The European Union has long been the world's leading provider of climate finance through official development assistance (ODA). Climate issues have become increasingly integrated into broader development strategies. Since 2002 the EU has steadily increased climate finance for developing countries, by using traditional grant funding to leverage additional private sector contributions and loans from European financial institutions.
The European Commission has provided around €3.7 billion in finance for climate-related projects through its funding for action outside the EU, including fast start finance, since 2002. Its annual contribution over the last five years (2007-2011) through grants for projects dedicated to climate change exceeded €550 million, three times the annual average for 2002-2006 (€175 million). Between 2008 and 2012, €290 million was channelled to least developed countries and small island developing states through the Global Climate Change Alliance (GCCA), an EU initiative that acts as a platform for dialogue and exchange of experience on climate change and provides technical and financial support to partner countries to integrate climate change into their development policies and implement projects that address it on the ground. European Commission support has to a large extent been focused on energy (supporting both renewable and efficiency measures), forestry, agriculture, water management, biodiversity, disaster risk reduction and institution building.
Significant contributions from EU Member States must be added to this figure, as well as their fast start finance contributions for the years 2010-2012.
More information about concrete climate-change related projects in different countries and sectors supported by the EU budget can be found in the brochure "Supporting a climate for change" or at the Climate actions for a better development page of the EuropeAid website.
Since 2007, complement traditional grant funding and leverage additional funding from other sources, the European Commission together with EU Member States has established a number of so-called blending facilities covering different regions. These are the Latin-America Investment Facility, the EU-Africa Infrastructure Trust Fund, the Caribbean Investment Facility, the Asian Investment Facility, Investment Facility for the Pacific, the Investment Facility for Central Asia, and the Neighbourhood Investment Facility.
These facilities are innovative financing mechanisms to pool grants from the EU budget, the European Development Fund and the EU Member states with loans from European finance institutions and private investors. The facilities support infrastructure projects in different sectors and small and medium sized enterprises.
Since 2007, almost €1 billion in public grants has been committed to about 130 projects in various sectors. This has unlocked total project financing of more than €30 billion. More than one third of this amount (€12 billion) has been invested in projects addressing climate change.
To increase the transparency of climate change finance, Climate Change Windows have been created in all regional blending facilities. These "windows" indicate the financing and enable tracking of all climate change related projects funded through these facilities. They encompass both public and private investments in strategic areas like transport, energy, environment, water, sanitation and forests.
In addition, the European Investment Bank provides climate finance to developing countries in the form of loans. The EIB is among the world's largest lenders for climate action: at least 25% of its yearly lending is devoted to addressing climate change.
The Bank's investments in climate projects have been increasing. In 2011, the EIB invested €18 billion in climate action - nearly a third of its total lending volume. Of this amount, more than €2 billion was invested outside the EU. A similar amount is expected for 2012. In 2013, the EIB expects to lend at least €1 billion – and possibly more than €2 billion - to climate projects in developing countries, in line with its annual target and depending on the market and political environment.