Tag Archives: climate finance tracking

Increased understanding of how finance is mobilized can support efforts to spend resources wisely

November 16, 2016 |

 

Developed countries’ goal to ‘mobilize’ USD 100 billion per year by 2020 to address the climate action needs of developing countries will not close the global climate finance investment gap. However, it is an important political benchmark for assessing progress on climate finance within the context of multilateral negotiations. This provides policy makers with both challenges and opportunities.

On one side, reaching more consistent definitions for climate finance and eligible activities will be politically challenging. However doing so could promote transparency and help build trust between countries.

On the other, close scrutiny of the USD 100 billion could help to maximise its impact and help policymakers everywhere to learn lessons about what works and what works better in terms of ensuring international and national public resources drive private investment in climate action.

One word in the negotiating texts best encapsulates both the challenge and the opportunity – ‘mobilize’. The goal to ‘mobilize’ USD 100 billion a year was originally set at the international negotiations in Copenhagen in 2009. Last year’s Paris Agreement also refers to a ‘collective mobilization goal.’

CPI has helped to unpack the diversity of opinions about how this term should be applied. However, few disagree that in part this ‘collective mobilization goal’ is a recognition that implementing countries’ nationally determined contributions will require trillions not billions of dollars. To make this shift, public finance must be catalytic, driving private investment by tackling viability, risk and knowledge gaps that private actors cannot or are unwilling to bear.

In some sectors and markets, this means public finance will need to play more of a leading role in discovering, developing, and piloting new technologies and approaches that do not yet deliver returns sufficient to satisfy private investors, or which are perceived as having unmanageable risks.

Initiatives and studies from a range of organizations have explored different methodological approaches to estimate the extent to which public climate finance, support or policy can be said to have ’mobilized’ private climate-related investments. These include the co-financing approach proposed by multilateral development banks (MDBs), the methodology of the Technical Working Group composed of donors from the OECD member countries that was applied by the OECD and CPI in the “Climate Finance in 2013-14 and the USD 100 billion goal” report, and a CPI report on mobilized private finance for adaptation which explored the legitimacy and feasibility of measuring the more “indirect” impacts of public finance and support on mobilizing finance.

The accounting methods and data provided in these reports are helping countries and individual actors to understand two things. Firstly, what is being counted and what is being excluded in different ’mobilization’ approaches. Secondly, the complex interplay between different sources of finance and the range of actors and instruments involved in its delivery – work that CPI has led since 2010.

The Paris Agreement may also help. It charges the UNFCCC’s Subsidiary Body for Scientific and Technological Advice (SBSTA) with developing accounting guidelines for national-level reporting by 2018 to support better tracking of finance provided and ‘mobilized’ through public interventions.

Reaching agreement will be a complex, technical and politically challenging exercise for the SBSTA but will build on existing work to further enhance transparency around domestic climate finance and allow decision-makers to assess more easily the role different actors in the financial system play in achieving overarching economic and environmental goals.

CPI remains committed to supporting this process and to improving decision makers’ understanding of climate finance flows at the global, national and local levels.

Since 2010, CPI has supported decision makers from the public and private sectors, at international, national and local levels, to define and track how climate finance is flowing from sources and actors, through a range of financial instruments, to recipients and end uses. Providing decision makers with robust and comprehensive information helps them to assess progress against real investment goals and needs. It also improves understanding of how public policy, finance and support interact with, and drive climate-relevant investment from diverse private actors, and where opportunities exist to achieve greater scale and impact.

This blog is part of a series on climate finance tracking challenges. Read more here.

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National-level climate finance tracking can help countries meet NDC goals effectively

November 10, 2016 |

 

Around the world, 74% of total global climate finance and over 90% of total private climate finance is raised and spent in the same country. As low-carbon, climate-resilient assets become increasingly attractive to national actors compared to the alternatives, action on climate is largely happening within national contexts.

In fact, the domestic bias of climate finance is likely understated. CPI’s Global Landscape of Climate Finance reports have repeatedly highlighted substantial data gaps around domestic budgets in particular.

In 2014, the majority of global climate finance was raised and spent in the same country. Because domestic investment dominates, it is vital to get policies right. This requires robust national-level climate finance tracking.

The majority of finance was raised and spent in the same country. Because domestic investment dominates, it is vital to get policies right. This requires robust national-level climate finance tracking.

Clearly, understanding how finance flows within countries is key to accelerating countries’ transitions toward low-carbon and climate-resilient economies.
CPI has worked with counterparts in Germany, Indonesia and most recently Côte d’Ivoire to track their climate finance and other organizations are also tracking climate finance at the national level. For example, Institute for Climate Economics (I4CE) used CPI’s approach as a foundation to conduct a similar exercises in France, Trinomics has done similar work in Belgium, and the United Nations Development Programme (UNDP) has worked with seven Asia-Pacific countries to understand climate-related public expenditures in their national budgets.

While these countries have made a start, more work is urgently needed as improved national tracking will critically inform countries’ efforts to implement their Nationally Determined Contributions (NDCs) submitted under the Paris Agreement. The International Energy Agency (IEA) has estimated that, to implement NDCs, energy efficiency and low-carbon technologies require$13.5 trillion in investment over the next 15 years. Ensuring that investment from a range of national and international sources is optimized will help ensure impact and value for money.

There are many benefits to improving national-level climate finance tracking systems

Identifying, tagging, and tracking budget allocations that respond to climate change challenges enhances governments’ ability to allocate appropriate resources at the national and local levels and ensure they are being spent as intended.

