In the world of international climate negotiations, the term “climate finance” is often heard. But what exactly does climate finance mean for the civil society sector?
Today we will try to clarify the term and equip the civil sector in Eastern Europe, Caucasus and Central Asia (EECCA) with the knowledge to help them unlock the opportunities of such finance and ensure responsible governance through effective monitoring.
Imagine fighting climate change – it’s like building a giant spaceship to save the Earth! Climate finance then acts as the fuel for that ship. The bigger and more complex the ship – the more reliable and efficient the fuel must be. Where do we get it from and who should put in how much from themselves – this is the complexity of the discussion around climate finance.
Fasten your seatbelts!
In the context of international climate negotiations, climate finance is of significant importance. Climate finance is local, national or transnational funding from public, private and alternative sources to support climate change mitigation and adaptation.
On the international stage, the UN Framework Convention on Climate Change (UNFCCC), a treaty to which 195 countries are parties, is in force. This document recognizes a crucial truth: developed countries have a greater impact on climate change because they have burned fossil fuels for decades and built their economies on them. That’s why, as part of this agreement, they have pledged financial support to developing countries.
For the climate justice movement, climate finance is seen as part of repaying the climate debt. This is the debt owed by those most responsible for climate change to those least responsible but suffering the consequences the most.
Governments of wealthy, industrialized countries have a responsibility to ensure that funds come from those responsible for excessive greenhouse gas emissions – namely corporations, fossil fuel giants and other co-conspirators, including states – and should not come at the expense of the impoverished in their own countries.
What is the goal of climate finance or where will the money go?
UN climate negotiators have pledged funds to cover both adaptation (helping people adapt to climate change) and mitigation (reducing greenhouse gas emissions) costs.
Here’s a recent victory worth sharing: After years of campaigning, developing countries finally made progress at COP27! Climate finance will now also address loss and damage – the irreversible harm caused by climate change.
And so, let’s go over the key terms again:
Adaptation: Imagine building walls to protect coastal cities or growing drought-resistant crops. That is adaptation in action! In other words, adaptation encompasses the policies, programs, and measures that enable countries, communities, and people to cope with the impacts and consequences of climate change.
Mitigation: This is about reducing emissions at the source itself. Think about cleaner energy sources, smog-free, and energy-efficient technologies. It is vital for them to shift to a sustainable development path and contribute to global efforts to reduce greenhouse gas emissions. Here’s a reminder that nuclear power is not a clean energy source. Why? You can read in our position paper.
In 2020, 90% of funding went to mitigation, so more funding for adaptation is needed.
Loss and Damage: When climate change causes disruption that adaptation can’t handle, it’s about loss and damage. This includes rising sea levels that swallow up island nations or extreme weather events that destroy crops and people’s livelihoods.
How much does it cost to save the planet?
The answer is: It’s expensive! And a lot! In 2024, the Climate Action Network launched the #PayUp campaign, demanding developed countries to contribute $5 trillion in climate debt each year.
Why $5 trillion? Several existing studies (see table) estimate the amount of finance needed to confront the climate crisis. These studies have looked at a variety of needs, including reducing emissions, adapting to climate impacts, and addressing unavoidable loss and damage.
Notably, no study covers the full range of costs, including mitigation, adaptation, loss and damage, and a just transition for affected communities.
As one example, the first UNFCCC Needs Determination Report of 2021 provides the estimated needs of Biennial Update Reports (BURs) for 24 developing countries out of 62. These amount to a total of 11.465 trillion USD through 2030. This translates to an average of USD 1.27 trillion per year, covering only mitigation, adaptation, and cross-cutting needs.
It is worth noting here that there are 164 developing countries participating in the UNFCCC. The amount of 11.465 trillion dollars until 2030 represents the estimated needs identified by only 14.6% of the developing countries participating in the UNFCCC. Furthermore, this amount does not include the cost of loss and damage, nor does it include the cost of ensuring an equitable transition to green energy.
So how can we use this data to better inform estimates of the costs of climate change mitigation and adaptation in developing countries? We can apply a conservative multiplier – say 3 – to avoid overestimating needs. This approach suggests that by 2030, developing countries will need at least USD 34.39 trillion for mitigation and adaptation measures, averaging USD 3.4 trillion per year.
At the same time, the authors of the Global Climate Finance Landscape report estimate that the amount of finance needed “for climate change mitigation and adaptation is between USD 5.4 trillion and USD 11.7 trillion per year through 2030 and between USD 9.3 trillion and USD 12.2 trillion per year over the next two decades”.
Is it fair to demand this amount, and will countries be able to absorb 5 trillion USD per year? Here, we present the example of COVID-19, when governments of developed countries mobilized USD 16 trillion in fiscal stimulus to support their economies.
