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. For over a decade 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.
European Commission stepping up climate finance
Between 2007 and 2013 the European Commission provided around €4.5 billion in finance for climate-related projects through the European Union’s development and external assistance policy instruments for climate-relevant activities in developing countries.
Annual climate-related support has shown an upward trend, reaching €800-900 million in 2013. 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.
Between 2008 and 2013, around €300 million was channelled to least developed countries and small island developing states through the Global Climate Change Alliance (GCCA). This EU initiative acts as a platform for dialogue and exchange of experience on climate change and provides technical and financial supportto partner countries to integrate climate change into their development policies and implement projects that address it on the ground.
Climate change objectives will be fully integrated into the EU budget for 2014 to 2020 through an ambitious series of measures and targets. These include an over-arching target that at least 20% of the overall EU budget will be spent on climate-related activities.
The EU’s development policy will contribute to achieving this overall commitment, with an estimated €1.7bn of climate spending in developing countries foreseen in 2014-2015 alone. This is on top of climate finance from individual Member States.
More information about concrete climate-related projects in different countries and sectors supported by the EU budget, and by Member States, can be found in the brochures Supporting a climate for change and European Union Climate Funding for Developing Countries in 2013 .
Leveraging other sources of financing
Since 2007, the European Commission together with the Member States has established a number of EU Blending Facilities that combine grant funding with loans and cover different regions. These Facilities are designed to increase the leverage effect of external assistance and underpin achievement of the EU’s external priorities, while ensuring coherence with EU strategies and policies.
In 2010 Climate Change Windows were established in all Blending Facilities to improve the tracking and overall visibility of climate actions within these investment facilities. Climate Change Windows also aim to improve project design, so that low-carbon and climate-resilience considerations are incorporated in strategic infrastructure areas such as transport, energy and environment.
Since 2007 about €480 million in public grants has been committed under the Blending Facilities to more than 200 climate-relevant initiatives. These include investments in infrastructure projects as well as support to the private sector, particularly small and medium sized enterprises. This has leveraged €6 billion of loans from European public finance institutions and regional development banks. This corresponds to total project financing of more than €14 billion, benefiting both low and middle income countries.
Topped up by EIB loans
In addition, the European Investment Bank (EIB) provides climate finance to developing countries in the form of loans.
The EIB is among the world's biggest lenders for climate action, with at least 25% of its yearly lending devoted to addressing climate change. Between 2008 and 2012, the EIB invested almost €80 billion in climate change mitigation and adaptation projects in Europe and in emerging and developing countries outside Europe. Support to climate projects outside Europe has expanded considerably, particularly since 2010.
The year 2013 saw increased demand for investment in energy efficiency, renewable energy, resource management and adaptation across all regions outside the EU.