Climate change represents a revolutionary moment for the global economy.  What has gone before needs to change. The new growth model moving forward will reflect a reality of low carbon development. To its credit, the international community recognised this at the Copenhagen COP meeting last December and agreed to support those countries most vulnerable to climate change, and least responsible for it, in making the transition to a low carbon development future and in meeting their adaptation needs. The pledge made by Heads of State within the Copenhagen Accord was that a transfer of new and additional resources to developing countries would total US$100 billion each year from 2020 onwards.  The UN Secretary General, Ban Ki-moon, subsequently established a High-Level Advisory Group on Climate Change Financing (AGF) to come up with suggestions as to how this new and additional money – climate finance – might be mobilised.  Today the group published their report.

What the AGF report has done
So, what is climate finance? For such an often repeated phrase there is a remarkable level of uncertainty over what should be counted. Here the AGF report adds real value by laying out four categories of potential sources of finance: public sources; development bank instruments, carbon market finance and private capital. The group concludes that this diversity is necessary to respond at scale and to the differing needs of climate change actions under differing national contexts. In that regard the AGF group is probably right. What it implies, however, is that considerable complexity underpins any policy discussions on international climate finance. Securing consensus under such circumstances is problematic as the AGF report itself demonstrates. Throughout the report there are repeated references to the group failing to reach a consensus: if this cannot be achieved among a small number of like-minded individuals what hope is there that agreement can be reached within the challenging environment of the UNFCCC COP?  However, the AGF’s inability to reach consensus on a number of important issues reflects a more fundamental point: these are primarily political concerns rather than economic ones.  For example, the balance between public and private finance and the balance between taxation and reliance on the carbon market are decisions ultimately made by governments not the market.
The AGF report delivers a strong endorsement for the role to be played by the multilateral development banks in securing finance at scale.  Much emphasis is given to the potential leverage that can be obtained by blending public and private capital.  There is equally strong endorsement of the UN system in assisting developing countries build national capacity.  The emergence of climate finance is therefore seen to offer a new lease of life to those institutions that have dominated the development landscape over the past 50 years.  Whether their record over this time justifies such a strong endorsement rather than a call for a new institutional landscape is a mute point.

What the AGF report has not done
The AGF report has delivered on the remit set by the UN Secretary General but, as I have argued elsewhere, the mobilisation of funds is only the first element of delivering on climate finance pledges.  For money to reach those on the ground further questions need to be asked on how this finance will be managed and how it will be disbursed.  So far, despite an array of new funding initiatives over the last two years, these questions remain largely unanswered. What will be the global allocative mechanism for climate finance? Which countries will receive international support, based on what criteria? Equally, what will be the delivery mechanism(s) for this finance? So, whilst acknowledging the AGF report as a start, the challenge in determining how best to secure new and additional finance for climate actions in developing countries has only just begun.

• See also: Dirk Willem te Velde - The climate finance report: are we clearer now?