Climate Funds Update highlights: May 2016

Climate Funds Update highlights: May 2016

The Paris Agreement necessitates a gear change in progress on the ground

In December 195 nations came together in Paris to secure an historic global climate agreement. The question of who should foot the bill for implementing the agreement was always at the core of the negotiations, and especially so for poorer countries with little historical culpability and urgent development imperatives.

Talks held in Bonn, Germany over the past fortnight were the first official meeting of parties to the UN climate convention since the euphoria of COP 21‘s close in December. Now that agreement has finally been reached the world’s focus must shift from negotiating to getting on with the task at hand.

Paris sent a strong signal with respect to finance with countries announcing US$ 1.5 billion in new pledges to climate funds, and reaffirming their commitment to scale up climate finance from a 2020 floor of $100 billion per year. Rich countries must deliver on these commitments if they are to maintain the mutual trust needed to foster momentum for the rapid low-carbon and climate resilient transition required.

Climate Fund’s Update has just completed its first refresh of climate fund data since before the Paris conference. This note highlights some of the most notable developments that we have observed.

The climate finance architecture is still in flux

The new Green Climate Fund (GCF) is now the largest climate fund in the world, and bears a significant weight of expectation as the primary channel for delivering public finance to help low-income and emerging economies implement their climate plans.  Donors are increasingly delivering on their financial pledges, with $2.85 billion now paid into the fund (28% of the $10.26 billion pledged in total).

The GCF will be under much scrutiny this year as it seeks to demonstrate the ability to program transformative and effective projects at scale. The fund approved a first $160 million for eight projects back in September, and has set itself an ambitious target of increasing this figure to $2.5 billion of total approvals by the end of 2016.

Noteworthy increases in pledges for other funds at Paris included $248 million for the Least Developed Countries Fund from eleven donors, $78 million to the Adaptation Fund from countries including Germany, Japan and Monaco, and $339 million to the Forest Carbon Partnership Facility.

The Climate Investment Funds managed by the World Bank and implemented through regional development banks have been making the case for continued funding, despite the original intention of donors that these funds ‘sunset’ once the GCF was up and running. The Pilot Program for Climate Resilience, a component of the CIF, has for instance supported seven new countries to develop investment plans and invited another nine to do the same, despite having no unallocated resources available to put towards potential projects. The CIF argue that their track record and pipeline of further projects justify continued donor support.

Climate funds increase support for solar power and rural energy access

The Clean Technology Fund approved the largest new projects by size over the last six months, with over $570 million in new activities receiving the go ahead. Much of this funding was targeted at scaling up solar power in India, with several projects aiming to develop transmission infrastructure for large solar parks and another $125 million project supporting the National Punjab Bank to provide cheaper-than-market loans for the installation of rooftop solar panels on commercial and public sector  buildings.

Liberia and Vanuatu could not be more different in many respects, but one thing they do share is a very low rate of access to energy. Both countries received approval at the end of 2015 for their first projects under the Scaling-up Renewable Energy Program, which seeks to demonstrate the viability of renewable energy for tackling critical energy access challenges in low-income countries. The $25 million Liberian project seeks to scale-up renewable energy-powered mini-grids in rural communities, while Vanuatu’s $7 million grant will be used to replace dirty diesel generation with hydro-power and to extend the reach of the electricity grid on two of its main islands.

Support grows for diverse adaptation activities in Sub-Saharan Africa

The Least Developed Countries Fund has also been busy recently. Since our last update in October the fund, which provides grants to help the world’s poorest countries adapt to climate change, has approved US$ 69 million for new projects in 11 countries, largely in Sub-Saharan Africa.

These include a $5.2 million grant to strengthen the resilience of ‘Natural Reserve Communities’ in four regions of Senegal. The project will involve reviewing local development plans to incorporate climate adaptation priorities, supporting local governments to establish grant schemes for community adaptation measures, and improving the ability of community-established savings unions to lend for adaptation activities.

Another newly approved project will work with the Environment Protection Agency of Sierra Leone to develop better models for understanding the impacts of coastal climate risks, support the strengthening of related policy and coordination mechanisms, and fund pilot adaptation investments to better protect coastal infrastructure and community assets.