The International Institute for Sustainable Development (IISD) provides the March update on global developments in climate finance.
March 2016 Climate Finance Update: Fund Boards Meet, Carbon Markets Under the Spotlight
In the Paris Agreement, agreed upon by 195 UN Member States in December 2015, countries agreed to make “finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient development.” Developing countries will receive financial resources for both mitigation and adaptation actions, while developed countries are expected to continue to lead in mobilizing climate finance from a variety of sources, with public funds playing a significant role in reaching the previously agreed US$100 billion annual target by 2020. Monthly IIDS RS Climate Finance Updates aim to help track multilateral financing to support the finance goal agreed under the UNFCCC, which will in turn contribute to the implementation of Sustainable Development Goal (SDG) 13 (Take urgent action to combat climate change and its impacts).
Access to Finance
As we move from governance to implementation, climate finance news in March included a focus on access to finance, deploying climate finance, or the impacts on national budgets of climate policies. The Cook Islands, in the Pacific, received the first tranche of a total of US$150,000 in readiness funding from the Green Climate Fund (GCF). The US$75,000 grant will support the strengthening of the country’s National Designated Authority (NDA) to the GCF, the organization of national consultations and the establishment of country-owned processes to “fast-track” access to GCF funding. Access to climate finance was also the theme of a seminar organized by the Government of Sweden in New York, with high-level speakers from Sweden, Bangladesh, Samoa and the UN Development Programme (UNDP).
In related news, the Nordic Council of Ministers launched a study that recognizes that, while public actors have a responsibility for deploying climate finance, the contribution of the private sector will need to be significant. The study focuses on Public Private Partnerships (PPPs), which are presented as a promising avenue for public authorities to engage with the private sector and ensure climate finance is leveraged and deployed effectively, thereby contributing to SDG 17 (Strengthen the means of implementation and revitalize the global partnership for sustainable development).
A study by the European Bank for Reconstruction and Development (EBRD) explains how issues around climate change-related policies affect national budgets and proposes a methodology for calculating budgetary risk arising from climate change-related policies.
On available resources, the Nordic Environment Finance Corporation (NEFCO) published updated information on its financing instruments, including the Arctic Council Project Support Instrument (PSI), which provides funding for Arctic Council-approved projects in areas, including, pollution prevention, climate change mitigation, cleaner production and energy efficiency. PSI focus areas include sectors that generate short-lived climate pollutants (SLCPs).
Increasing Resilience in the Caribbean, Sudan and Peru
Adaptation project news this month focused on the Caribbean, Sudan and Peru. In the Caribbean, the Caribbean Development Bank (CDB) approved US$11.44 million in financing to a project to reduce the vulnerability of 21,000 people to extreme rainfall and other climate change impacts in Saint Vincent and the Grenadines.
Belize launched the second phase of its Sustainable Tourism Program, which aims to support the implementation of the National Sustainable Tourism Master Plan 2030 in new and emerging tourist destinations in the country, while promoting disaster and climate resilience and environmental sustainability. This programme, supported by a US$15 million loan from the Inter-American Development Bank (IDB), mainstreams biodiversity and ecosystem services by, inter alia, supporting the development of nature-based tourist attractions.
The Adaptation Fund Board (AFB) approved a coastal adaptation project in Peru that will address the impacts of climate change on the country’s coastal marine ecosystem and fisheries, with funding for US$6.95 million.
On the African continent, a £10 million four-year programme aimed at enhancing climate resilience and environmental management, Adapt for Environment and Climate Resilience in Sudan (ADAPT!), is being rolled out with support from the UN Environment Programme (UNEP) and the UK Government. This project is one of several UNEP projects that aim to stop the “vicious cycle of climate change, resource scarcity and conflict” through support to communities on sustainable management and restoration of ecosystems in Sudan.
A Diversity of Mitigation Actions
As for mitigation, March brought news on a wide range of topics, from deforestation to green cities and gas flaring.
City leaders, meeting in Singapore, launched the Global Platform for Sustainable Cities (GPSC), as part of the Global Environment Facility’s (GEF) US€151.6 million Sustainable Cities Program. The GPSC will work with 23 cities, serving as a platform to share knowledge on integrated approaches to sustainable urban planning and financing, including in the area of climate change mitigation.
