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Climate Finance Essentials

Module 01

Climate Finance Essentials
Lesson 1

Key Concepts and Examples of Climate Finances in Practice
Presentation Script

Climate Finance Essentials
Lesson 1 – Key Concepts and Examples of Climate Finances in Practice

Presentation Script

1. Home

Welcome to this e-course on Climate Finance. A large part of solving the climate
change challenge is using climate finance in a transformative way to enable the
transition to low-carbon and climate-resilient growth. In this course, you will
learn key concepts and draw from illustrative examples to build a working
knowledge of climate finance.
Click Next to begin.

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Climate Finance Essentials
Lesson 1 – Key Concepts and Examples of Climate Finances in Practice

Presentation Script

2. Introduction

In this first module of the course, you will become familiar with the key concepts
of climate finance, investment needs and financial flows. You will cover this
material in three lessons, shown here.
Take a moment to become familiar with the key questions addressed in Module
1.

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and the magnitude of the investment challenge. By the end of this lesson. you will also be able to identify how climate finance can support low-carbon and climate-resilient growth.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 3. You will also learn the evolving global finance architecture in the context of the United Nations Framework Convention on Climate Change negotiations. Key Concepts of Climate Finance In this lesson. Page 3 of 32 . you will learn key concepts such as the need for climate finance to help countries achieve low-carbon and climate-resilient growth in addressing the climate change challenge.

the atmospheric concentrations of three major greenhouse gases carbon dioxide.have increased to levels unprecedented in the last 800.to fully understand the climate change challenge. Page 4 of 32 .000 years. methane. and nitrous oxide . As for global mean surface temperature. and models show that we are on our way to 3 and 4 degrees warming by 2100 with no additional mitigation efforts.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 4. and secondarily from net land use change emissions. emissions must reduce by 50% from 1990 levels by 2050 to limit warming to 2 degrees. The climate change challenge First. Carbon dioxide concentrations have increased by 40% since pre-industrial times. As stated in the World Bank report “Turn Down the Heat. Why a 4 Degree world must be avoided”. primarily from fossil fuel emissions. each of the last three decades has been successively warmer at the Earth's surface than any preceding decade since 1850. According to the recently published report by the Intergovernmental Panel on Climate Change (IPCC). let us look at what is currently happening with emissions and surface temperature .

while maintaining development priorities. Addressing the causes and impacts of climate change. Climate finance is therefore vitally important to solving the global climate change challenge. Developing countries are particularly vulnerable to climate change and are already suffering from severe flooding. and planning for a resilient future. with the poorest and most vulnerable hit the hardest. all requires additional financial resources. climate change threatens the health. The climate change challenge Climate finance is necessary to combat this climate change challenge. Page 5 of 32 . longer droughts. left unchecked. crop damage and biodiversity loss. We know that.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 5. homes. and livelihoods of millions of people around the globe.

Investment needs vary by country and the size. depends on the mitigation and adaptation activities desired. The critical need for climate finance While there is no internationally agreed definition at present for climate finance. These ranges also illustrate that the overall dollar amount for climate finance needed to combat climate change will be evolving as the world continues to grapple with how it plans to respond to the challenge. nature and timeline of mitigation and adaptation interventions.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 6. Page 6 of 32 . Take a moment to review the various ranges of additional resources required for addressing climate change. How much climate finance is required to achieve lowcarbon and climate-resilient growth. it is generally thought to refer to financial resources invested in mitigation and adaptation measures. require significant additional investments compared to business as usual. as well as adaptation interventions. You can see that mitigation.

to which we will turn to now.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. the Parties identified finance as a critical issue. At the 13th Conference of the Parties in Bali in 2007. Climate Finance Architecture under the UNFCCC The international community is taking action on climate finance and the investment challenge under the United Nations Framework Convention on Climate Change (or UNFCCC). Page 7 of 32 . pursuing enhanced action with a financial architecture under the UNFCCC.

This emerged at the 15th Conference of the Parties in Copenhagen in 2009. Click on the button to learn more. UNFCCC . Industrialized countries party to the Convention agreed to a goal of mobilizing jointly USD 100 billion dollars a year by 2020 to address the needs of developing countries.1.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. parties agreed to what is known as ‘Fast Start Financing' or initial funds approaching USD 30 billion dollars to concrete actions in developing countries. Page 8 of 32 .15th COP 2009. leading to the USD 100 billion dollar goal. At the same time. Copenhagen One main aspect of the finance architecture is the commitment to mobilize resources.

Click on the button to learn more about the GCF.16th COP 2009. Governments at the 16th COP in 2010 in Cancun decided to establish a Green Climate Fund (or GCF) as an operating entity of the financial mechanism of the Convention. Page 9 of 32 . In order to scale up the provision of long-term financing for developing countries.2 UNFCCC .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. Cancun Another main aspect of the finance architecture under the Convention is the delivery of finance.

and decisions were made around the governing instrument for the GCF. UNFCCC . Page 10 of 32 .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. Durban The 17th COP in 2011 in Durban launched the work of the Green Climate Fund.17th COP 2011.3.

further defining the roles and functions.1 SC . mobilized and delivered finance. At the 17th COP.17th COP 2011.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. Parties decided to establish a Standing Committee on Finance (or SC) to assist the Conference of the Parties in exercising its functions in relation to the financial mechanism of the Convention. as well as composition and working modalities. the SC launched its work. Page 11 of 32 .3. Durban Another main aspect of the finance architecture under the Convention that evolved in Durban is the institutional arrangements to provide oversight to the planned.

