International Climate Finance Research Articles

Reducing the cost of capital through international climate finance to accelerate the renewable energy transition in developing countries

Despite a vast potential, the accessibility of low cost finance remains a critical barrier to the deployment of Variable Renewable Energy (VRE) in many developing countries. High financing costs threaten the competitiveness of renewable energy technologies and impede progress in the energy transition. This study aims to assess the extent to which international climate finance could help reduce the cost of capital for VRE investments and accelerate the renewable energy transition in developing countries. We employ the IMACLIM-R multi-regional Integrated Assessment Model (IAM) to examine various climate finance scenarios, factoring in the interaction between public and private capital through a dedicated model for the average cost of capital (CoC). The results show that international climate finance can significantly enhance the adoption of renewable energy in regions that receive this support. For instance, Africa could achieve +43% electricity generation from VRE by 2030 in a scenario with deep risk sharing and mitigation for VRE investments, compared to a no-policy scenario. Our study demonstrates that reducing the financing costs of VRE investment through international climate finance encourages clean and affordable energy development. However it must be complemented by other policies to achieve more ambitious climate and sustainable development objectives.

Health engagement in national climate commitments of small island developing states: a content analysis of Caribbean nationally determined contributions

ObjectiveTo investigate how health is incorporated into the NDCs of Caribbean SIDS and their financing challenges. MethodsThe study analysed the NDCs of sixteen Caribbean SIDS using content analysis to investigate their level of engagement with health. ResultsCaribbean SIDS have a high level of reference with health in their NDCs relative to other developing countries which is expected to increase as they update them. All sixteen countries included health in their NDCs, mostly with regard to adaptation to be achieved by 2025/2030. Five countries provided targets in health aimed at increasing climate resilience. This may be explained by the region's poor health profile, high exposure to climate change and disasters, inadequate health infrastructure and resources and dependence on external finance. There was hardly any information on how countries intend to finance their health goals. ConclusionInclusion of health in Caribbean SIDS NDCs could increase obligation to climate action at domestic and regional levels and attract international climate finance. The Caribbean should seek out funds that make finance available to tackle health-related risks from climate change. It is imperative that Caribbean SIDS compute and state their climate finance needs in health if they are to attract international finance and raise donor and investor confidence. Caribbean SIDS have the opportunity to advocate for and be an example for the integration of health into climate change policy and politics to encourage global cooperation and boost countries’ climate change aspirations and ramp up international climate finance.

The role of institutional design in mobilizing climate finance: Empirical evidence from Bangladesh, Brazil, Ethiopia, and Indonesia

International climate finance is a crucial component of the response to climate change. This paper examines how national-level funding vehicles mobilize finance from international sources. Based on interviews with policymakers and various actors involved in the negotiation and design of four major early national climate funds, the Amazon Fund, the Bangladesh Climate Change Resilience Fund, Ethiopia’s Climate Resilient Green Economy Facility, and the Indonesia Climate Change Trust Fund, this paper identifies design features of national climate funds and highlights the trade-offs that developing countries face in their pursuit of climate finance. These design features have significant bearing on the overall effectiveness of the funds themselves. The findings from this study suggest that developing countries seek to maximize control over the funds even though it means that the design features do not minimize costs, as efficiency-oriented perspectives would suggest. The experience of these early national climate funds could be instructive to those governments and stakeholders considering establishing their own national climate funds or improving features. Three policy lessons are noteworthy: the importance of demonstrating commitment to climate policy through transparent data and results, instilling robust fiduciary standards and safeguards, and the virtuous cycle mobilizing climate finance and acquiring a track record on climate programming.

