International climate finance
Significant financial resources will be needed to help developing countries deal with climate change. The European Union is the largest contributor of climate finance to developing countries and the world's biggest aid donor, collectively providing more than half of global official development assistance (ODA). Climate change is being increasingly integrated into the EU's broader development strategy.
The EU’s Global Climate Change Alliance (GCCA) initiative provides technical and financial support to developing countries to integrate climate change into their development policies and budgets, and to implement projects that address climate change on the ground. The GCCA is also a platform for dialogue and exchange of experience.
Scaling up climate finance
While continuing to invest in domestic climate action, the EU is scaling up climate finance to help the poorest and most vulnerable countries mitigate and adapt to climate change.
This means that:
- At least 20% of the EU budget will be spent on climate action by 2020.
- At least €14 billion, an average of €2 billion per year, of public grants will support activities in developing countries between 2014 and 2020.
- Compared to the average level in 2012-2013, funding for international climate action will more than double.
The EU and its Member States exceeded their commitment to provide €7.2 billion in "fast start finance" over 2010-2012 for immediate action on the ground in developing countries. Despite difficult economic circumstances, they provided €7.34 billion.
In 2013, funding to countries in need amounted to €9.5 billion, from public budgets and other development finance institutions. In 2014, contribution by the EU and its Member States reached €14.5 billion.
To scale up support for the poorest and most vulnerable, the EU has launched a new phase of the Global Climate Change Alliance (GCCA+), with an expected commitment of around €350 million for 2014-2020. This will support least developed countries (LDCs) and small island developing states (SIDS) in adapting to the impacts of climate change and integrating climate change resilience in their overall development planning and implementation.
Contributing to the $100 billion goal
The EU remains committed to contributing its fair share towards the developed countries’ goal of jointly making available USD 100 billion per year by 2020 to support developing countries.
As part of the Paris Agreement, this goal was extended until 2025, prior to which a new collective goal will be set.
The funding will come from a wide variety of public and private, bilateral and multilateral, and alternative sources of finance in the context of meaningful mitigation action and transparent implementation by developing countries.
The EU is calling for emerging economies to also contribute in line with their respective capabilities and responsibilities.
The EU and its Member States have set out their strategies and approaches for mobilising more climate finance by 2020. Scaling up finance will go hand-in-hand with solid preparatory work in both developed and developing countries.
Capitalising the Green Climate Fund
The Green Climate Fund (GCF) was set up in 2010 at the Cancún climate conference (COP 16). This UN fund has a central role to play in channelling financial resources to developing countries and catalysing private climate finance.
EU Member States have pledged nearly half of the fund's resources: USD 4.7 billion.
The Fund recently approved its first eight investments. Over time, the Fund aims for a 50:50 balance between funding for mitigation and adaptation action.
Leveraging climate-friendly investments
Countries need to attract additional public and private financing to transition to a climate-friendly economy and drive sustainable economic growth. International climate finance should be used as a lever to incentivise climate-resilient and low-carbon investments, complementing domestic resources in developing countries.
The EU's approach is twofold:
- to provide grant funding directly to the poorest and most vulnerable countries, and
- to use grant funding to leverage private investment by combining grants with loans and equities from public and private sources, including bilateral and multilateral development banks.
For example, the EU and Member States have since 2007 established a number of blending facilities that combine grant funding with loans and cover different regions.
Through these blending facilities, the EU has:
- provided grant finance to over 240 blended projects in 2007-2014 ,and
- helped unlock investments in partner countries by combining EU grants with public and private financing: more than €1 billion in EU grants has been committed to green projects worth a total of €25 billion in low- and middle-income countries.