Towards a more effective, efficient and fair climate finance regime

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The SEI initiative on Climate Finance is a two year (2015-2016) research programme focusing on the governance of climate finance. The initiative has two core objectives: 1) to build and share new knowledge and insights on key issues that create complexity and fragmentation in climate finance, and 2) to identify ways to improve international governance of the emerging global climate finance regime, to help make it more effective, efficient and fair.

This Initiative is funded by the Swedish International Development Cooperation Agency (SIDA).

Project Background and Overview

Climate change poses enormous financial challenges. The combined cost of mitigating and adapting to climate change has been estimated at several hundred billion U.S. dollars per year, of which the majority will have to be invested in developing countries. International climate finance is therefore essential to reducing climate risk and avoiding the worst impacts of climate change.

Within the global climate policy regime, climate finance is seen as one of three pillars of support for climate action in developing countries, along with technology transfer and capacity building. Despite disagreements on many aspects of climate policy, there is broad agreement that developed countries should provide climate finance to developing countries.

There are commitments to mobilize 100 billion USD per year for this purpose from 2020 onwards, yet how these funds will flow is far from straightforward. The global climate finance architecture is inherently complex, including multilateral and bilateral funding streams as well as private sector investments

Along with a major new UNFCCC agreement expected to be reached at the Paris Climate Change Conference in December, 2015 has also brought two other new global governance regimes: the Sendai Framework for Disaster Risk Reduction 2015–2030 and the Sustainable Development Goals (SDGs). Each of these agreements requires finance for implementation. This raises questions about how they might interact and how to best align them to achieve the best outcomes for developing countries.

This SEI Initiative aims to help identify ways to improve international governance of the emerging global climate finance regime, to help make it more effective, efficient and fair. It also has relevance for the design and implementation of finance for sustainable development more broadly, since finance for climate and for development are inextricably linked.

Thematic focus of SEI’s Initiative on Climate Finance

The initiative will achieve its aims and objective through high-quality, timely, and policy-relevant research and communications by an SEI team with extensive expertise in climate finance and strong networks in the relevant fields. Its focus is on four key issues that are crucial to the successful mobilization, delivery and scaling up of climate finance:

Defining and evaluating “effectiveness” in a way that it can be operationalized and connects with the priorities of developing countries;
Reinvigorating the global climate finance paradigm to improve effectiveness;
Private finance and its implications for the use and prioritization of public climate finance; and
Defining and operationalizing the concept of “intolerable risks” and its implications for finance.

The work takes a multi-disciplinary approach, building on the SEI team’s knowledge of political science, international relations, development studies, economics, human geography, law and other disciplines, as well as an in-depth understand- ing of international climate policy and negotiations, and other relevant institutional processes. We are also working closely with research partners and stakeholders in both developed and developing countries.

The full desciption of the SEI Initiative on Climate Finance is available here.