Financing the fight against climate change

The issue of climate finance will be one of the pillars of the 2015 Paris Climate Conference. The Green Climate Fund, which has reached $9.3billion with the first capitalization, including $1billion from France, will be crucial in order to establish confidence and mobilize private investors. In the longer term, climate finance must also be strengthened and clarified, to increase visibility and shift investments towards the low-carbon economy.

The Green Climate Fund: initial capitalization of $9.3billion

The $9.3billion provided for the Green Climate Fund is the culmination of a long process initiated at the Copenhagen and Cancun sessions of the COP. The Fund, which is intended for developing countries, must act as a catalyst for large-scale mitigation and adaptation initiatives. It is set to become the cornerstone of climate finance architecture.

France took action very early on to support the Green Climate Fund and worked actively to ensure that this initial cycle of capitalization would send an important signal and build confidence among developing countries.

After Germany and France, which each committed to contributing $1billion to the Fund, the United Kingdom made a substantial contribution of around $1.2billion during the Berlin conference of 19-20November2014. Lastly, the United States announced a contribution of $3billion. In Berlin, where the first capitalization conference took place, several countries made more modest contributions to the Fund, such as Panama, which promised $1million, while others, such as Canada and Poland, were to announce their contribution during the Lima Conference in December.

In total, 32countries arranged to meet to establish a budget for the Green Climate Fund for the next four years. This initial capitalization, launched this year, remains open to all contributors that are interested, from developing and developed countries. The Fund will be able to plan its first investments before COP21 in Paris.

Climate finance: France’s commitment

Under the Copenhagen and Cancún agreements, developed countries collectively committed to mobilizing fast-start financing of up to $30billion over the period 2010-2012 to combat climate change in developing countries. The European Union committed to making a significant contribution to that effort by mobilizing €7.2billion in fast-track financing over three years. Alongside its European partners, France fulfilled its own international commitments by mobilizing more than €420million per year between 2010 and 2012 in fast-track financing, i.e. a total of €1.26billion over that period.

After the so-called “fast-track financing” period, developed countries also committed themselves under the Copenhagen and Cancún agreements to mobilizing $100billion per year (around €70billion) in public and private financing by 2020.

To limit the global temperature increase to 2°C by the end of this century, France believes it is essential to adopt a comprehensive and integrated approach to development and combating climate change, involving, in particular, the “greening” of national development assistance policies. This approach, which encourages the definition and implementation of new, low-carbon and climate-change-resilient development strategies, also implies better donor coordination.

As part of its strategic development plan for the period 2012-2016, the Agence Française de Développement (AFD) is committed to ensuring that 50% of its annual financial aid to developing countries is allocated to climate projects (30% for its “private-sector” subsidiary Proparco). One year after its adoption, AFD was successfully continuing to implement this strategy: in 2012, climate finance accounted for 48% of its assistance and 32% of Proparco’s commitments.

In 2012, the AFD Group thus authorized the allocation of €2.4billion to 54climate projects (development projects with climate-related co-benefits) in developing countries and overseas France.

For further information:

Agence Française de Développement (AFD) action plan 2012-2016.

France promotes innovative climate finance

For a number of years now, France has been promoting innovative financing for development within the Leading Group and various international bodies, as financing mechanisms supplementing traditional sources of development assistance. These mechanisms have already proved their worth in the fields of health and education and, combined with other sources, could help reach the objective of $100billion per year as from 2020 for combating climate change.

France is focusing in particular on the financial transaction tax (FTT) and market instruments in international air and sea transport:

A financial transaction tax could help raise considerable resources. The French FTT, adopted on 29February2012, should provide a model with a view to universalization of the mechanism. Some FTT revenue is to be used for the Green Climate Fund. At European level, discussions on implementing an EU Financial Transaction Tax (EUFTT), intended to contribute in part to the EU budget, have made some progress.

France supports carbon pricing (carbon tax or quota system) in international air and sea transport to effectively achieve global reductions in emissions in these sectors, which are increasing sharply, and generate significant revenue for climate finance. At the most recent session of the Assembly of the International Civil Aviation Organization, it was agreed that a market-based global system would be negotiated in 2016, for entry into force in 2020.

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