Mobilising International Climate Finance: Lessons from the Fast-Start Finance Period

Developed countries committed to provide US$ 30 billion in new and additional climate finance between 2010 and 2012 under the United Nations Framework Convention on Climate Change (UNFCCC). This ‘Fast-Start Finance’ (FSF) was an initial step towards mobilising climate finance at a level that reflects the adaptation and mitigation challenges these countries face. Delivering FSF during a global financial crisis that constrained budgets in many developed countries was challenging. The need for climate finance, however, was urgent then, and will become even more so over the coming decade.

This report reviews the FSF contributions that 37 countries have reported to the UNFCCC. It draws on detailed case studies of the five largest contributors: Germany, Japan, Norway, the UK and the USA. These five countries delivered almost 80% of reported FSF. They also provide a large share of development finance, including Official Development Assistance (ODA) and Other Official Flows (OOF).

Key points:
• Developed countries report that they mobilized US$ 35 billion for climate change in developing countries from 2010 through 2012, exceeding their target of US$ 30 billion.
• But not all of this funding is new or additional. Developed countries have had discretion to choose what ‘counts’ as climate finance, and have taken divergent approaches.
• One objective of the Fast-Start Finance (FSF) period was to increase funding for adaptation. While adaptation received US$ 5.7 billion, mitigation (including initiatives to address emissions from forests) received US$ 22.6 billion, more than 70% of the total funding.
• Almost half of the contribution comprises loans, guarantees and insurance, including export-credit finance for developed- country companies to invest in developing countries. These instruments, in particular, have tended to support mitigation.
• Nearly 80 per cent of FSF was also reported as Official Development Assistance (ODA), and the geographic distribution of FSF closely mirrors that of non-climate-related ODA. It is not highly correlated with either total greenhouse gas (GHG) emissions or vulnerability in recipient countries.
• Continued commitment to scaling up climate finance is needed. But to make good use of available finance, developing countries will also need to take the initiative to implement sound strategies for using this finance. They will need to align their policy, regulatory and governance arrangements with climate-compatible
development.
• Improved transparency on climate finance in both developed and developing countries will promote understanding of whether countries are meeting their commitments to deliver climate finance in a spirit of mutual accountability, and whether funding is being used effectively.

Remarks:

This revised edition of the report is based on a data set that has been updated since its original release in 11 November 2013