18th COP 2012. the standing committee agreed to establish clarity in the delivery of climate finance. Doha At the 18th COP in Doha in 2012. Page 12 of 32 .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7.4 UNFCCC . focusing on adaptation finance in 2014. particularly through preparing an assessment of climate finance flows starting in 2014 and to organize a forum for climate finance communication.

the essential requirements to receive.19th COP 2013. The general message from Warsaw was to gain clarity on the delivery of climate finance.5 UNFCCC . Warsaw The finance architecture further evolved at the 19th COP in 2013 in Warsaw. program and disburse financial resources from the Green Climate Fund. where Parties welcomed the establishment of the independent GCF secretariat and the selection of the Executive Director of the GCF by the GCF Board.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. manage. with a large emphasis on the need to finalize as soon as possible. Page 13 of 32 .

6 UNFCCC – 20th COP 2014. generated much conversation around climate finance. and African countries. which should go beyond current targets.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. Ultimately. Lima The 20th COP in 2014 in Lima. or LDCs. policy frameworks. and set new levels of ambition for the Intended Nationally Determined Contributions (or INDC's). Governments also noted that urgent support was required for developing countries to build institutional capacities and enable private sector participation. particularly in Least Developed Countries. Small Island Developing States. the Lima Call for Climate Action reiterated the global objective of holding global temperature increase limits below 1.5 or 2 degrees Celsius compared to preindustrial levels. including a call for developed countries to “enhance the quantitative and qualitative elements of a pathway” for 2016 through 2020. Page 14 of 35 . or SIDS. Peru. Click on the button to learn more. and methodologies that improve the transparency of climate finance projects. It also requested Parties continue enhancing enabling environments.

Click on each button to learn more.1 Finance architecture under the UNFCCC Another major topic in Lima was the readiness and preparatory support for the GCF.6. Governments also urged the GCF to accelerate the start of its Private Sector Facility. or when 50% of all pledges are received. Governments welcomed the 10. Page 15 of 35 . the GCF will enhance climate finance deployment. Once operationalized.2 billion dollars in pledges to date and noted that the GCF will be able to make funding decisions no later than April 2015.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7.

This Dialogue provides a unique opportunity for Ministers to engage with each other to reflect on the current institutional arrangements and the information tools for climate finance under the UNFCCC. Page 16 of 35 .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script Ministerial Dialogue For the first time. the Conference of the Parties decided to convene a biennial High-level Ministerial Dialogue on Climate Finance. and to further discuss their potential for scaling up funding. which launched at COP 20 in Lima.

2 Finance architecture under the UNFCCC (cont. Parties to the Convention worldwide will be making efforts in preparation for this critical climate negotiations meeting. Leading up to Paris. visit the UNFCCC website.6. Page 17 of 35 .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. which you can do by clicking the logo on-screen.) The next international climate negotiations are the 21st COP in Paris in 2015. This is a landmark date for reaching agreement on new ways forward in scaling up climate finance and overall efforts in tackling climate change. For the latest information. where securing a universal climate change agreement in 2015 will be discussed.

Click on the button to see how this amount compares to other global expenses. 1 trillion dollars in total. nevertheless.6. Page 18 of 35 . or in other words. This is far below the UNFCCC goal to mobilize a 100 billion dollars a year by 2020. The gap between actual and needed funds for mitigation and adaptation is large.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 7. The most recently released Global Landscape of Climate Finance 2013 report by Climate Policy Initiative (CPI) finds that global climate finance flows have plateaued at USD 359 billion. the investment challenge is significant.3 The magnitude of the investment challenge While there has been great momentum at the international level in climate finance.

reduction of subsidies for GHG-related activities in various sectors can achieve emission reductions as well. By removing subsidies for fossil energy. according to the IPCC. it is dwarfed when compared to other global expenses. Page 19 of 35 . national governments poured USD 544 billion into fossilfuel subsidies. and at the same time free-up resources for climate finance. Also. But. like fossil fuel subsidies. These subsidies are used by governments to keep the price of fossil energy artificially low. In 2012. governments can create favorable conditions for alternative energy.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script Other Global Expenses The magnitude of the climate finance investment challenge may appear daunting at first.

Participant Question Let’s take a moment to reflect on your own experience with climate finance.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 8. How can climate finance help to advance low-carbon and climate-resilient growth in your country? Page 20 of 35 .

How can climate finance support low-carbon and climate-resilient growth? More and more countries are integrating low-carbon and climate-resilient growth into sustainable development plans and investment decisions. many developing countries have begun to integrate climate change considerations into national development plans. focusing on different priorities according to their national circumstances and capacities. Page 21 of 35 . With support from developed countries. development institutions.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 9. as well as international support. the private sector and civil society.

help enable national climate-friendly investing and catalyze more climate finance in order to transition to low-carbon and climate-resilient growth.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 9. as depicted in the framework displayed. cover costs and risks. Resources are required to build national capacities. Page 22 of 35 .1 How can climate finance support low-carbon and climate-resilient growth? Countries require diverse climate finance investments to carry forth such climate change considerations in their national development plans.

