Financing the fight against climate change [fr]
The decision to create the Green Climate Fund was made at the Copenhagen Conference of the Parties in 2009, and it is headquartered in Korea. The Fund has been operational since 2015.
As the main multilateral fund dedicated to financing the fight against climate change in developing countries, it works as a catalyst for actions to mitigate the effects of climate change and large-scale adaptation in developing countries by bringing added value in three forms:
- Increasing financing for the fight against climate change
- Rolling out financial instruments (grants, concessional loans, guarantees, acquisition of stakes, insurance, risk sharing, performance incentive mechanisms, budgetary assistance, etc.) through an extensive network of implementation bodies and intermediaries, including at the national level
- Better coverage of needs that are currently insufficiently covered such as adaptation for the most vulnerable.
The Green Climate Fund finances the projects and programmes which have the most potential to transform economies to make them low-carbon and resilient, in line with countries’ needs.
The initial investment criteria are:
- the expected impact,
- the paradigm-shift potential,
- the sustainable development potential,
- the beneficiary’s needs,
- national ownership,
- effectiveness and efficiency.
There is no predetermined allocation per country. The allocation rules do however set indicative objectives aiming for (i) balance between mitigation and adaptation; (ii) a minimum of 50% of adaptation resources for the most vulnerable countries, including the least developed countries, African States and Small Island Developing States; (iii) significant allocation of resources to the private sector facility ; (iv) a fair and balanced geographical distribution to maximise the transformational impact and scale of projects.
The Green Climate Fund is governed by a Board representing donor and beneficiary countries equally and in which France has a seat. Its executive director, Yannick Glemarec, took office in April 2019.
With an initial commitments of $10.3 billion for the period 2015-2018, France was the 5th largest contributor to the fund (€774 million).
The 21st meeting of the Fund Board held in Bahrain in October 2018 launched the replenishment process of the Green Fund which ended with the replenishment conference hosted by France on 24 and 25 October 2019. Thanks to France’s mobilization, 28 countries have contributed to this new mobilization for the period 2020-2023 with $9.8 billion.
Commitments to contribute to the Green Fund thus exceed the $9.3 billion pledged at the previous conference in Berlin in 2014, even though some contributors have still not indicated their commitment.
At the G7 in Biarritz, France had announced the doubling of its contribution. With a contribution of €1.5 billion , France becomes the 2nd largest contributor to the Green Fund for the period 2020-2023. To date, 124 projects worth $5.6 billion have been financed by the Green Fund covering nearly 100 countries.
In order to limit the global temperature increase to 2°C by the end of the century, France believes it is essential to take a comprehensive and integrated approach to development and combating climate change, reflected in particular in a greening of national development assistance policies. As well as encouraging the framing and implementation of new, low-carbon development strategies that foster resilience1 to climate change, this approach also implies better donor coordination.
The decision adopting the Paris Agreement reasserted the developed countries’ goal of mobilising US$ 100 billion per year from 2020 through 2025 for climate initiatives in favour of developing countries. The agreement states that a balance should be sought between mitigation and adaptation financing and that a new collective quantified goal will be set before 2025.
In this context, France has pledged to increase its climate financing in developing countries from €3 billion in 2015 to €5 billion in 2020, including an increase in adaptation financing to €1 billion per year, compared with an average of €400 million over the period 2010- 2015. This will be linked with the €4 billion increase in the annual amount of loans granted by the French Development Agency (AFD) and an almost €400 million increase in grants in 2020 versus 2015.
In 2018, the AFD Group, an implementing agency of the Ministry of Europe and Foreign Affairs, has committed €4.8 billion of financing with "climate" co-benefits, including €612 million for the least developed countries. Despite the increase in its volume of activity (+11%), AFD met its target of 50% of commitments with climate co-benefits.
This level of commitments has risen sharply compared to 2015 (+65%) and brings the total amount of AFD Group financing committed since 2005 with a "climate" co-benefit to more than €33.8 billion. In line with its climate strategy, AFD (excluding Proparco) will reach 55% of allocations with a "climate" co-benefit in 2018.
In 2018, €1.4bn has been allocated to adaptation projects and €0.2bn to public policy loans for adaptation, for a total of €1.6bn in commitments for adaptation. 55% of this funding was allocated to projects on the African continent.
AFD will devote at least €3 billion over the period 2016-2020 to the development of renewable energies in Africa, this target forming part of the commitment to €5 billion per year in 2020. To date, France’s contribution amounts to 46 projects representing €2.2 billion, i.e. 1.3 GW of new capacity and the connection of more than 2 million people. This funding will contribute to the roll-out of the Africa Renewable Energy Initiative (AREI), which aims to give Africa 10GW of renewable energies by 2020 and 300GW by 2030.
The One Planet Summits were launched by the President of the Republic in partnership with the United Nations and the World Bank to mobilize funding to effectively combat climate change and biodiversity loss. The OPSs innovate by catalyzing commitments by multiple actors. States, local authorities, companies, banks, insurers, investment funds and philanthropists are joining forces in coalitions for climate action.
Strong announcements were made in Paris (12 December 2017, two years after the adoption of the Paris Agreement), New York (September 2018) and Nairobi (March 2019).
The last "One Planet event" held on the sidelines of the Green Fund replenishment conference in Paris (24 and 25 October) mobilized the international community. The event presented the new ways of "blended finance" and the Green Fund was recapitalized at the level expected by the President, of nearly $10 billion.
For a number of years now, France has been promoting innovative financing for development within the Leading Group and various international bodies, as financing mechanisms supplementing traditional sources of development assistance. These mechanisms have already proved their worth in health and education and, combined with other sources, could help to reach the objective of US$ 100 billion per year 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. These financing have already proved their worth in the field of health and education and could contribute, together with other sources, to reaching the target of $100 billion per year from 2020 for the fight against climate change.
France focuses in particular on the Financial Transaction Tax (FTT) and market instruments in international air and maritime transport :
A financial transaction tax would raise substantial resources. The French FTT, adopted on 29 February 2012, should provide a model with a view to universalisation of the mechanism. Some of the revenue from the tax will be used for the Green Climate Fund. At European level, discussions on implementing an EU financial transaction tax (EU FTT), 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 in order to effectively achieve global reductions in the fast-growing emissions from these sectors and generate significant revenue for climate finance. At the most recent Assembly of the International Civil Aviation Organisation, it was agreed that a market-based global system would be negotiated in 2016, for entry into force in 2020.