Climate Finance

Climate Finance

Subject – Environment

Context – COP 26 in Glasgow

Concept –

• Climate finance refers to local, national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change.
• The Convention, the Kyoto Protocol and the Paris Agreement call for financial assistance from Parties with more financial resources to those that are less endowed and more vulnerable.
• In accordance with the principle of “common but differentiated responsibility and respective capabilities” set out in the Convention, developed country Parties are to provide financial resources to assist developing country Parties in implementing the objectives of the UNFCCC.
  • The Paris Agreement reaffirms the obligations of developed countries, while for the first time also encouraging voluntary contributions by other Parties.

What is the financial mechanism? What are the other funds?

• To facilitate the provision of climate finance, the Convention established a financial mechanism to provide financial resources to developing country Parties.
• The financial mechanism also serves the Kyoto Protocol and the Paris Agreement.
• The Convention states that the operation of the financial mechanism can be entrusted to one or more existing international entities.
• The Global Environment Facility(GEF) has served as an operating entity of the financial mechanism since the Convention’s entry into force in 1994.
• At COP 16, in 2010, Parties established the Green Climate Fund (GCF) and in 2011 also designated it as an operating entity of the financial mechanism. The financial mechanism is accountable to the COP, which decides on its policies, programme priorities and eligibility criteria for funding.
• In addition to providing guidance to the GEF and the GCF, Parties have established two special funds—the Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF), both managed by the GEF—and the Adaptation Fund (AF) established under the Kyoto Protocol in 2001.
• At the Paris Climate Change Conference in 2015, the Parties agreed that the operating entities of the financial mechanism – GCD and GEF – as well as the SCCF and the LDCF shall serve the Paris Agreement.
• At COP 16 in 2010, Parties decided to establish the Standing Committee on Finance (SCF) to assist the COP in exercising its functions in relation to the financial mechanism of the Convention.
• The UNFCCC website includes a climate finance data portal with helpful explanations, graphics and figures for better understanding the climate finance process and as a gateway to information on activities funded in developing countries to implement climate action.