About This Route
Insufficient finance at speed and scale remains a chief constraint to achieving the goals of the Paris Agreement. This requires scaling up the supply of climate finance and redirecting public funds toward low-carbon and climate-resilient activities, away from harmful subsidies and maladaptation. It also requires streamlining requirements for developing countries to access climate finance; and strengthening enabling environments. It is crucial to identify how Nationally Determined Contributions (NDCs) 3.0 support the unlocking of climate finance to facilitate NDC implementation.
Paris Agreement and International Context
Climate finance plays a role in ensuring a just and equitable transition to achieve the goals of the Paris Agreement. In 2009, developed countries committed to a collective goal of mobilizing USD 100 billion per year by 2020 for climate action in developing countries. This goal is being revised as part of the process to define a New Collective Quantified Goal on Climate Finance. At COP21 in Paris, this was reiterated as well as extended to 2025, and the Paris Agreement (including Articles 2 and 9) enshrined the importance of mobilizing and scaling up climate finance to deliver climate-resilient development low in greenhouse gas emissions. The first Global Stocktake of the Paris Agreement at COP28 in Dubai underscored the key role of finance, technology and capacity building in enabling effective climate action, as well as the importance of mobilizing support for climate action in developing countries and transforming the international financial system to support low-emission, climate-resilient development. COP28 also saw the operationalization of new funding arrangements, including a fund for responding to loss and damage.
Reflecting the Global Stocktake
The first Global Stocktake (GST), in its “Context and cross-cutting considerations” section, “emphasizes that finance, capacity-building and technology transfer are critical enablers of climate action,” and its Section C, “Means of implementation and support,” includes the following key paragraphs related to unlocking finance:
- “67. Highlights the growing gap between the needs of developing country Parties, in particular those due to the increasing impacts of climate change compounded by difficult macroeconomic circumstances, and the support provided and mobilized for their efforts to implement their nationally determined contributions, highlighting that such needs are currently estimated at US$ 5.8-5.9 trillion for the pre-2030 period.”
- “68. Also highlights that the adaptation finance needs of developing countries are estimated at US$ 215-387 billion annually up until 2030, and that about US$ 4.3 trillion per year needs to be invested in clean energy up until 2030, increasing thereafter to US$ 5 trillion per year up until 2050, to be able to reach net zero emissions by 2050.”
- “69. Notes that scaling up new and additional grant-based, highly concessional finance and non-debt instruments remains critical to supporting developing countries, particularly as they transition in a just and equitable manner, and recognizes that there is a positive connection between having sufficient fiscal space, and climate action and advancing on a pathway towards low emissions and climate-resilient development, building on existing institutions and mechanisms such as the Common Framework.”
- “70. Also recognizes the role of the private sector and highlights the need to strengthen policy guidance, incentives, regulations and enabling conditions to reach the scale of investments required to achieve a global transition towards low greenhouse gas emissions and climate-resilient development and encourages Parties to continue enhancing their enabling environments.”
- “71. Recalls that developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention and that other Parties are encouraged to provide or continue to provide such support voluntarily.”
- “72. Also recalls that, as part of a global effort, developed country Parties should continue to take the lead in mobilizing climate finance from a wide variety of sources, instruments and channels, noting the significant role of public funds, through a variety of actions, including supporting country-driven strategies, and taking into account the needs and priorities of developing country Parties, and that such mobilization of climate finance should represent a progression beyond previous efforts.”
- “73. Reiterates that support shall be provided to developing country Parties for the implementation of Article 4 of the Paris Agreement, in accordance with Articles 9-11 of the Paris Agreement, recognizing that enhanced support for developing country Parties will allow for higher ambition in their actions.”
- “74. Also reiterates the urgency to support the implementation of the Paris Agreement in developing countries.”
- “75. Emphasizes the ongoing challenges faced by many developing country Parties in accessing climate finance and encourages further efforts, including by the operating entities of the Financial Mechanism, to simplify access to such finance, in particular for those developing country Parties that have significant capacity constraints, such as the least developed countries and small island developing States.”
