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2015/03: Understanding climate finance for the Paris summit in December 2015 in the context of financing for sustainable development for the Addis Ababa conference in July 2015

Headline issue

This paper was produced to inform negotiations ahead of a key international conference on finance for development, due to take place in Addis Ababa, Ethiopia, in July 2015, and the United Nations climate change summit, which will be held in Paris in December 2015.

The paper asserts that overseas aid to support developing countries should be interwoven with efforts to mitigate and adapt to climate change. It claims that efforts to separate the two could be deeply damaging.

Key findings
◾It is important to see climate finance for the Paris summit, at US$100 billion per annum, as catalytic in this context, rather than ‘gap-filling’.”
◾The paper examines the critical issue of the ‘additionality’ of climate finance with respect to official development assistance (ODA), and identifies four ways of defining it:
– supporting programmes or projects that would not have come about without climate finance;
– stimulating action in areas which would not be otherwise covered or financed adequately by other sources;
-mobilising new sources of financing that would not otherwise be forthcoming or available; and
– providing a scale of overall ODA resources for climate action which is additional to what has been previously committed to development.
◾The paper proposes six priority areas for support by climate finance:
– promoting low- or lower-carbon activity in relation to infrastructure that may be under-emphasised in the agreement in Addis Ababa;
– enhancing low-carbon activities, including energy efficiency, in non-infrastructure activities for buildings, transport, industry, agriculture, etc.;
– funding adaptation, particularly for the most vulnerable and poorest countries;
– avoiding deforestation, more productive land use, and protection of fragile resources, including oceans and biodiversity;
– investing in innovation and breaking new ground for climate action, including novel ways for the public and private sectors to work together (eg on carbon capture and storage or climate-resilient agriculture); and
– creating regional action, as many climate actions for both adaptation and mitigation are regional in nature but at the moment are under-supported and under-funded

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