International climate finance mechanisms: A review with focus on Africa

Climate change poses an unprecedented threat to the global environment, with far-reaching consequences for vulnerable regions, particularly in Africa. This paper provides a comprehensive review of international climate finance mechanisms, shedding light on their effectiveness in addressing climate-related challenges, with a specific focus on the African continent. As climate change continues to exacerbate existing vulnerabilities, understanding and optimizing the mechanisms through which financial support is channeled to affected regions becomes paramount. The paper explores a range of international climate finance mechanisms, including multilateral funds, bilateral agreements, and private sector initiatives. It assesses their strengths and weaknesses in terms of mobilizing resources, promoting sustainable development, and enhancing climate resilience. The analysis also delves into the evolving landscape of climate finance, considering the emerging role of innovative financial instruments and the potential for leveraging private sector investments to complement public funding. Focusing on Africa, the review examines the unique challenges faced by the continent, such as extreme weather events, water scarcity, and agricultural disruptions. It assesses the suitability and impact of existing climate finance mechanisms in addressing these challenges and supporting Africa's adaptation and mitigation efforts. The study also considers the effectiveness of capacity-building initiatives to enhance the ability of African nations to access and utilize climate finance resources efficiently. Furthermore, the paper highlights the need for enhanced transparency, accountability, and governance in the disbursement and utilization of climate finance in Africa. It emphasizes the importance of inclusive and participatory approaches that engage local communities and ensure that climate finance contributes to sustainable development goals while addressing the specific needs of the most vulnerable populations. This review provides a nuanced understanding of international climate finance mechanisms, offering insights into their application and impact in the context of Africa's unique climate challenges. By identifying opportunities for improvement and addressing existing gaps, the paper aims to contribute to the ongoing discourse on optimizing climate finance for a more resilient and sustainable future.

Funding Resilience: Exploring International Climate Finance Strategies in African Contexts

This article addresses a gap in the existing literature by presenting comprehensive solutions to bolster international climate finance mechanisms, with a specific focus on alleviating the impact of extreme weather events in Africa. The core objective of this research revolves around examining innovative strategies that can augment the financial support flowing to African nations, ensuring their capacity to adeptly respond to the challenges presented by climate change. Through a critical analysis of the current landscape of international climate finance, along with the identification of successful models and a consideration of their limitations, the study aims to propose actionable recommendations. Beyond contributing to academic discourse, the article seeks to provide practical insights for policy-making, empowering African nations to enhance resilience and adapt to the escalating threats of extreme weather events amid a rapidly changing climate.

INDIA IN THE LANDSCAPE OF CLIMATE FINANCE: PROSPECTS AND CHALLENGES

Climate change is not a cliché anymore but a burning reality with far reaching consequences for the very survival of humankind and the nature. India on the one hand is the third largest carbon emitter and on the other hand is susceptible to the high risks of climate change, ranging from heat waves to cyclones and urban and rural displacements. Though India is a major recipient of international climate finance, it is proven to be more than insufficient to meet the climate change adaptations as per Paris Agreement. The present study analyses the challenges and prospects of India with respect to the Green Climate Fund and the imperative for developing its own paradigm of climate finance. KEY WORDS: Climate Change, Climate Finance, Green Climate Fund

Implementing nationally determined contributions under the Paris Agreement: An assessment of ocean-based climate action in Caribbean Small Island Developing States

This paper investigates the integration of ocean-based ambitions and actions into the climate commitments of Caribbean Small Island Developing States (SIDS) in achieving their Nationally Determined Contributions (NDCs) under the 2015 Paris Agreement together with the climate financing needs to meet these targets. The paper examined whether the Caribbean acknowledges ocean-based activities as important ways to address mitigation and adaptation as well as the role of international and domestic finance, private sector finance, and fiscal policy reform with respect to ocean-based activities within their NDCs. The methodology adopted was a content analysis of Caribbean countries’ NDCs and updated NDCs. The data used for the content analysis were obtained from initial and updated NDCs for sixteen Caribbean SIDS. The paper found that the Caribbean views ocean-based activity as important for mitigation and adaptation with significant potential to increase blue climate ambition and action. The region is however dependent on international climate finance which is not sufficient to reach its ocean-based NDCs, while there is lack of public finance and an absence of private sector finance as well as innovative domestic private and public finance and fiscal incentives to achieve these goals.

The liberal limits to transformation in the Green Climate Fund

ABSTRACT International climate finance institutions increasingly articulate their goals as catalyzing transformation, but can these institutions bring about deep structural change when they reflect the same liberal logics that arguably created the challenges they are designed to address? In this analysis, we use a virtual ethnography of Green Climate Fund (GCF) board meetings. We ask: how does the GCF navigate the tensions between different conceptualizations of transformation? Our sample included deliberations on 181 projects, and over 42 h of board meetings. Discussions were thematically coded to reveal concerns raised by board members and observers, followed by a structured content analysis. We found that while the transformational potential of proposals featured prominently in deliberations, there was no unified vision or clear definition of transformation. However, approaches that emphasized economic efficiency, technology and infrastructure, and market mechanisms and the private sector aligned with the liberal logic of the fund, while proposals that framed transformation in other ways faced more scrutiny. Board members and observers also raised concerns that proposals had the potential to increase vulnerability or cause harm. Despite this, almost all projects in our sample were approved, suggesting that more work is needed to expand beyond liberal understandings of transformation.

