CLIMATE CHANGE FINANCE

• View HLF4’s ministerial plenary session on Climate Change Finance
  (from 01.51.09-02.38.03)
• HLF4 Building block on Climate Change Finance

The CDDE seeks to help countries share country level experience and knowledge to enhance aid effectiveness across the Asia-Pacific region. It supports wider aid effectiveness knowledge with on the ground examples of successes and lessons learned.

Analysis on how climate financing can be governed most appropriately in partner countries is beginning to inform debate on the design of climate change financing modalities. Decades of experience in aid financing offer important lessons. The Aid Effectiveness Principles in the Paris Declaration and the Accra Agenda help provide a framework within which to assess:

• The governance arrangements for climate change finance at the national level.
• How these arrangements are established to channel external sources of public finance.

Experience suggests it is critical to avoid complex and fragmented sources of climate change finance. It is vital to ensure developing countries have sufficient capacity to effectively absorb and use additional resources for their intended purposes. Furthermore, as development objectives and climate change strategies are strongly intertwined, policymakers will need to ensure complementarity between development and climate change objectives to achieve effective results on the ground.

• New* HLF4 outcome on Climate Change Finance (Para34)
  
• New* Asia Pacific Climate Change Finance and Development Effectiveness Roadmap 2011
• Africa outcome: The Nairobi Call for Action on Climate Change Finance and Development Effectiveness
• Making the Most of Climate Change Financing in Asia and the Pacific: Realizing development effectiveness
• Asia-Pacific Climate Change Finance and Development Effectiveness Workshop 2011 (12-13 September, 2011 in Bangkok)
• African Dialogue on Climate Change Finance and Development Effectiveness (21-23 September, 2011 in Nairobi, Kenya)

• Bangladesh CPEIR Inception Report
• Climate Finance in the Philippines
• Nepal CPEIR Final Report
• Thailand Report Baseline Assessment CFF

• Climate Public Expenditure and Institutional Review (CPEIR)
• UN Capital Development Fund’s facility for investment in local level climate resilience (LoCAL )
• Catalyzing Climate Finance – A guidebook on policy and financing options to support green, low emission and climate resilient development – version 1.0
• UNEP fit for funds
• Blending climate finance through National Climate Funds

• Key Lessons from Development Cooperation That Apply to Climate Change Financing
• Further resources
• Basic Introduction to the climate change debate
• Climate adaptation
• Climate mitigation

1. Key Lessons from Development Cooperation That Apply to Climate Change Financing

Introduction Analysis on how the emerging climate financing can be governed most appropriately in recipient countries is beginning to inform debate on the design of climate change financing modalities. Decades of experience in aid financing offers important lessons in this regard. In particular, the Aid Effectiveness Principles embedded in the Paris Declaration and the Accra Agenda help provide a framework within which to assess
(i) the governance arrangements for climate change finance at the national level,
(ii) how these arrangements are established to channel external sources of public finance. Experience to date suggests that it is critical to avoid the complex and fragmented sources of climate change financing and ensuring that developing countries have sufficient capacity to effectively absorb and use the additional resources for their intended purposes. Furthermore, as development objectives and climate change strategies are strongly intertwined, policymakers will also need to ensure complementarity between development and climate change objectives in order to achieve effective results on the ground.

Resource 1 Climate Change and Development – Key Principles to Inform Climate Change Financing

The OECD DAC has developed this fact sheet on how aid effectiveness and climate change financing relate to each other.

Resource 2 Making_the_Most_of_Climate_Change_Financing_in_Asia_and_the_Pacific_-_CDDE_Report_2010.pdf
The Facility has begun work with the OECD DAC, SIDA, the Asian Development Bank (ADB) and other partners in the Asia Pacific to support country led analysis of climate change financing arrangements through the lens of the Paris Declaration in Bangladesh, Cambodia, Indonesia, Philippines and Vietnam. A synthesis report Making the Most of Climate Change Finance in Asia and the Pacific was then written and a regional dialogue facilitated in Bangkok 19-20 October which led to the articulation of the Bangkok Call for Action which articulates how aid effectiveness principles can and should be applied to externally provided public sources of climate change finance.