So, unequivocally yes!
And who pays: sources of climate finance.
Money for climate finance comes from a variety of sources. They can refer to both public and private funds. Through a combination of public funds, development bank financing, private sector investment and philanthropic contributions, comprehensive and sustainable climate solutions can be effectively implemented. Each source of finance plays a critical role in mobilizing resources to address climate change on a global scale.
Public funds
Public funds for climate initiatives come from state budgets, which distribute money collected in taxes. These funds are used for various climate-related projects such as grants, subsidies, and direct funding.
Development Banks
Development banks such as the World Bank, the European Bank for Reconstruction and Development (EBRD), and the Asian Development Bank (ADB) provide financing specifically for climate-related projects. They offer low-interest loans, grants, and technical assistance for large-scale infrastructure and development projects. For example, these banks finance renewable energy infrastructure projects. Capital for these banks comes from member countries, including public and private contributions, and from financial markets.
Private sector investment
Private sector companies invest in green technologies and sustainable practices, guided by business strategies and corporate social responsibility. These investments include direct project financing, venture capital for green startups, and corporate bonds. Ironically, many of the same companies responsible for the climate crisis (and fossil fuels) are among the top investors in green energy.
The philanthropic arm of Google,, invests in renewable energy projects to benefit low-income communities. For example, they have awarded $2.75 million in grants to support renewable energy projects in sub-Saharan Africa, focusing on providing clean energy to schools, health clinics and homes. Such investments are funded through company profits, capital markets and private investors.
Philanthropic contributions
These funds come from foundations and philanthropic organizations that fund climate research, innovation, and educational activities. This funding comes in the form of grants, endowments, and endowments.
For example, the Bill & Melinda Gates Foundation supports research into sustainable agricultural practices and innovations in renewable energy technologies to combat the effects of climate change. Money for these purposes comes from private donations, endowments and fundraising events.
How and through what does climate finance work?
In 2010, during COP16, the UNFCCC decided to establish the Green Climate Fund (GCF) to act as the operating entity of the financial mechanism.
The Global Environment Facility (GEF) temporarily served as the international organization charged with the responsibility for the operation of the financial mechanism. The Fund continues to operate but is no longer the main operating entity of the financial mechanism of the UNFCCC.
The Special Climate Change Fund (SCCF) was established under the Convention in 2001 to complement other funding mechanisms for the implementation of the Convention.
The Least Developed Countries Fund (LDCF) was established to support a work program to assist least developed countries in preparing and implementing national adaptation programs of action. These two funds are administered by GEF.
The Adaptation Fund (AF) was established to finance adaptation projects and programs in developing countries party to the Kyoto Protocol. It is financed by a 2% share of revenues from Clean Development Mechanism (CDM) project activities and other sources of financing.
This is all well and good, but where do I, a representative of the civil sector, fit into this picture? What is my role?
We come to the most important point: what role does the civil sector play in these processes? Can a registered organization directly access funding?
Let’s answer!
Firstly, you can scrutinize and monitor climate finance. One approach is tracking the activities of development banks in your country and the grants they support. Why? It’s common for projects to cause human rights abuses and pollution. For instance, Azerbaijan’s geopolitical position and vast hydrocarbon reserves make it crucial for the US and Europe. The World Bank, EBRD, EIB, and ADB have backed the Southern Gas Corridor project, disregarding human rights and the rule of law.
Let’s examine how you can analyze this. Take the EBRD, a global financial institution funding projects in energy, infrastructure, and sustainable development. Information on EBRD projects, policies, strategies, results, and environmental impacts is public. Note that most EBRD website content is in English.
You can explore projects financed or planned in your country and find implementing partners on the EBRD website.
For deeper analysis, use the Early Warning System platform. This web-based tool, coordinated by civil society and communities, organizes, aggregates, and standardizes 15 development banks’ projects. It provides local communities and supporting organizations with verified information on potential human rights and environmental violations from proposed development bank-funded projects, along with clear advocacy strategies.
Secondly, you can participate in decision-making to persuade the government to increase climate finance. Supporting existing impactful climate initiatives and raising public awareness is crucial.
For example, Ukraine’s 2021 climate march demanded increased climate change and environmental protection funding, resulting in a higher carbon tax and air quality monitoring funds.
Another example is Bishkek residents’ criticism of the city’s decision to replace trolleybuses with fewer electric buses. Activists are defending their position by appealing to the mayor’s office and demanding public hearings.
Remember, your involvement level is your choice. You don’t need climate finance expertise to contribute. Even small actions create a significant impact. The key is taking action and collaborating with like-minded individuals.
