Financing Climate Change Solution

Element Description:
The amount and possibility of financing the solutions of mitigating and adapting to the effects of global climate change.
Stakeholders: The citizens of the governmental body that is inacting these financial policies weither it is a government like the U.S. government or an international body such as the UN
Key Issues: It is going to be very expensive to pay for all of this.

According to the UNFCC “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.

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.

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.

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.

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

Financial issues under a future climate change regime with increased effectiveness will require: Shifts in investment and financial flows to more climate-friendly and climate-proof investments Scaling up international and public capital dedicated to climate-friendly and climate proof investments Optimizing the allocation of the funds available by spreading the risks across private and public investors, for example by providing incentives for private investment in the early deployment of new technologies. Private sector investments constitute up to 86% of investment and financial flows and are thus another important means to enhance investment and financial flows to address climate change in the future.Policy certainty is important for investors. A longer-term international agreement on climate change broadens the range of mitigation measures that are attractive investments.

Additional external public funding for climate change mitigation and adaptation will be needed particularly for sectors in developing countries that depend on public investment and financial flows.