Monday, April 22, 2024

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Climate Finance

Climate Finance involves the flow of funds to enable countries mitigate the effects of climate change and become more resilient to climate change. According to The United Nations Framework Convention on Climate Change (UNFCCC) “Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts.” Climate Finance funds are aimed at activities, projects and programmes that support either climate change adaptation or mitigation or both. The type of finance provided include low cost loans, grants, development aid, equity etc. The sources of the funds include both public and private sector.

The flow of the funds is normally from the developed countries to the developing countries. This is targeted at helping the developing countries adapt to the effects of climate change and cut emissions. The flow follows this channel because the developing countries are at a higher risk of feeling the effects of climate change because of factors such as geographical locations. In addition, limiting global emissions requires an equitable approach. This means that developed countries need to recognize that developing countries have legitimate development needs, that their development may be jeopardized by climate change, and that they have contributed little, historically, to the problem[1]. The Copenhagen Agreement provided that developed countries commit to giving $100 billion a year by 2020 to the developing countries[2].

The Global Environment Facility (GEF) and Green Climate Fund (GCF) are among the international sources of climate finance. GEF provides a channel where developed countries provide financial resources to the developing world according to the provisions of the United Nations Framework Convention on Climate Change[3]. GEF funds are available to developing countries and countries with economies in transition to meet the objectives of the international environmental conventions and agreements[4]. The Green Climate Fund (GCF) was established in 2010 by the Parties to the United Nations Convention on Climate Change(UNFCCC) (UNFCCC, 2017; Indian Ocean Commission, 2015). The Fund is an operating entity of the Financial Mechanism of the UNFCCC, which is legally independent and has its headquarters in South Korea (ODI and Heinrich Böll Stiftung North America, 2016). The mandate of the GCF is to enable a paradigm shift towards low-emission and climate resilient pathways in developing countries through mobilizing and channeling funds to developing countries (GCF 2017).

Countries are also encouraged to mobilize domestic sources of climate finance to enable them to tackle the effects of climate change. According to Kenya’s GCF Strategy 2018, Kenya’s transition to a low carbon and climate resilient development pathway requires significant financial investment in interventions that will reduce Green House Gas (GHG) emissions from key emitting sectors, climate proof sectors driving the economy and promote human well-being and ecological integrity. Hence there is a need for mobilization of climate finance through establishment of various institutional structures that will enable the country to not only access climate finance but also make good use of the finance once it gets into the country.