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UNDP Launches Guidebook on Designing National Climate Financing Mechanisms

Blending Climate Finance through National Climate Funds14 September 2011: The UN Development Programme (UNDP) has launched report that provides a step-by-step guide to developing countries in setting up national climate funds and in making informed decisions on climate financing options. The guidebook, “Blending Climate Finance through National Climate Funds: A Guidebook for the Design and Establishment of National Funds to Achieve Climate Change Priorities,” is based on UNDP's experience with 750 funds comprising over US$5 billion in resources from various donors. 

The guide aims to assist governments in planning, financing and delivering on their climate policies. Noting that there are over 50 international public funds, 45 carbon markets and more than 6,000 private equity funds that provide billions of dollars to finance national-level climate change actions, it stresses that the proliferation of funding mechanisms increases the transaction costs for developing countries seeking climate finance. The guidebook underlines that while investments in the clean energy sector grew up to 30% in the estimated amount of US $243 billion dollars in 2009-2010, only one tenth of these resources were invested in countries outside of the G-20, including Small Island Developing States (SIDS) and Least Developed Countries (LDCs).

The guidebook acknowledges that the responsibility for climate finance and planning is often shared among multiple ministries and agencies at the country level, and formulates a set of recommendations and steps to facilitate designing a national climate fund. It states that common and structural components for designing a national climate fund should include: defining clearly the objectives of the fund; identifying options for capitalization; instilling effective governance; ensuring sound fiduciary management; supporting efficient implementation arrangements; and facilitating effective monitoring, reporting and verification (MRV) of the use and application of the resources.

Finally, the guidebook provides examples of national climate fund schemes, such as: the Climate Change Trust Fund in Indonesia; the Climate Change Resilience Fund in Bangladesh; the Clean Development Mechanism Fund in China; the Yasuni ITT Trust Fund in Ecuador; and the National Fund on Climate Change in Brazil. [Publication: Blending Climate Finance through National Climate Funds: A Guidebook for the Design and Establishment of National Funds to Achieve Climate Change Priorities] [UNDP Press Release]