Top climate change mitigation funds

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One of the more significant outcomes of the Doha climate change conference held in November 2012 was the Kyoto Protocol’s extension until 2020 which came two weeks after the World Meteorological Association’s announcement that there was a new record high amount of greenhouse gases in the atmosphere.

Acknowledging the polluting effect of traditional energy sources, the U.N. General Assembly concluded its 67th session in December 2012 by underscoring the importance of clean energy and by declaring that 2014-2023 is the “Decade of Sustainable Energy for All”.

The global development community appears encouraged by the United Nations’ strong emphasis on renewable energy. There is some reason for the optimism. A 2012 joint-report by the Frankfurt School of Financial Management and the U.N. Environment Program cites the falling technological costs of renewable energy sources. Further, the Intergovernmental Panel on Climate Change affirmed that, in some forms, costs associated with renewable energy production have reached the levels of more conventional sources. Even the employment competitiveness of renewable energy as a fledgling energy sub-sector is now increasingly being recognized.

Although the importance of climate change remains unclear in the current priorities of austerity-pressured donor governments, some analysts say that shifting the focus of the global climate change agenda to renewable energy programming offers an effective and practical long-term approach.

According to a Devex analysis, from 2010-2012, 41 percent of the climate change aid funding focused on mitigation-related activities that are geared towards reducing greenhouse gas emissions and establishing cleaner energy sources.

Ahead of the World Future Energy Summit – a forum which will bring together government officials, policy makers, investors, and energy experts to discuss future energy challenges and solutions – here Devex provides a rundown of the top dedicated multilateral climate change mitigation funds which primarily support renewable energy projects and other energy efficiency measures.

Clean Technology Fund

Year created: 2008

Implementing agencies: World Bank (main administrating unit), European Bank for Reconstruction and Development, African Development Bank, Asian Development Bank and the Inter-American Development Bank

The largest fund supporting mitigation, the Clean Technology Fund is one of the two multidonor trust funds within the Climate Investment Fund. It aims to promote scaled-up financing for demonstration, deployment and transfer of low-carbon technologies with potential for significant greenhouse gas emission reductions. CTF has provided almost 90 percent of its funding through concessional loans. Funding eligibility conditions include recognition of the Organization for Economic Cooperation and Development’s DAC as a legitimate ODA-qualified country and existence of active multilateral development bank program in the country. Mexico and South Africa are its leading funding recipients. Some of the current projects and tenders financed or co-financed by the CTF are the Third Individual Operation for Entrepreneurial Development Project in Mexico, Urban Transport Clean Technology Fund Project in Colombia and the Eskom Renewables Support Project in South Africa.

Global Environment Facility Trust Fund (4 and 5)

Year created: 1991

Implementing agencies: World Bank (main administrating unit), U.N. Development Program, U.N. Environment Program, International Fund for Agricultural Development and the Food and Agriculture Organization

The oldest fund supporting climate change, the Global Environment Facility Trust Fund supports various environmental programs but with a 90 percent funding concentration on mitigation. The GEF Trust Fund supports projects in areas including renewable energy, energy efficiency, sustainable transport, land-use management and forestry. Its financial instrument is solely grant-giving. GEF Trust Fund’s eligibility for funding includes being a World Bank borrower or a UNDP technical assistance recipient. China and India are GEF Trust Fund’s leading aid recipients. To date it has the largest disbursement for climate change mitigation. Some of the current projects and tenders financed or co-financed by GEF include the Clean Production and Energy Efficiency Project in Viet Nam: Assessment of Energy Saving Potential of the Plastics Industry and the Development of Renewable Energy, Energy Efficiency and Electrification Project in Suriname.

Global Energy Efficiency and Renewable Energy Fund

Year created: 2008

Implementing agency: European Investment Bank

The most innovative fund dedicated to mitigation, the Global Energy Efficiency and Renewable Energy Fund is a Public-Private Partnership that aims to maximize private investments through leveraging public funds mainly provided by the European Commission. Designed as a fund of funds, GEEREF finances sub-funds that raise money in private equity to be able to support small and medium-sized renewable energy and energy efficiency project developers and enterprises. Funding eligibility includes having private sector engagement in national policies or projects and those having a proposed budget of less than € 10 million. To date there is no announcement yet of GEEREF’s official funding disbursement.

Scaling-Up Renewable Energy Program

Year created: 2009

Implementing agencies: World Bank (main administrating unit), European Bank for Reconstruction and Development, African Development Bank, Asian Development Bank and the Inter-American Development Bank

Scaling-Up Renewable Energy Program is part of the Strategic Climate Fund which is one of the two funds within the Climate Investment Funds. It aims to help low-income countries, with special focus on Africa, utilize new economic opportunities to increase energy access through renewable energy use such as wind, bioenergy, geothermal and hydropower. SREP provides financing mainly through grants. Eligibility includes strong poverty alleviation benefits and high potential for scaling-up of lessons learned in pilot projects and programs and replication. The fund’s main financing instrument is grant-giving and has thus far given most of its financing to Kenya and Mali. Some of SREP’s current projects and tenders include Assela Wind Farm: Scaling-up Renewable Energy Program (SREP) Project Preparation Grant for Ethiopia, Scaling up Renewable Energy Program Preparation Grant in Honduras and the Scaling-up of Renewable Energy Program in Nepal.

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About the author

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    Juan Carlos Concepcion

    Juan Carlos is an analyst at the Devex Manila Office where he provides business information by producing early intelligence, donor funding strategy, and project reports. A strong advocate of civic education, he also teaches undergraduate courses on Philippine politics and governance.