Climate finance

Limiting the rise in global temperature to well below 2°C above pre-industrial levels, in accordance with the Paris Agreement goal, will require a significant shift in investment patterns towards low-carbon and climate-resilient options. The finance needed to build a climate friendly sustainable economy can come from public, private and alternative sources, notably from carbon taxes or the auctioning revenues from cap and trade schemes. Investment can be directed towards local, national, or international projects and programmes.

Under the United Nations Framework Convention on Climate Change (UNFCCC), developed countries must provide financial resources to assist developing countries in dealing with climate change. The Paris Agreement sets out the global framework for climate finance flows. Countries have reiterated their commitment to providing USD100 billion in annual finance by 2020. The World Economic Forum predicts that by 2020, annual investments of $5.7 trillion in climate-friendly infrastructure are required, much of which will be needed in today’s developing world.

In order for climate finance to be effective and consistent with the Paris Agreement, it is important that investments meet high-quality criteria and are directed to truly transformational policies and projects that will enable a sustainable low-carbon future. This includes making sure that investments flow into sustainable technologies while having policies in place that guarantee robust social safeguards. For example, investments must avoid promoting more fossil fuel infrastructure, and every climate finance project must respect human rights.  

As an observer of both the international climate talks at the UNFCCC and the Green Climate Fund, Carbon Market Watch works to mainstream social safeguards and robust stakeholder consultations in climate finance streams to ensure effectiveness, highlight sustainable co-benefits, and help maximize the potential of scarce resources.