Financing climate change
One of the key findings of the review is that the additional investment and financial flows in 2030 to address climate change amounts to 0.3 to 0.5% of global domestic product in 2030 and 1.1 - 1.7% of global investment in 2030.
This is a small amount in overall global figures but large compared to the currently available public and private financial resources for climate change (including the ones available under the UNFCCC and its Kyoto Protocol). Current levels of funding will be insufficient to address the future financial flows estimated to be needed for adaptation and mitigation under a strengthened future climate change deal post 2012.
a. For mitigation
Mitigation measures needed to return global greenhouse gas emissions to current levels by 2030, require a small increase in global investments and financial flows: between USD 200-210 billion per annum in 2030.
In many sectors, such as the power generation sector or industry, the lifetime of capital stock can be thirty years or even more. Total investment in new physical assets is projected to triple between 2000 and 2030. Due to rapid economic growth, a large share of these investments will occur in developing countries. Investments should focus on new facilities in many of these sectors.
Particularly in the energy sector, huge investment flows are needed. For energy supply: USD 432 billion is projected to be invested annually into the power sector. Of this amount, USD 148 billion needs to be shifted to renewables, Carbon Dioxide Capture and Storage (CCS), nuclear and hydro. Investment into fossil fuel supply is expected to continue to grow, but at a reduced rate.
Investment flows to developing countries are estimated at about 46% of the total needed in 2030. The resulting emission reductions achieved by these countries in 2030 would amount to 68% of global emission reductions.
Failure to achieve changes in investment and financial flows for mitigation will lead to unsustainable development paths and "lock-in" effects for the next 20-30 years. This will lead to higher emissions, more climate change impacts, and larger investment and financial flows needs for adaptation in the longer-term.
b. For adaptation
The review found that for adaptation, additional investment and financial flows needed for in 2030 amount to several billions of USD. No precise global figure is available at present and further analysis on this needs to be conducted. These figures are indicative and may represent the lower bound of the amount actually required.
Particular attention for developing countries
Particular attention will need to be given to developing countries, as, while only 20-25 per cent of investment currently occurs in developing countries, due to expected rapid economic growth, a large share of investment and financial flows will be needed in developing countries:
* Because of their economic growth, the energy demand in developing countries will hugely increase;
* Investment flows to developing countries is estimated at about 46% of the total needed in 2030. The resulting emission reductions achieved by those countries in 2030 would amount to 68% of global emission reductions;
* Additional investment and financial flows for adaptation in developing countries is estimated between USD 28 to 67 billion.
Current financial mechanisms of United Nations Framework Convention on Climate Change (UNFCCC) are insufficient
* The Global Environment Facility(GEF) operates the financial mechanism under the Convention on an on-going basis, subject to review every four years.
* A Special Climate Change Fund, which complements other funding mechanisms and exists to finance projects relating to:
* technology transfer
* climate change mitigation and economic diversification for countries highly dependent on income from fossil fuels.
* A Least Developed Countries Fund intended to support a special work programme to assist the LDCs.
* An Adaptation Fund became operational with the first commitment period of the Kyoto Protocol in 2008:
* To finance practical adaptation projects and programmes in developing countries and support capacity-building activities.
* Funded from an adaptation levy (2%) on Clean Development Mechanism (CDM) projects.