How will we report on the $100 billion climate finance target?

The agreement at the COP21 in Paris reaffirmed: developed countries will mobilise $100 billion a year for climate change mitigation and adaptation actions in developing countries, from 2020 onwards. To assure this target will be met, many questions still need to be answered: how do we define climate finance? How do we calculate the financial flows? The answers to these questions have a big impact on the final figures that are reported as climate finance.

Trinomics has supported the Ministry of Foreign Affairs in the Netherlands with three projects: a pilot study measuring Dutch mobilisation of climate finance in 2012, a comparative assessment of methodologies by different OECD countries, and technical assistance in the reporting of Dutch climate finance for 2015. The results have contributed to the discussions that have led to the Joint Statement, signed by 18 countries and the European Commission, on how to track progress towards the $100 billion goal. In 2016 and 2017, Trinomics continued to support the Ministry of Foreign Affairs in the Netherlands by analysing and reporting private climate finance (read more here).

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Example of a calculation method for reporting mobilised private climate finance. Source: Trinomics.

Key findings of the research can be summarised as follows:

  • At the moment, climate finance figures are reported without an internationally determined methodology. For instance, efficiency investments for coal-fired power plants are seen by the USA and Japan as climate mitigation, while the EU does not account any investment in coal as climate finance.
  • The following issues have a big impact on the final figures: how do you value the different public instruments such as subsidies, soft and hard loans, or export credit insurance? Do you value all finance at face value? When can climate finance by the private sector be considered mobilised? What point in the financial decision-making process do you take as point of measurement? And finally: how do you calculate the amount of climate finance mobilised by a specific country through multilateral channels, such as the Multilateral Development Banks?