Climate finance policy in practice: a review of the evidence

Abstract

ABSTRACT This paper empirically evaluates how policy to mobilize climate finance works in practice. It examines the performance of nine types of climate finance policies, namely target lending, green bond policy, loan guarantee programmes, weather indexed insurance, feed-in-tariffs, tax credits, national development banks, disclosure policies and national climate funds, through a literature review and case studies. Both successful and unsuccessful country cases are examined. Criteria are established to evaluate climate finance policy, factors which lead to effective climate finance policy in practice are identified, current knowledge gaps are clarified, and policy implications provided. Key Policy insights The effectiveness of climate finance policies depends on the criteria being used. Strengths and weaknesses exist for each of the climate finance policies. Feed-in tariffs, tax credits, loan guarantees, and national development banks are all effective at mobilizing private finance, but evidence to date is weak or thin on the effectiveness of national climate funds, targeted lending, disclosure, and green bonds. Significant data and research gaps exist regarding the empirical impacts of climate finance policies, especially their environmental and equity impacts. In selecting climate finance policies, a balance should be struck between mobilization effectiveness, economic efficiency, environmental integrity, and equity.