The paper examines how an effective international architecture for climate finance could be built in line with meeting the Paris targets and the sustainable development goals. In particular how the USD 100 billion should be raised, if this target is enough, who should provide it, what financing mechanisms should be used, how it can be accessed and where it should be distributed.
The finance of climate mitigation and the USD 100 billion target represent key challenges in the negotiations of an international climate agreement. Finance mechanisms are important since stabilizing the climate requires significant emissions reductions in both the developed and the developing countries, and therefore large scale investments in energy infrastructure.
The transition to low-carbon, climate-resilient economies require additional investments at a scale that most of the developing countries are not able to capture without support. In their capacity of recipients of the climate finance, the developing countries will feel first and foremost the consequences of a failing international climate finance architecture. Thus, improving the overall coherence and performance of the climate finance architecture is one of the key demands of the developing countries.
For the developed countries, it is important to take into account, to understand and assess the priorities and financial needs of developing countries, as well as to understand how these financial resources can be mobilized, resources that should aim to achieve a balance between adaptation and mitigation. Therefore, many questions about if and how the commitments of developed countries can be fulfilled are yet to be answered.
In the light of these assumptions, drawing on the relevant economic literature, comparing different financial policies and analyzing various international economic contexts, we debate on that role of public and private actors in investment and the significance of the institutional architecture of climate finance, both elements being influenced by the current reporting of climate finance. We argue that greater coordination of international financial flows and an effective international architecture for climate finance is required to promote coherent delivery of the needed support.
The paper is divided in 5 chapters. After introducing the context and methods of our research in chapter 1, we elaborate, in chapters 2, on the different elements influencing the existing system of climate finance. We continue with chapter 3, assessing the potential determinants of the substantial reform and expansion of the actual system. In chapter 4, we prospect the weight of possible characteristics of the new financial architecture for climate finance. We conclude with chapter 5, with suggestions aimed to build an effective international architecture for climate finance.
The suggestions result from our research showing that the future architecture for climate finance should make use of institutions and channels both inside and outside current financial Mechanism. Progressing on the mobilization and scaling up of climate finance require resources originating from a wide variety of sources. Assessing progress in provision and mobilization of support, as well as more transparency and enhanced predictability of financial support are needed. We commend on all these elements to be taken into consideration for designing an effective and efficient institutional framework for governance of international climate finance.