Page 23 of 35 . Take a moment to read and consider this list. which can help address climate change and shift countries toward a low-carbon and climate-resilient growth pathway. we see the range of interventions that are made possible by climate finance.2 How can climate finance support low-carbon and climate-resilient growth? With climate finance support available. to make these types of interventions possible.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 9. countries can pursue any combination of national-level interventions that support low-carbon and climate-resilient growth. After reviewing. The next challenge is how to mobilize climate finance investments. particularly in developing countries.

Page 24 of 35 . climate finance can usually be used to refer to different investments. Click on each of the buttons to learn more. Typology of investments that climate finance can cover According to common practitioner use.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 10. We will now review a typology of investments that climate finance is used to cover.

the present value of the capital and operating costs of a solar power plant less the present value of the capital and operating costs of the natural gas unit displaced. influencing where investors decide to put their money.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script Incremental Costs The incremental cost is the present value of the extra capital and operating costs associated with a mitigation or adaptation measure over its lifetime. for example. Page 25 of 35 . Incremental costs often make the difference in the final investment decision. Climate finance is provided to incentivize the shift to mitigation or adaptation technologies by compensating for the increase in cost associated with these options. and are generally funded by public climate finance resources. Click on the button to view a graph displaying the annual investment flows for mitigation activities over the next two decades.

Page 26 of 35 . and decreasing investment in the two high emitting technologies represented: fossil fuel power plants without carbon capture and storage.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script This graph shows the change in annual investment flows for mitigation activities from the average baseline level over the next two decades.increasing resources dedicated to low-carbon technologies. This underscores that investment needs are evolving in the direction of addressing climate change. What is interesting here is that such investment changes based on model studies and model comparisons reflect a significant shift in investment behavior . and extraction of fossil fuels.

the investment in wind turbines less the investment that would have been required for the coal generating unit displaced. for example.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script Incremental Investment The incremental investment is the extra capital cost required to implement a mitigation or adaptation measure. Incremental investment is generally covered by private sources of funding. Page 27 of 35 .

Page 28 of 35 .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script Cost to Remove Barriers Climate finance also helps cover the costs to remove barriers .both domestic and foreign . Click on each of the highlighted icons to learn more about the types of potential barriers and then click on the button for additional considerations.to technology introduction and create an enabling environment that promotes low emissions and climate resilient development plans.

Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script Page 29 of 35 .

and the Adaptation Fund (or AF) under the Kyoto Protocol.the Green Climate Fund (or GCF) under the Convention. Click on the button to learn more. The UNFCCC Finance portal provides updated information on these funds. These special funds help developing countries in addressing the climate change challenge. Page 30 of 35 . the Least Developed Countries Fund (or LDCF) . Climate finance funds under UNFCCC To help manage delivery and deploy climate finance to cover the types of costs just mentioned.both managed by the Global Environment Facility (or GEF) .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 11. parties to the UNFCCC Convention have established four special funds: Special Climate Change Fund (or SCCF).

Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script Page 31 of 35 .

World Bank Examples of Climate Finance Funds and Facilities Outside of the UNFCCC. Page 32 of 35 .Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 12. The World Bank has established or housed a number of funds and facilities that are also helping developing countries with climate finance. a number of other bilateral and multilateral funds were created in past years. Click on each of the logos to learn more.

commercial and residential). with a total program cost of US$147. Both sectors are identified as ready for scaling-up of investment. Climate finance supporting Colombia’s sustainable transport and energy goals A concrete example of climate finance helping countries transition to low-carbon and climate-resilient growth.urban transport and energy efficiency. Click on the button to learn more.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 13. it is estimated that the CTF Efficiency Program would save 4.9 Mt CO2e over a 20-year period. Page 33 of 35 . and as exhibiting high potential for transformation change in terms of shifting investment patterns onto a lower carbon path.2 million. is funding from the Clean Technology Fund (or CTF) which is supporting Colombia's implementation of abatement measures in two key sectors -. through use of CTF resources. Through the specific interventions in the targeted three consuming sectors (industrial.

delivery and oversight of climate finance to developing countries now and for the future. Summary In summary. Page 34 of 35 . in order to help countries address the climate change.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 14. In the next lesson. you have seen how climate finance is in critical need. climate finance makes it possible for countries to implement interventions for low-carbon and climate-resilient growth. you will become more familiar with the current landscape of climate finance and what instruments are critical to mobilizing more climate finance to fill the resource gap. The finance architecture under the UNFCCC Convention has evolved to encompass mobilization. if mobilized. While the magnitude of the investment challenge seems large.

Page 35 of 35 . References and Resources You have reached the end of Lesson 1. Displayed are some links that you may visit for additional information.Climate Finance Essentials Lesson 1 – Key Concepts and Examples of Climate Finances in Practice Presentation Script 15.