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What Is Climate Finance? Definitions to Improve Tracking and Scale Up

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Published: July, 2014

This brief explains CPI’s understanding and definition of key climate finance terms and the reasons for these definitions to inform the debate and build a common understanding among stakeholders.

Summary

• Policy makers, investors, financial intermediaries and analysts do not always have the same understanding of key climate finance terms and concepts. Building a common understanding of key climate finance terminology would improve ongoing discussions on how best to track climate finance, clarify efforts to measure its effectiveness, and help identify where public sector interventions can best impact the scale up of climate finance.

• In its Global Landscape of Climate Finance studies, CPI applies a definition of climate finance which counts public and private investment costs plus public framework expenditures but excludes revenue support. We use this to track current climate mitigation and adaptation financing, while reducing double counting as far as possible. In detailed case studies, we also analyze other costs and public revenue support provided over the lifetime of investments.

• Clarifying project-level climate finance terminology can help policymakers
better understand the range of options available for public actors to both reduce the costs and boost the revenues of low-carbon and climate-resilient projects in order to make investment more financially attractive for the private sector. It also helps to show that public framework expenditures are an essential part of the transition towards low-carbon and climate-resilient economies.