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.