Climate Finance: Key Concepts and Ways Forward

Climate finance is fundamental to curbing anthropogenic climate change. Compared, however, to the negotiations over emissions reduction timetables, commitments, and architectures, climate finance issues have received only limited and belated attention. Assuring delivery and appropriate use of the financial resources needed to achieve emissions reductions and secure adaptation to climate change, particularly in developing countries, is as vital as agreement on emission caps. Yet, a comprehensive framework on financing for mitigation and adaptation is not in sight. Developed and developing countries cannot agree on even the fundamentals of what should be included (e.g. should private finance through carbon markets be included?), let alone the level and terms of financing commitments, regulatory and other mechanisms, or governance structures.

This impasse, which reflects a lack of trust between developed and developing countries, has manifested itself in basic disagreements over three main issues relating primarily to mitigation finance: first, the necessity of credible and substantial developed country commitments on public funding; second, the role of private finance; and third, the institutions and governance structures to ensure equity and environmental effectiveness.