Climate change finance refers to the finances required to support programs for mitigation, adaptation, and technology transfer in response to climate change.

According to the UNFCCC, in order to support enhanced action on the provision of financial resources and investment for climate change, four broad means can be considered and influenced by governments. These include: private finance; public finance; national policies; and the United Nations Convention. Within the UN Convention, adaptation, mitigation and technology transfer activities are funded by the Global Environment Facility Trust Fund, the Special Climate Change Fund, the Least Developed Countries Fund and the Adaptation Fund.

Estimates of financial flows and investment needs for adaptation run in the tens of billions, possibly hundreds of billions of U.S. dollars per year. For mitigation, a UNFCCC 2007 report estimates that additional investment and financial flows of USD 200-210 billion would be necessary to reduce carbon dioxide emissions by 25% below 2000 levels in 2030. ¹

Financing is one of the four pillars which emerged from the United Nations Climate Change Conference in Bali in December 2007. Since the Bali conference, a number of government proposals for financing climate change programs have emerged. Some of the key ones include the following: Mexico proposed a World Climate Change Fund, which would include mitigation, adaptation, and technology transfer activities. All countries would contribute to this fund and withdrawals would be determined by a formula based on current greenhouse gas emissions, population, and gross domestic product. India has called for a New Global Fund for Adaptation where industrialized countries would contribute .3-1% of their gross domestic product, with the funds designated for adaptation activities in the developing world. And, the G-77 and China have proposed a technology transfer financing mechanism called the Multilateral Climate Technology Fund. This would finance activities in developing countries related to clean energy technology research, development, diffusion and transfer. ²

Finance for climate change will continue to be a key negotiating theme as countries prepare for COP-15, which will take place in Copenhagen (2009).

Footnotes

¹ "Investment and Financial Flows to Address Climate Change: An Update." United Nations Framework Convention on Climate Change. November 26, 2008.

² "Government Proposals for Climate Change Mitigation, Adaptation and Technology Transfer" in State of the World 2009: Into a Warming World. The Worldwatch Institute, Washington D.C.

References

The Harvard Project on International Climate Agreements, "Climate Finance," Policy Brief, Harvard University, November 2009. Accessed Nov 19, 2009. Presents options to improve and expand climate finance in the context of criticism that climate finance has insufficient scale, a low share of private-sector investment, and insufficient institutional framework. Also discusses climate mitigation and adaptation in developing countries as a key challenge in post-Kyoto negotiations.