Climate Finance: An Overview

Climate Finance: An Overview

Deutschlands internationale Klimafinanzierung auf dem Prüfstand

Abstract In this paper, we discuss whether Germany fulfills its international commitments in financing climate projects in vulnerable countries of the Global South or whether the financing is rather guided by German interests. To this end, we take a critical look at the fact that climate projects are mainly financed through the development cooperation budget. We also discuss the allocation of funds between climate change adaptation and climate change mitigation. We argue that the budget of development cooperation should be increased, and that international climate finance should focus more on climate adaptation.

Identification and prioritization of barriers to access international climate finance for Nepal

Identification and prioritization of barriers to access international climate finance for Nepal

Financing needs to achieve Nationally Determined Contributions under the Paris Agreement in Caribbean Small Island Developing States.

Caribbean Small Island Developing States (SIDS) are highly vulnerable to the impacts of climate change. Given high mitigation and adaptation costs and constrained domestic finances, they seek international funding to meet their climate objectives. This paper investigates Caribbean SIDS perspectives on the role of international climate finance in addressing climate change and its effectiveness in meeting climate goals. The paper first explored the climate financing needs of sixteen Caribbean SIDS through a content analysis of their Nationally Determined Contributions (NDCs). It then compares the climate finance needs of the region with international climate finance commitments received by examining climate finance trends using data from the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee's (DAC) Creditor Reporting System (CRS). The study revealed large gaps in estimating the climate finance needs of the region, as well as important patterns in the way climate finance is being distributed across mitigation, adaptation and overlap activity; principal versus significant climate objective; recipient country; sector; and source and type of funding. These findings are useful to help countries make decisions about how international climate finance should be used, and how its impacts should be evaluated and a basis for climate finance negotiations and dialogue with bilateral development partners and multilateral climate funds, and to assess whether available funds are being put to good use and identify problems that need to be addressed.

What determines international climate finance? Payment capability, self-interests and political commitment

What determines international climate finance? Payment capability, self-interests and political commitment

Transparency and Corruption Prevention in Financing Climate Action

The article summarises the arguments and counter-arguments within the scientific debate on enchancing the climate finance transparency. The main purpose of this study is to investigate the mechanism of climate finance and identify the key challenges that hinder the effective climate fund monitoring system. The relevance of addressing this research problem is due to the fact that the largest recipients of international climate finance are countries with high corruption risks, low standards in protection human rights, low trust in law enforcement and judicial authorities, etc. Therefore, the reporting and the quality of the reports prepared on the funds received under international assistance programmes is an important component of establishing long-term relations and trust between donor-countries or receipient-countries. The article examines the issue of climate finance transparency in the following logical sequence: analysed scientific publications on the issues of transparency and corruption in climate finance, examined the institutional mechanism of global climate finance, analysed the scale of climate finance in the world, and identified the main challenges in improving the transparency and efficiency of climate funds. The study was conducted using empirical (observation, description) and theoretical (grouping, synthesis, abstraction) research methods. The paper substantiates that the strengheting transparency of climate finance in developing countries requires a comprehensive approach - on the one hand, improving the level of justice, judiciary, enchancing the work of local regulatory authorities, developing legislation in recipient countries of international financial assistance, and on the other hand, improving the methodology of integrated accounting and reporting on the receipt and use of climate funds, as well as tracking the effects of project implementation. The study found that the key challenges that hinder the formation of an effective climate funds monitoring system are: a data collection and reporting system, an accounting and reporting system, and a coordination system.

Green finance in green building needs under the Paris Agreement

Green building (GB) is a key mitigation and adaptation measure in the Nationally Determined Contributions (NDCs) of Parties to the Paris Agreement. This paper explores the potential of green finance (GF) to support country efforts to shift from conventional construction to GB and to promote green renovations in existing buildings (GREB) within the context of the 2015 Paris Climate Agreement. Through a meta-synthesis of new or updated country NDCs, we provide, first, a comprehensive qualitative overview of country perspectives on GF-in-GB needs. Second, we examine the role of domestic finance, international financial support, and fiscal policy reforms toward GB and GREB implementation. Finally, the role of financing actors in promoting GF-in-GB-and-GREB is discussed. The analysis of new or updated NDCs revealed that only 20 of the 42 countries reviewed provide clear cost estimates for proposed climate-related buildings and construction activities. Developed countries account for more than 80% of total cost estimates. The majority of developing country adaptation and mitigation efforts are contingent on international climate (green) finance. While certain domestic finance sources are mentioned, the majority of countries emphasize the need for (international or national) fiscal policy reforms to help finance climate action. The findings of the study could serve as a useful reference to Parties when developing future NDCs.