Increasing understanding of what different domestic and international, public and private actors are investing, in which climate-relevant activities, and what instruments they are using to deliver finance, can help identify blockages, and highlight opportunities to better coordinate spending and reallocate finance to areas where it will have more impact.

Extending the scope of tracking exercises beyond climate finance can reveal how much public money is flowing to support business-as-usual investments including in fossil fuels, and unsustainable land use. Understanding where public incentives are misaligned with climate goals can highlight opportunities to improve policies and ensure public spending is coherent.

CPI has designed related tools to inform decision makers thinking around this broader question and is applying them in the context of REDD+ related finance in Côte d’Ivoire to support the country’s work to develop a REDD+ strategy.

Ultimately, such tracking provides a basis for decision makers to ensure that limited domestic and international public resources are targeted where and how they are needed most to help countries achieve their goals. Effective tracking provides a starting point to inform discussions about what is happening, and informs the design of more cost-effective policies and financial instruments to mobilize investment.

CPI remains committed to improving understanding of climate finance flows at the national and local levels.

Since 2010, CPI has supported decision makers from the public and private sectors, at international, national and local levels, to define and track how climate finance is flowing from sources and actors, through a range of financial instruments, to recipients and end uses. Providing decision makers with robust and comprehensive information helps them to assess progress against real investment goals and needs. It also improves understanding of how public policy, finance and support interact with, and drive climate-relevant investment from diverse private actors, and where opportunities exist to achieve greater scale and impact.

This blog is part of a series on climate finance tracking challenges. Read more here.

Click here to sign up for updates on this and other aspects of our work.

If you would like our support tracking your climate finance flows, get in touch here.

This article first appeared on Public Finance International.

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What CPI Has Learned in Six Years of Tracking Climate Finance

November 4, 2016 |

 

Since 2010, CPI has supported decision makers from the public and private sectors, at international, national and local levels, to define and track how climate finance is flowing from sources and actors, through a range of financial instruments, to recipients and end uses. Providing decision makers with robust and comprehensive information helps them to assess progress against real investment goals and needs. It also improves understanding of how public policy, finance and support interact with, and drive climate-relevant investment from diverse private actors, and where opportunities exist to achieve greater scale and impact. Below, I share a few lessons we at CPI have learned from six years of work on these issues.

Sound data enables decision makers to evaluate progress towards their goals

Assessing whether financial resources are being used wisely, and what are the entry points to further scale up investments, requires sound data to identify sources of finance, the mix of financial instruments and investments, and the uses to which finance is put. The more comprehensive, clear and comparable data is, the easier it is to draw insights and share best practice.

The data produced by CPI’s tracking work is referenced by donors and policymakers in the context of the UNFCCC negotiations and used in national development plans and strategies drawn up by governments and financial institutions. It forms the solid foundation on which ours and others analysis is built.

Understanding how public and private climate finance interact is key

Robust information about how public resources and private interests interact will help to ensure public interventions effectively target, and eliminate the cost, risk, and knowledge gaps that impede private investors. Spent wisely, pubic resources can drive private investment while reducing the burden on taxpayers, optimizing returns for international and domestic public and private investors alike. CPI has focused much of its work at this intersection of the public and private actors.

CPI’s Global Landscape of Climate Finance highlights that private investors strongly prefer domestic markets and that, while public finance remains the driver of much private investment, it will not be enough on its own to meet countries investment goals. Familiarity with and confidence in domestic policies and regulatory frameworks is essential to attract climate-relevant investment because investors must have confidence they can balance risks and returns. National and international public finance play key roles building projects’ bankability by covering viability and knowledge gaps, driving huge increases in investment from the private sector.

CPI’s work analysing projects and portfolios of investments and tracking how to measure how public finance mobilizes private investment provides tools for policy makers to determine how effective public interventions have been. It also informs our work supporting the development of innovative solutions to drive further investment in climate action.

Significant progress has been made on tracking in the last six years

Significant progress has been made on tracking climate finance in the last six years helped in part by CPI’s tracking work and our focus on convening public and private climate finance actors to share insights and experiences and integrating both public and private source of climate finance data.

CPI’s reports were the first to provide a comprehensive picture of all climate finance data reported to or by other organisations including the Organisation for Economic Co-operation and Development (OECD), and Bloomberg New Energy Finance. We highlighted opportunities to improve data collection and harmonize reporting could help build a more robust overview.

The latest edition of CPI’s spaghetti chart showing the flow of climate finance from sources to end uses

Landscape main flow diagram

The engagement of key stakeholders in compiling these reports, and particularly providers of international public finance, has informed efforts by multilateral development banks, bilateral financial institutions and national development banks to close some of the gaps we reported in 2011. Our tracking methodologies have also been applied by others who have themselves developed innovations to suit national circumstances.

Many tracking gaps and challenges remain, and these are the subjects of a blog series that will be published over the coming weeks. By continuing to shed light on the intersection between public policy, finance and private investment, our work will continue to help decision makers optimize the use of their resources.

 

 

 

 

 

 

 

 

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Tracking climate finance can support better policy in developed and developing countries

December 12, 2014 |

 

Climate finance tracking is one of the topics under discussion at the international climate negotiations taking place in Lima this week. Our work on tracking climate finance for countries like Germany and Indonesia and in upcoming reports for organizations has demonstrated the benefits of mapping climate finance flows. This video shares some of the insights from the recent Landscape of Public Climate Finance in Indonesia we carried out with the Ministry of Finance in Indonesia and describes how it is supporting Indonesian policymakers to develop more effective tracking systems and policies.

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