By Megan Rowling

LONDON (AlertNet) - At least $97 billion per year is being provided to support low-carbon, climate-resilient development, but the bulk is investment in mitigation projects like renewable energy, with only 5 percent going to help vulnerable countries adapt to climate change, according to a new report on climate finance.

The study - which maps the size and nature of climate finance flows, mainly using 2009-2010 figures - raises the question of whether the international community is already close to meeting the annual $100 billion it promised to mobilise by 2020 to assist developing nations in tackling climate change.

The pledge, made at the 2009 Copenhagen climate summit, is intended to be met with funding from private, public and "alternative" sources. But the report from the Climate Policy Initiative (CPI), an international research organisation, cautions against asserting that the rich world has nearly reached its goal well ahead of time "for multiple reasons".

These include the fact that a "significant share" of the current estimated flows of $97 billion is not new money but was already being provided before the Copenhagen accord. In addition, many countries have argued that the majority of the promised funding should come from the public sector, and should not include capital investment.

The financial flows identified in the report include both "incremental costs" - resources provided to cover the difference between a cheaper, more polluting option and a costlier, greener one - and "capital investment", which is tangible investment in mitigation or adaptation projects that needs to be paid back.

Most climate finance in 2009/2010 - $74-87 billion out of $97 billion - can be classified as investment, according to the report.

It notes that building a comprehensive picture of climate finance flows is essential to fulfilling the $100 billion commitment, which is a major issue in U.N. climate change negotiations.

"Understanding how much and what type of support is being made available to advance action on low-carbon, climate-resilient development, how these types of support correspond to countries' needs, and whether financial resources are being spent productively, is critical to building trust among countries and ensuring the effective use of the available financial resources," it says.

PRIVATE MONEY DWARFS PUBLIC

The study shows that that the amount of private climate finance is close to three times greater than public finance, at an average of $55 billion of the annual total. The public sector provides at least $21 billion, which is raised through carbon market revenues, carbon taxes and general tax revenues.

"The relatively small role of the public sector compared to the private sector is remarkable, in light of the debate in the global climate change negotiations where many have emphasised the need for developed countries to fund mitigation and adaptation in developing nations," the report says.

Equally noteworthy is the finding that just $4.4 billion out of $97 billion is going to efforts to help countries and communities adapt to the impacts of climate change, including more extreme weather and rising seas.

The huge share being channeled into mitigation activities - focused on limiting heat-trapping greenhouse gas emissions - is mostly the result of large capital investments in measures like renewable energy, the report says.

It notes that the 95:5 split between mitigation and adaptation contrasts with some of the rhetoric in global negotiations, where many countries and commentators have said that climate finance should be allocated equally between the two types of response.

But it may make sense to invest in mitigation today, while climate change can still be curbed, and put more into adaptation later, the report says. "One could see our data as proof that the world is acting rationally now," it observes.

It adds that private investment is more likely to go into mitigation projects - for a which a business case can be made - rather than adaptation work, which is often a public good that requires public funding.

Other interesting findings include:

•  Carbon finance plays only a small role at present, accounting for just $2 billion in 2009-2010, in contrast with initial high expectations for the amounts it would generate.

•  Intermediary bodies, such as bilateral and multilateral financial institutions, play a key role in distributing climate finance, managing around 40 percent of the total.

•  Dedicated climate funds channel a small but growing portion of finance - between $1.1 billion and $3.2 billion per year.

The report argues that fragmented and patchy information on climate finance is impeding a better understanding of what is needed to make it more effective. It calls for a common set of definitions to enable tracking and comparison of complex data.

"A comprehensive picture of climate finance flows is essential for the success of international climate policy," the report says, advocating for the development of a "comprehensive tracking system that ultimately helps countries learn how to spend money wisely".

01 Nov 2011 14:59

Source: alertnet // Megan Rowling