Finance for Climate Action Flowing Globally stood at $650 Billion annually in 2011-2012, and possibly higher

Hundreds of billions of dollars of climate finance may now be flowing across the globe annually according to a landmark assessment presented on 3 December 2014 to governments meeting in Lima, Peru at the UN Climate Convention meeting.

The assessment – which includes a summary and recommendations by the UNFCCC Standing Committee on Finance and a technical report by experts – is the first of assessment reports that puts together information and data on financial flows supporting emission reductions and adaptation within countries and via international support.

The assessment puts the lower range of global total climate finance flows at $340 billion a year for the period 2011-2012, with the upper end at $650 billion, and possibly higher.

• Support from developed countries to developing countries amounted to between $35 and $50 billion annually, with multilateral development banks (MDBs), climate-related Official development Assistance (ODA) and other official flows (OOF) representing significant shares of resources channeled through public institutions

• Funding through dedicated multilateral climate funds – including UNFCCC funds ($ 0,6 billion) – represented smaller shares during the same period, and do not include the recent pledges for the Green Climate Fund amounting to nearly $10 billion.

The assessment notes that the exact amounts of global totals could be higher due to the complexity of defining climate finance, the myriad of ways in which governments and organizations channel funding, and data gaps and limitations – particularly for adaptation and energy efficiency.  

In addition, the assessment attributes different levels of confidence to different sub-flows, with data on global total climate flows being relatively uncertain, in part due to the fact that most data reflect finance commitments rather than disbursements, and the associated definitional issues.  

The assessment is an important contribution of the Standing Committee on Finance that enhances transparency and clarity on climate finance flows – including information on international support to developing countries.

In addition, the assessment includes a set of recommendations by the Standing Committee on Finance to the Conference of the Parties, which, among other things, include ways to strengthen transparency and accuracy of information on climate finance flows through working towards a definition of climate finance and further efforts that would enable better measurement, reporting and verification.

The assessment also recognizes the need for understanding the impacts of climate finance associated with emissions reductions and activities to boost resilience to climate change.

The 2014 Biennial Assessment and Overview of Climate Finance Flows has been prepared by the Standing Committee on Finance following a mandate by the Conference of the Parties. The 2014 report was prepared with input from a wide range of experts and contributing organizations that collect data on climate finance flows.

Christiana Figueres, Executive Secretary of the UNFCCC, said: “Finance will be a crucial key for achieving the internationally-agreed goal of keeping a global temperature rise under 2 degrees C and sparing people and the planet from dangerous climate change”.

“Understanding how much is flowing from public and private sources, how much is leveraging further investments and how much is getting to vulnerable countries and communities including for adaptation is not easy, but vital for ensuring we are adequately financing a global transformation,” she said.

“I would like to thank the Standing Committee on Finance and the numerous experts and organizations who have contributed to this important assessment. It provides a baseline and a foundation upon which future assessments and more importantly future climate action can be refined and focused,” said Ms. Figueres.

“This first biennial assessment represents a milestone of the work of the Standing Committee on Finance. It is an important information tool for Parties to the Convention that provides a picture of climate finance flows and how they relate to climate actions, including the objectives of the Convention” said Standing Committee on Finance co-chairs Diann Black Layne and Stefan Schwager.

“Going forward, the Standing Committee on Finance will contribute further to improvements in the information on climate finance flows, including through collaborations with data collectors and aggregators,” they added.

More Facts and Figures from the 2014 Biennial Assessment and Overview of Climate Finance Flows Report:

• Global total flows: Most climate finance in 2011/2012 is raised and spent at home – in developed countries 80 per cent of the funds deployed for climate action are raised domestically.

• The same pattern is seen in developing countries where just over 71 per cent comes from national sources

• Around 95 per cent of global total climate finance is spent on mitigation or cutting emissions with 5 per cent on adaptation.

• Subsidies for oil and gas and investments in fossil fuel-fired generation are almost double the global finance for addressing climate change

• Flows from developed to developing countries: Multiple sources were involved in providing funding to support climate action in developing countries ranging from Multilateral Development Banks (MDBs) and Overseas Development Assistance (ODA) to multilateral climate funds – including funds administered by the Operating Entities of the Financial Mechanism of the Convention and the Kyoto Protocol.

• For example, finance from MDBs is around between $15 and $23 billion annually; multilateral climate funds including via the GEF were about $1.5 billion, including those linked to the UNFCCC at about $0.6 billion a year.

• 48 to 78 per cent of finance is reported as fast-start finance (2010-2012), in Biennial Reports (2011-2012), through multilateral climate funds, and through MDBs supports mitigation, or other/multiple objectives (6 to 41 per cent)

• Adaptation finance in the same sources ranges from 11 per cent to 24 per cent.

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Notes

The assessment has tried to identify the flows to various sectors and initiatives – real precision in this area will have to await future assessments and the numbers need to be treated with caution.

Assessing investments in adaptation is particularly difficult often because they can form part of a larger project such as an investment in a port of water supply system.

Meanwhile, there is also no universal operational definition of what constitutes adaptation and in addition publicly funded adaptation actions within countries – both developed and developing – is rarely reported or available.

As a result, flows from developed to developing countries are not really known with precision.