Climate Finance

Abstract

Climate finance refers to local, national, or transnational financing for climate change mitigation and adaptation of related activities drawn from public, private, and alternative sources. There is no single definition of climate finance. It is, in some instances, discussed separately but often integrated with related and overlapping concepts of green, sustainable, or low-carbon finance. The United Nations Framework Convention on Climate Change (UNFCCC) has defined climate finance as “finance that aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts.” This definition encapsulates climate finance in its broadest form, as it represents the funding of all activities and projects that take climate change mitigation and adaptation into account. A broad definition is necessary as climate finance consists of many different elements such as the type of financing that is provided, the source of financing, flows of financing, what is financed, and whether climate change mitigation is the major or minor element of the activity. Climate finance is, however, most often utilized in the context of climate change negotiation processes, wherein the aim is to provide additional financial resources from developed to developing countries for climate change mitigation and adaptation activities that are unlikely to occur without additional financing.