Climate finance to support Caribbean Small Island Developing States efforts in achieving their Nationally Determined Contributions in the energy sector

Decarbonisation of the energy sector requires immediate action to mitigate the effects of climate change. This paper explored the potential of climate finance to support Caribbean Small Island Developing States (SIDS) efforts in achieving their Nationally Determined Contributions (NDCs) under the 2015 Paris Agreement in the energy sector. A comprehensive overview of the region’s perspective on climate financing needs for mitigation and adaptation activities in meeting their climate targets in the energy sector was conducted. The paper also examined whether the Caribbean acknowledges a role for domestic financing, private sector finance, and fiscal policy reform within their NDCs, as ways to address mitigation and adaptation in energy. The methodology adopted was a content analysis of Caribbean countries’ NDCs and updated NDCs. The data used for the content analysis were obtained from initial and updated NDCs for sixteen Caribbean SIDS. The paper finds that the Caribbean established ambitious mitigation and adaptation goals for its energy sector but is heavily dependent on international climate finance which is not adequate to attain its energy NDCs, while there is a lack of private sector financing as well as innovative domestic private and public sector financing and reform of fiscal incentives to realize these goals.

Rethinking governance in international climate finance: Structural change and alternative approaches

AbstractInternational public finance plays an increasingly prominent role in global efforts to combat climate change and, as it grows, it faces a familiar challenge: governance. Global organizations not only disburse climate funding, but are also expected to ensure the “good governance” of climate programs in recipient countries. Many of these same organizations faced similar challenges in disbursing development finance. In what became known as the “institutionalist turn,” they sought to reform governance and build effective institutions in recipient countries. At first glance, the approach to governance in climate finance appears to be a continuation of these largely ineffective policies. I argue, however, that important structural differences between climate finance and development finance have been overlooked, and that these differences create space for alternatives approaches to governance. I first examine the literature on what led to the ineffectiveness of governance reforms tied to development finance, concluding that global organizations have been consistently unable to recognize and grapple with how power actually works in recipient countries, especially informal power. I then highlight three new principles underlying climate finance: (1) that it is restitution not aid, (2) that recipient countries should control resource allocation, and (3) that funding should support mitigation and adaptation. I demonstrate how each new principle has produced shifts in decision‐making authority away from contributors and toward recipient countries. I discuss how alternative approaches could emerge both from forums where recipient countries exercise newfound authority, and from experimentation on the part of multilateral organizations.This article is categorized under: Climate and Development > Social Justice and the Politics of Development Policy and Governance > Multilevel and Transnational Climate Change Governance

Transformational adaptation and country ownership: competing priorities in international adaptation finance

ABSTRACT International climate finance is an integral part of the global climate policy regime. Because available adaptation finance is significantly below identified needs of developing countries, competition for scarce resources incentivises countries to design projects to align with funding priorities. One of the areas where this dynamic is particularly relevant is regarding transformational change. Transformational adaptation has risen on the climate policy agenda in recognition of the inadequacy of business-as-usual approaches, and the growing urgency of climate change. It is often characterized based on: (i) the intensity or quality of the change (depth); (ii) the distribution of change (breadth) and (iii) the timeframe through which a change occurs (speed). This study analyses how transformational adaptation is articulated in direct access proposals to the Green Climate Fund to assess compatibility between how transformation is conceptualized and the fund’s priority of country ownership. Our analysis reveals significant framing of transformation in terms of scalability and replicability of projects, resulting in an approach to transformational adaptation that emphasizes scalable techno-managerial solutions that extend beyond the project site over social and behavioural change at the local level. We argue that without greater attention to inclusive policies that centre on the most vulnerable, climate finance risks becoming another top-down development strategy that prioritizes adaptation strategies that are easily scalable rather than those that address local needs. Key policy insights: Transformational change has risen up the policy agenda, shaping the design of adaptation projects financed by the GCF. Direct access, a mechanism to enhance country ownership and ensure local priorities are represented in climate finance, may be insufficient to mitigate the tensions between the priorities of climate funds and local needs. Project proposals emphasize scalability and replicability in their conceptualisation of transformation. By privileging those aspects of transformational adaptation that can be easily scaled-up or replicated, GCF proposals frame transformation in terms of breadth and speed, rather than depth, resulting in a stronger emphasis on scalable techno-managerial solutions over social and behavioural change.

