Low-carbon financing tops $97 billion a year

Climate Policy Initiative (CPI) has collated data on how much finance is available to develop what is describes as “low-carbon, climate-resilient development activities”, concluding that at least $97 billion is being pumped into to such activities per annum, mostly by private investors rather than public funds. However, while CPI says this information “is topical leading up to the COP 17 in Durban”, it raises questions about “definitional uncertainties” surrounding the data which need to be addressed.
Low-carbon financing tops $97 billion a year

To support discussions on the adequacy and effectiveness of international climate finance, CPI has published the first comprehensive review of the climate finance landscape. Compiling data from a wide range of sources, CPI's report shows how much finance is currently available and describes the flows of finance, including the sources, intermediaries, instruments, channels, and end uses.

CPI finds that at least $97 billion is already being provided annually to finance low-carbon, climate-resilient development activities. However, CPI also points to definitional uncertainties that make it difficult to assess whether the international community is close to meeting its commitment to mobilise $100 billion per year by 2020 to help developing nations tackle climate change.

For example, questions arise about how much of the $97 billion can be considered "new and additional," and whether both public and private sources of finance should be counted. It is also unclear whether the portion that is capital investment should be considered as aid. Additionally, the $97 billion figure relates to commitments, not disbursements, counted at their gross value (rather than the net 'aid' value); it is not clear whether the $100 billion commitment is similarly defined.

"While the debate about the amount of funding is topical leading up to the COP 17 in Durban, for us the data also prompts questions about how current flows correspond to countries' needs, whether current uses are effective, and how climate finance can be scaled up to support the transition to a low-carbon, climate-resilient future," said Barbara Buchner, director of CPI Venice. "We hope that these questions are addressed in the next phase of discussions."

The study by CPI also found that the total amount of private finance is almost three times greater than total public finance, indicating the importance of capital investment to mitigation and adaptation activities. Finance derived from offset markets plays only a small role at present.

Intermediaries, including bilateral and multilateral financial institutions, play a key role in distributing climate finance (around 40% of the total). Dedicated climate funds represent a small but growing portion of finance. Most climate finance ($74-87 billion out of $97 billion) can be classified as gross investment that has to be paid back (e.g., loans, equity), while the vast majority of climate finance (95%) is used for mitigation; only a small share goes to adaptation measures.

Despite reaching these clear conclusions, CPI has published its findings alongside a caveat: “While there are many efforts underway to track and document elements of the climate finance landscape, information is fragmented and definitions and methodologies vary. This impedes a better understanding of what is needed to enhance the effectiveness of climate finance”.

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Climate Policy Initiative

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