Financing of SLCP mitigation

About

Securing sustainable development requires remarkable investment if the public and private sectors are to transform their operations in ways that address climate change in the medium and long-term. One obstacle to accelerating and upscaling the reduction of short lived climate pollutants (SLCPs) is the lack of relevant finance mechanisms outside of CO2 focused abatement projects. While climate finance is directed at incentivizing low-carbon and resilient economies, SLCP reduction projects are usually financed implicitly, for example – by financing waste management projects and adoption of more efficient cookstoves. Fragmentation of financing is adding to the hurdles for SLCP mitigation finance, and financial barriers are affected by behavioral, technological, and other barriers.

While financing is a challenge for all types of SLCP mitigation efforts, these challenges differ depending on the types of SLCPs targeted, source activities, and countries. Some SLCP measures are economically profitable, would pay for themselves, and make sense from a social planner’s perspective. However, in other cases, there is no evidence building the business case  and the SLCP abatement projects cannot secure private financing.  Some projects have no associated direct revenue in the absence of carbon-related finance (e.g. avoiding HFC emissions from industrial processes), while many others have insufficient revenue to cover project costs and risks or have too long a payback period to justify investments (e.g. methane capture and power generation from landfills).  

Indirect costs, such as the cost of enforcing regulations, and the valuation of benefits associated with the measures are often difficult to quantify.  Uncertainty is particularly higher for cost data from some specific sectors, such as for cookstoves, agriculture and brick kilns industry, due to lack of metrics and emission data and impacts quantification. Similarly, many SLCP projects may generate substantial benefits to public health and the environment that are not factored into project economics.

Top facts

World Bank invested $543 million in 52 carbon finance projects, reducing methane emissions by 375 mt, avoided 150 premature deaths and preventing 33 000 t of crop losses with a market value of US$5.8 million.
Total climate finance provided by the Multilateral Development Banks in 2014 in developing and emerging economies was USD 28.3 billion.
New mechanisms have the potential to increase investments in carbon finance. The 1st Pilot Auction Facility attracted 28 bidders from 17 countries. It created a carbon price of USD$2.40 and sold 8.7 million tCO2e.

Top facts

  • World Bank invested $543 million in 52 carbon finance projects, reducing methane emissions by 375 mt, avoided 150 premature deaths and preventing 33 000 t of crop losses with a market value of US$5.8 million.
  • Total climate finance provided by the Multilateral Development Banks in 2014 in developing and emerging economies was USD 28.3 billion.
  • New mechanisms have the potential to increase investments in carbon finance. The 1st Pilot Auction Facility attracted 28 bidders from 17 countries. It created a carbon price of USD$2.40 and sold 8.7 million tCO2e.

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Initiative contacts

Finance & Cookstoves Initiative Coordinator
Yekbun.Gurgoz.Affiliate [at] unep.org

Plan, action and progress

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Who is involved

Partners (8)

World Bank
Lead
Canada
Norway
Sweden
United Kingdom

Partners (8)

World Bank
Lead
Canada

Actors

0

FAQ

What are the financing needs for climate change?

It is estimated that to mitigate climate change, and to decorbonize the economies of the world, will require channelling financing of over 1 trillion USD per year until 2050 to green the two most GHG emitting sectors: energy and land-use.

What is the USD 100 dollars a year goal?

At COP15 in Copenhagen in 2009, developed countries committed to a goal of jointly mobilising USD 100 dollars a year by 2020 from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance.

What does results-based finance mean?

Results-based programs disburse funds in relation to outputs or outcomes rather than inputs and activities. For an example of successful RBF program, please see webinar on developing clean stove technologies.

Where do I find information on where to access the funds available from multilateral and bilateral institutions, as well as public and private sources?

From fund governance and eligibility to sharing experiences on on-going projects, the Climate Finance Options platform enables users to get an informed perspective.

Climate Funds Update is an independent website that provides information on the growing number of international climate finance initiatives designed to help developing countries address the challenges of climate change.
 

Get involved in this initiative

If you want to collaborate with us to reduce short-lived climate pollutants, we encourage you to explore engagement options on this website and to contact the Secretariat to discuss further.

CCAC Secretariat
ccac_secretariat [at] unep.org
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