Implementing nationally determined contributions under the Paris agreement: an assessment of climate finance in Caribbean small island developing states

ABSTRACT This perspective paper explores the potential of climate finance to support Caribbean Small Island Developing States (SIDS) efforts in achieving their Nationally Determined Contributions (NDCs) under the 2015 Paris Climate Agreement. Through a content analysis of sixteen Caribbean countries NDCs, it provides, first, a comprehensive overview of SIDS countries’ perspectives on climate financing needs for mitigation and adaptation activities in meeting their climate targets. Second, the paper examines whether Caribbean SIDS acknowledge a role for domestic financing and international and domestic fiscal policy reform within their NDCs, as a way to address climate change mitigation and adaption. The analysis of Caribbean SIDS NDCs reveals that only eight countries provide clear cost estimates for mitigation activities, five for adaptation and one with a combined cost. This gives a total of US$51.3 billion for the combination of Caribbean countries across their NDCs. The majority of climate change activities identified in the NDCs are conditional on the provision of international climate finance. While some countries discuss domestic sources of finance, few note the need for domestic fiscal policy reform to counteract direct and underlying drivers of greenhouse gas emissions and their reduction. The findings suggest that, while much attention is directed to inadequate quantities of international climate finance, fiscal policy and the use of domestic finances are important for realizing transformative change and yet receive little attention from in-country policymakers. Key policy insights Caribbean SIDS suffer from a significant climate finance gap. Caribbean countries cannot remain dependent on international climate finance and must pursue more innovation and diversified options to achieve climate goals. Caribbean countries struggle to use domestic policy and investment options to align finance and incentives to promote their climate goals. The region faces challenges inherent in aligning domestic fiscal policies and other economic and regulatory incentives, as well as private sector investment, to complement and augment international climate finance objectives.

Peru at the UNFCCC: explaining the country’s foreign climate policy

ABSTRACT Peru was one of the first developing countries to commit to a voluntary emissions reduction target and is seen as a bridge builder within the UNFCCC. It played an important role in advancing the multilateral climate process between 2013 and 2015. Peru is a member of the Independent Alliance of Latin America and the Caribbean (AILAC), a progressive coalition of countries that promotes ambitious positions within the climate regime. Although the country’s level of activism in international negotiations has markedly declined since 2016, there have been no significant changes in its foreign position. What factors explain Peru’s conciliatory and relatively progressive stance at the UNFCCC? To answer this question, I use the ‘climate commitment approach’ as analytical framework and trace the processes that link possible causes with outcomes, comparing two different periods in the trajectory of Peru’s participation in the climate regime. The study is based on semi-structured interviews, governmental publications and data, reports and studies by independent organizations, news reports, and scientific literature. It concludes that Peru’s position in the UNFCCC negotiations has been mainly determined by the dominant presence of Peru’s Ministry of Environment (MINAM) in foreign climate policy decision-making as well as of individual agents who act as climate leaders. It also points to several other factors that determine its position: the low level of interest in, or understanding of, the climate issue by domestic pressure groups; the country’s international profile; the governmental perception of economic, political, and diplomatic benefits associated with a more ambitious climate position; and the wish to access international climate financing. Key policy insights Foreign pressure and support were major pillars of the development of Peru’s foreign climate policy. Peru’s diplomatic position was profoundly shaped by the vision and interests of MINAM, which filled a political vacuum and exercised leadership in international climate negotiations. Given the ministry’s expertise, and international support for its activities, other ministries could hardly compete with MINAM for influence. Recently, the diminished authority of MINAM, the inclusion of climate change into Peru’s national policy agenda combined with domestic political turmoil, have translated into a marked decline in the country’s level of foreign activism. Peru has continued to align with AILAC due to the link between the country’s foreign trade and climate policy agendas, and to the benefits associated with a more ambitious foreign climate position, including possibilities for attracting international climate finance.