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Climate finance

Climate finance refers to local, national or transnational financing, which may be drawn from public, private and alternative sources of financing. Climate finance is critical to addressing climate change because large-scale investments are required to significantly reduce emissions, notably in sectors that emit large quantities of greenhouse gases. Climate finance is equally important for adaptation, for which significant financial resources will be similarly required to allow countries to adapt to the adverse effects and reduce the impacts of climate change. Continue

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Finance main page Finance Portal Fast-start Finance
Standing Committee on Finance Long-Term Finance Green Climate Fund
Global Environment Facility Adaptation Fund Review of the Financial Mechanism
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Climate finance, continued

In accordance with the principle of common but differentiated responsibility and respective capabilities set out in the Convention, developed country Parties (Annex II Parties) are to provide financial resources to assist developing country Parties in implementing the objectives of the UNFCCC. It is important for all governments and stakeholders to understand and assess the financial needs developing countries have so that such countries can undertake activities to address climate change. Governments and all other stakeholders also need to understand the sources of this financing, in other words, how these financial resources will be mobilized.

Equally significant is the way in which these resources are transferred to and accessed by developing countries. Developing countries need to know that financial resources are predictable, sustainable, and that the channels used allow them to utilize the resources directly without difficulty. For developed countries, it is important that developing countries are able to demonstrate their ability to effectively receive and utilize the resources. In addition, there needs to be full transparency in the way the resources are used for mitigation and adaptation activities. The effective measurement, reporting and verification of climate finance is key to building trust between Parties to the Convention, and also for external actors.

Main-topics

Standing Committee on Finance
The Standing Committee on Finance was created by Parties to the Convention with the aim of assisting the COP, with regards to, for example, transparency, efficiency, and effectiveness in the delivery of climate finance. Furthermore, the Standing Committee on Finance is designed to improve the linkages and to promote the coordination with climate finance related actors and initiatives within and outside the Convention.

The committee consists of twenty members, with ten members from developing countries and ten members from developed countries, who work together to assist the Conference of the Parties (COP) with regards to the financial mechanism of the Convention. Currently, the Standing Committee on Finance has been assigned four specific functions by Parties to allow it to meet its goal. Firstly, the committee has the function of assisting the COP to improve coherence and coordination in the delivery of climate change financing. Secondly, the committee has the function of working to assist the COP in a rationalization of the financial mechanism of the UNFCCC. The third function of the Standing Committee on Finance is to support the COP in the mobilization of financial resources for climate financing. Finally, the fourth function is to support the COP in the measurement, reporting and verification of support provided to developing country Parties. The Standing Committee on Finance meets at least twice a year, and has been assigned a series of activities by the Parties in relation to its four functions.

Long-term Finance
The financial resources required to assist developing countries in undertaking mitigation and adaptation activities will become more and more significant in the future as such countries take on more responsibilities to mitigate greenhouse gas emissions and as the impacts of climate change become more prevalent.

Long-term finance refers to climate finance that is required to allow developing countries to undertake mitigation and adaptation activities in the long term. It includes an understanding that the sources of this finance will be public, private and alternative sources, and that a significant scaling up of resources will be required to allow for developing countries to be able to effectively undertake these activities to meet the objectives of the Convention. The funding that will be provided to developing countries will have to take into account their urgent and immediate needs, especially of those countries which are particularly vulnerable to climate change. Additionally, in order to allow developing countries to respond to climate change, this funding also needs to be predictable and adequate.

Finance Portal
The Finance Portal comprises three modules, each of which includes information made available by Parties to the Convention and the operating entities of the financial mechanism of the Convention. The first module is the 'National Communications Module' and presents information communicated by contributing countries on the provision of financial resources, in the context of regular reporting to the Convention. The second module, the 'Fast-start Finance Module', includes information on resources provided by developed countries in the context of their commitment to provide approximately USD 30 billion over the period 2010 – 2012.

The third module, the 'Funds Managed by the GEF' is a joint effort between the secretariat of the UNFCCC and the secretariat of the Global Environment Facility (GEF), and contains information on climate finance flows of the GEF in its role as one of the operating entities of the financial mechanism of the Convention. Additionally to the three modules, information on projects and programmes of the Adaptation Fund can be found in the Finance Portal. This fund was established under the Kyoto Protocol of the Convention to finance concrete adaptation projects and programmes in developing countries that are Parties to the Kyoto Protocol.