finance needs to support both the transition to sustainable development pathways and support efforts to adapt to the impacts of climate change at national and local levels. Inadequate investment and inaction may increase future costs substantially.

Data on climate finance is lacking, is untimely and is of poor quality

The absence of consensual definitions, together with poor reporting and misinterpretation, contributes to a poor understanding of climate finance. Data on private climate finance is especially poor. Without a single repository for data on climate finance, it is difficult to monitor commitments to the climate agenda or additionality in financing without relying on self-reported statistics or third party research.