Thirty-nine civil society organizations in South America, Africa and South-East Asia will receive grants, at a total value of NOK300 million (US$36 million) per year, through the Norwegian International Climate and Forest Initiative (NICFI), aimed at reducing deforestation and supporting equitable resource distribution.
A workshop in Egypt, organized by EBRD, focused on addressing problems related to gas flaring in the country’s oil sector. According to EBRD, “capturing the nearly two billion cubic metres of gas flared in the country would be enough to provide five per cent of national energy needs and add US$ 300 million a year to the Egyptian economy.”
Good News Continue on Green Bonds
Good news on the green bonds front continued, with the issuance of two new climate bonds. In the Philippines, the Asian Development Bank (ADB) backed the issuance of a U$225 million climate bond, which is the first of its kind in the Asia and the Pacific region and in an emerging market. ADB’s support, in the form of credit enhancement to a geothermal facility, is the form of a guarantee of 75% of principal and interest on the bond.
The International Finance Corporation (IFC), part of the World Bank Group, issued a ten-year green bond, which raised US$700 million for climate-smart investments in emerging markets, specifically targeting renewable energy, energy efficiency and other areas that reduce greenhouse gas (GHG) emissions.
Carbon Pricing Under the Spotlight
A World Bank dialogue on carbon pricing brought together representatives from more than 30 developed and developing countries to take stock and discuss opportunities and challenges to using carbon pricing to reduce GHG emissions. Also, the Partnership for Market Readiness (PMR) and the International Carbon Action Partnership launched an extensive handbook on the design and implementation of emissions trading systems.
The World Bank’s Pilot Auction Facility for Methane and Climate Change Mitigation (PAF), which leverages private sector financing by providing a guaranteed floor price on carbon reduction credits, received the title of the ‘Carbon Deal of the Year 2016′ by the online news service Environmental Finance. The PAF, which in July 2015 sold price guarantees totaling 8.7 million tonnes of carbon dioxide equivalent (CO2e), has announced its second auction for May 2016.
A study by the World Bank discusses the scope for market mechanisms to implement “net mitigation” (mitigation beyond Annex I countries’ formal mitigation requirements under the Kyoto Protocol), in light of potential targets under the Paris Agreement.
Climate Finance Institutions Take Stock of Past Achievements
Climate finance-relevant publications by multilateral development banks (MDBs) and other climate finance institutions included a number of annual reports, evaluations, assessments and studies. The Climate Investment Funds (CIF) and the Nordic Climate Facility (NCF) launched their respective 2015 annual reports. CIF disbursements, as of 31 December 2015, totalled US$1.8 billion, with pledges from 14 contributor countries to mitigation and adaptation projects in 72 developing countries totalling US$8.3 billion.
The African Development Bank (AfDB) published its 2015 annual report for its CIF portfolio. The report highlights three developments that helped catalyze the portfolio’s advancement: high number of countries signing up to pilot programmes; cross-collaboration between work by CIF and other climate finance mechanisms; and restructuring by AfDB of its support to Africa in a climate-smart way. The IDB released its 2015 sustainability report. The European Investment Bank (EIB) published a leaflet on an evaluation of its financing for climate action in the EU in the period 2010-2014, and organized a workshop that explored the Bank’s current and future support to climate action in Africa, the Caribbean and the Pacific.
GCF and Adaptation Fund Boards Approve Strategies, Targets, New Partners
The GCF and Adaptation Fund both held Board meetings in March 2016. The GCF, inter alia, adopted strategies and policies to evaluate existing funding proposals, including the Fund’s first Strategic Plan that includes the GCF’s vision, operational priorities and an action plan until 2018. The AFB, inter alia, set new fundraising targets (US$80 million per year over the next two years) and elected Naresh Sharma (Nepal) as the Board’s new Chair.
The GCF and Adaptation Fund announced a number of new accreditations. The GCF accredited new 13 entities from the public and private sectors as its partner institutions, including the African Development Bank, EIB and IFC, raising the total of accredited entities to 33.
The Adaptation Fund accredited two new implementing entities, namely the CBD, and the Ethiopian Ministry of Finance and Economic Development. The entities will be eligible to propose projects to the AFB and implement them, if approved. According to the Fund, demand for implementing entities is growing due to record numbers of proposals submitted in the last two submission periods.