Financing for climate change – meeting the challenge

1. Financing for climate change – meeting the challenge Mirey Atallah Cairo, November 2010

2. The Global Climate Change Financial Architecture Innovative Climate Finance (sources and governance under negotiation Capital Markets Private Cooperation Finance Government Cooperation Budgets Domestic Budget Bilateral Finance Institutions UNFCCC CSOs/NGOs National Implementing entities Private Sector Bilateral Cooperation Multilateral Cooperation National Financial Institutions Multilateral Finance Institutions Carbon Markets Official Development Assistance ‘New and additional’ climate finance CDM Levy funding the Adaptation Fund Industrialised countries emission reduction obligations Foreign Direct Investment Industrialised countries commitments to ‘new and additional’ finance for climate change Industrialised countries ODA commitment Total finance available for climate change mitigation and adaptation initiatives Source: Adapted from SEI 2009

3. New Financial Investment by Region, 2002-2008,$ billions

4. Mitigation and Adaptation: Complementary Risk Management Strategies or Two Sides of the Same Coins? Cost of abatement (marginal cost) rises Benefit of abatement (marginal benefit) falls Optimal abatement path necessary Economically optimal timing

5. Estimated costs of adapting to climate change • 20-40% of ODA and concessional finance are subject to CC risks; • Cost of addressing this risk would be $1-8billion/year Source: World Resources Institute, 2007

6. $ Amounts available in developing countries (2010-2014) $6 - 8 billion Catalyzing Environmental Finance • Global Environment Trust Funds • GEF Trust Fund • Montreal Protocol Multilateral Fund • SCCF, LDCF, Adaptation Fund • Multi/bi lateral funds • WB: CIF, FCPF, CPF • Japan CEP, Norway CFI, Germany ICI, Australia IFCI $15 billion • UN/UNDP E&E Trust Funds (TF) • MDG Spanish Fund, E&E TF $200-500 million • Foundations/Private Coorperation • UNF, Packard, Gates, Rockefeller $4 billion • New UNFCC Related Funds • REDD fund (s) • Fast Start Funds (s) • COP green climate fund (M/A , REDD, TT, CD) • Technology mechanisms $80 billion • Market based & Innovative • Sources of Financing • Carbon Finance (CDM/JI, VC, sectoral credit + financing) • Insurance + other risk financing • Innovative mechanisms (e.g. IFIs, air levies etc…) $75-150 billion • Institutional & Corporate Finance • Private equity funds • Green bonds $400 billion

7. Potential Sources of Climate Change Financing • Public finance from climate sources • Phase out of regressive fossil fuel subsidies • AAU auction proceeds • Emission Trading Schemes (ETS) auction proceeds • Carbon taxes • Marine and aviation/bunker fuel levies • Offset levies • Public finance from non-climate sources • ‘Tobin’ tax, taxing revenues from financial transactions • Leveraging of IMF Special Drawing Rights • Carbon markets • Other international financing proposals • Debt for clean energy swap • International Lottery

8. GEF CLIMATE CHANGE MITIGATION - more transformational impact, programmatic approaches and sectoral issues GOAL: support developing countries and economies in transition toward a low-carbon development path OBJECTIVES Conserve and enhance carbon stocks through sustainable management of land use, land-use change, and forestry (LULUCF) Promote demonstration, deployment, and transfer of advanced low-carbon technologies Promote market transformation for energy efficiency in industry and buildings Promote investment in renewable energy technologies Promote energy efficient, low-carbon transport and urban systems Enabling Activities and Capacity Building Direct access

9. Under the convention Nationally Appropriate Mitigation Action National Adaptation Plans Sectoral approaches: REDD and REDD+ Energy Transport Insurances

10. Thank you