It then goes on to note progress in mobilizing climate finance, including a range of funds and mechanisms operationalized through the Paris Agreement, including:
- The Global Environment Facility (GEF; operational entity of the Financial Mechanism)
- The Financial Mechanism
- The Green Climate Fund (GCF; operational entity of the Financial Mechanism)
- The Adaptation Fund
- The Least Developed Countries Fund (administered by the GEF)
- The Special Climate Change Fund (administered by the GEF)
Guiding Questions
Unlocking finance for climate action requires a comprehensive understanding of investment needs and barriers at both domestic and international levels. The following guiding questions could support reflection and identification of the most nationally appropriate and impactful opportunities within this Route:
Are the ministries of economy, finance, and planning actively engaged in revising and financing the NDCs, and are there national efforts to align the financial sector with climate change objectives?
Is there a clear strategy to integrate climate finance information into the national strategy, sectoral strategies, annual budgets, budget call circular, Medium Term Expenditure Frameworks, national communications and transparency reports to attract investment, and is there a plan to foster an enabling environment in the country to attract and mobilize finance for climate projects and NDC implementation?
Has there been a thorough assessment and prioritization of investment needs for NDCs, Long-Term Low Emissions Development Strategies (LT-LEDS), National Adaptation Plans (NAPs), and investment plans across various sectors?
Has there been a cost-benefit analysis of the proposed NDC measures, including an assessment of trade-offs and the sectors and stakeholders that will be positively and negatively impacted?
Was the last NDC informed by macroeconomic and macrofiscal modeling or analysis, and are key economic and fiscal indicators considered when evaluating mitigation and adaptation targets? Is there a comprehensive mapping and evaluation of a wide range of public and private sources of finance, and which of those would better fit the different NDC investment needs?
Has there been an assessment of financial flows related to climate (both positive and negative) and measures identified to align finance with the Paris Agreement goals? Are there gaps in understanding the climate finance landscape for the NDC 3.0?
Is the private sector involved in the review and implementation of NDCs, and have NDC ambitions been translated into specific investment plans, including private sector transition plans, financing, and resource-mobilization strategies?
Is there a need to align climate finance efforts with social equity and just transition principles, especially for vulnerable communities?
Are there opportunities to enhance collaboration with international partners and leverage innovative finance mechanisms to support NDC implementation?
Opportunities
The following Opportunities are a non-exhaustive set of options for enhancing finance accessibility and effectiveness in the NDCs 3.0. Further information on the importance of linking the NDC to investment planning as part of the climate finance mobilization efforts can be found in the NDC Partnership and GCF Climate Investment Planning and Mobilization Framework (CIPMF).
How This Links to Other Routes
Finance is inextricably linked to the following Routes of the NDC 3.0 Navigator.
Route: Aligned to the Paris Agreement Temperature Goal
Finance intersects with mitigation efforts by providing the necessary resources to achieve set targets, including economy-wide NDC targets. Additionally, the availability of climate finance is important, as it instills the confidence needed for parties to commit to higher mitigation ambition.
Route: Aligned to Paris Agreement Global Goal on Adaptation
Finance plays an important role in raising ambition and achieving adaptation targets, ensuring that adaptation efforts are adequately funded and implemented, such as through the Loss and Damage Fund.
Route: Mobilizes All-Of-Government and All-Of-Society
Financial flows within and between levels of government, as well as between non-Party stakeholders, are integral to implementing ambitious climate action.
Route: Delivers a Just and Equitable Transition
Just Transition initiatives heavily rely on finance to unlock opportunities for economic transformation, empowering all stakeholders and facilitating a smooth transition to sustainable practices.
Route: Technology and Capacity-Building as Needs and Enablers
Meeting the technological needs outlined in NDCs requires substantial financial support, enabling the uptake and transfer of technology to address climate challenges effectively.
