Climate Action

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International climate finance

Policy

Significant financial resources are needed to implement the Paris Agreement. The EU continues to support climate action in developing countries.

The EU, its Member States (including the UK) and the European Investment Bank are together the biggest contributor of public climate finance to developing countries providing €23.2 billion in 2019, a 6.9% increase compared to 2018. The total without the UK stood at €21.9 billion, a 7.4% increase compared to the total for the EU-27 in 2018.

They are also the world’s top provider of official development assistance (a total €75.2 billion in 2019), with climate action being increasingly integrated into the assistance.

Making finance flows consistent with climate goals

Under the Paris Agreement, countries committed to make finance flows consistent with a low-emission, climate-resilient pathway, to help achieve the long-term climate goals.

In this context, the EU has launched an ambitious Action Plan on Financing Sustainable Growth. The EU also supports developing countries in improving their conditions for mobilising low-carbon finance.

In October 2019, the EU together with relevant authorities from Argentina, Canada, Chile, China, India, Kenya and Morocco (further countries have now joined), launched the International Platform on Sustainable Finance. The Platform aims to scale up the mobilisation of private capital for environmentally sustainable investment.

European Commission contribution

In 2019, the European Commission provided €2.5 billion to developing countries, the majority of which tackles climate adaptation activities.

The Commission is on track to meet its pledge to provide at least €14 billion (or an average of €2 billion a year) to support climate activities in developing countries in the period 2014-2020.

Furthermore, 20% of the whole EU budget for 2014-2020 is spent on climate-related actions – and the Commission has proposed raising this share to at least 25% for 2021-2027.The Council considers the target should be 30%.

In addition, the European Investment Bank provided €3.1 billion in climate finance to developing countries in 2019. It finances, for example, energy efficiency and renewable energy projects in Africa and other regions, and often blends funds with Commission and EU Member State agencies.

An EU flagship initiative – Global Climate Change Alliance+

The main channel for EU support to policy dialogue and specific, targeted climate action in developing countries is the Global Climate Change Alliance Plus (GCCA+).

Grant funding for this initiative increased from €317.5 million in the first phase (2007-2014) to €420 million in the second phase (2014-2020).

The GCCA+ has a strong focus on Least Developed Countries and Small Island Developing States (SIDS) as they are most vulnerable to climate change.

The overall objective is to foster policy dialogue and cooperation on climate change between the EU and developing countries.

Priority areas:

  • Mainstream climate change into national development strategies
  • Increase resilience
  • Support the formulation and implementation of adaptation and mitigation strategies

EU External Investment Plan

The EU will mobilise innovative financial instruments, with particular focus on the EU External Investment Plan, to support the preparation and financing of bankable climate-relevant development projects.

The plan will encourage investment in the EU's partner countries in Africa and the EU Neighbourhood region through:

  • The European Fund for Sustainable Development (EFSD), which includes a financial guarantee and blending instruments to leverage much more public and private investment in sustainable development.
  • Technical assistance to enable investors and businesses to develop bankable projects, and support for regulatory improvements.
  • Improving business environment and investment climate in partner countries, including through regular dialogue with governments, businesses and other stakeholders.

With a contribution of €4.1 billion from the European Commission, the plan is expected to leverage more than €44 billion of investments by 2020.

It will promote inclusive growth, job creation and sustainable development and so tackle some of the root causes of irregular migration.

Contributing to the $100 billion goal

The EU remains committed to contributing towards the developed countries’ goal of jointly mobilising from different sources USD 100 billion per year by 2020 to support developing countries.

The goal was extended until 2025 before a new collective goal is set.

The funding will come from a wide variety of sources – 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 existing and potential contributors to also finance climate action in developing countries in line with their respective capabilities and responsibilities.

In September 2019, the OECD published a report on developed countries’ climate finance for climate action in developing countries. It shows that developed countries are making progress on climate finance and the indications are that the upward trend will continue. Climate finance to developing countries reached USD 71.2 billion in 2017, up from USD 58.6 billion in 2016.

Capitalising the Green Climate Fund

The Green Climate Fund was set up in 2010 to support developing countries in reducing their greenhouse gas emissions and adapting to climate change.

Since 2014, it has gathered initial pledges worth USD 10.3 billion. EU Member States have pledged nearly half of these: USD 4.7 billion.

In the first Green Climate Fund replenishment in October 2019, 27 countries (of which the vast majority EU Member States) pledged to replenish the fund with additional USD 9.78 billion equivalent for the next four years.

Some EU Member States and Regions also contribute about 95% of the annual voluntary pledges to ensure the functioning of the Adaptation Fund. The European Commission will support the Adaptation Fund with €10 million.

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:

  • Provide grant funding directly to the poorest and most vulnerable countries
  • 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 established a number of blending facilities that combine grant funding with loans, covering different regions.

Documentation

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