2. Further resources

OECD Work on Climate Change and the ENVIRONET

The impact of climate change on our environment, our economies and our security is one of the defining issues of our era. The OECD also has a role in conducting climate change analysis, promoting environmentally and economically rational policies related to adaptation, mitigation, technology, financing and development. The history of the OECD’s work on climate change economics and policy dates back to late 1980s. The OECD works closely with governments to assist them to identify and implement least-cost policies to reduce GHG emissions in order to limit climate change, as well as to integrate adaptation to climate change into all relevant policy areas. In the wake of the economic crisis, the OECD is also looking at how measures that governments are taking to spur economic growth can best be formulated so that they could move towards a green, low-carbon economy. Given the global nature of the climate change challenge, and its widespread economic, social and environmental impacts, the OECD has a particular role to assist countries put international climate policy on a solid economic footing consistent with frameworks for development. The brochure OECD Work on Climate Change (LINK)provides an overview of the recent OECD work on climate change and the OECD Network on Environment and Development Co-operation (ENVIRONET) promotes and facilitates the integration of environment and climate change into all aspects of development co-operation. Building on lessons learned and best practices, the Network works towards enhancing policy co-ordination and coherence to achieve more rapid progress towards the Millennium Development Goals and creating a successful shift towards "Pro-Poor Green Growth".

UNDP

3. Basic Introduction to the climate change debate

Policy makers at both national and international levels are increasingly concerned about the impact of climate change on development and poverty reduction. Climate change has the potential to derail the global development agenda and roll back the achievements of the past decade.

The balance of scientific evidence points to increasing risks of serious, irreversible impact from climate change, including sea level rises, changing rainfall patterns and an increase in extreme weather events. These impacts will be felt earliest and hardest in developing countries, even though they contributed little to causing the problem. Developing countries are concentrated in the geographical zones most exposed to climate change, have economies and societies more vulnerable to its impact, and have fewer resources to fund adaptation. They faced reduced access to water, lower agricultural productivity, infrastructure damage and increased exposure to vector-borne diseases – all of which could threaten the lives and livelihoods of millions of people.

The Intergovernmental Panel on Climate Change is the leading international body for the scientific assessment of climate change and its environmental and socio-economic consequences. Further reading: Millennium Campaign, “Climate change and the MDGs”, 2008

Action on climate change falls broadly into two areas. The first is mitigation – namely, reducing the extent of climate change by curbing carbon emissions. This is primarily an issue for industrialised countries. The second is adaptation – actions designed to assist countries and communities to adjust to the effects of climate change so as to moderate harm.

4. Adaptation

Many development goals contribute, directly or indirectly, to successful adaptation. Improvements to nutrition, education, infrastructure and health all help to increase the resilience of communities in the face of climate change. However, business-as-usual approaches to development are unlikely to be sufficient. Specific measures need to be taken to identify climate change risks and ensure that they are taken into account in development planning.

In May 2009, the OECD Development and Environment Ministers issued Policy Guidance on integrating adaptation into development cooperation. It advises both national governments and development partners to integrate a ‘climate lens’ into development planning, implementation and monitoring at the national, sectoral, local and project levels. It calls for a ‘whole of government’ approach to climate change, improved monitoring of climate change impacts and innovative new financing mechanisms for adaptation.

OECD countries have acknowledged that there will be a need to fund adaptation in developing countries over and above current ODA commitments. New funding commitments and mechanisms are being discussed in preparation for Copenhagen. The principles of aid effectiveness, in particular country ownership, are equally applicable to adaptation.

The consensus is that adaptation and development go hand in hand. Developing a low-carbon economy can simultaneously address both the climate challenge and the current economic crisis, while providing a long-term path to energy security. The introduction of clean technologies can boost human development and economic growth, while increasing resilience to climate change. However, to achieve this we need to change our development paradigm towards a ‘greener’ model.

5. Mitigation

The United Nations Framework Convention on Climate Change (UNFCCC) is the principal mechanism for international action on climate change mitigation, supported by a UN Secretariat. It was strengthened by the Kyoto Protocol, which sets binding targets for 37 industrialised countries to reduce greenhouse gas emissions by, on average, 5% on 1990 levels by 2012. Recognising that developed nations are mainly responsible for current carbon levels as a result of 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of “common but differentiated responsibilities”. Negotiations are now underway on a successor agreement to the Kyoto Protocol, to be agreed at the UNFCCC Conference in Copenhagen in December 2009. Yvo de Boer, executive secretary of the UNFCCC, has said that the four essential questions for agreement at Copenhagen are:

• How much are industrialised countries willing to reduce their emissions of greenhouse gases?

• How much are major developing countries such as China and India willing to do to limit the growth of their emissions?

• How is the help needed by developing countries to engage in reducing their emissions and adapting to the impacts of climate change going to be financed?

• How is that money going to be managed?

Further reading: OECD, “Climate change mitigation: what do we do?”, 2009