The debate on climate finance is evolving quickly, spurred on by international processes such as the newly created Green Climate Fund. While there has been much attention given to the international architecture needed to secure the supply of climate finance, there is now a growing focus on how to manage national demand. This is not before time, as it is vital to secure more effective management and use of climate finance, particularly in countries that are vulnerable to the impact of climate change. 

This was the subject of a three-day workshop in Bangkok last month, where two major international players, UNDP and the World Bank, convened a meeting of around 100 participants from Asia Pacific, Africa and Latin America. The meeting generated much discussion, but I was struck by the continuing ambiguity over what is meant by climate change-related actions and, therefore,the lack of clarity when it comes to identifying the funding needed to support such actions.  How can we be confident that the cost estimates of the projected impacts of climate change are credible if we do not really know what to include in such costings? Far more work is needed on this issue.

At ODI we have devoted some time to think through this challenge and, as a contribution to this debate, we have now published papers on defining climate finance across three themes:  adaptation, mitigation and REDD finance. (While the latter is a sector-based mitigation strategy, it has received a lot of attention in recent years and offers some lessons).

It is clear from all three papers that there is no simple solution to the question of how to place a cost on the national response to climate change. Any attempt to answer the question requires much careful analysis to explain the implications of any ‘headline’ figure. This is because there are many actions that could contribute to a national climate change response, but only a few actions are funded solely as a direct response.  Looking ahead, we need to be clear about these definitional challenges that confront our understanding of ‘climate finance’.

Being clear on how the international community can support national action

Climate change is a new international policy concern and is often linked to development, as it represents a potential threat to much of the progress that has been made in reducing global poverty. Yet, the response needed goes far beyond the relationship that has built up over the past 50 years, as aid has been channelled from north to south in the hope of securing economic and social development.

When it comes to climate change, no country can claim success, as the response required is without precedent. I have argued that this is one reason why the international response to climate change needs to differ from the one that has defined the development cooperation relationship for many years. Countries in the north are in as much of a quandary over their national climate change strategies as those in the south. How can a new approach be created: one that is not encumbered by the history of past relationships, one that goes beyond ‘business as usual’?

What is needed is to go back to the principles that underpin such funding decisions, as I have commented in the past. We need to learn from aid, but move beyond that particular mind set. This may require new actors, as well as new institutions, to generate the ideas we need if we are to build a credible global strategy. If a new global fund is deemed necessary, do we also need new actors to ensure that funding reaches the most vulnerable, and that the threat posed by climate change is averted?