This report, Catalyzing low carbon growth in developing countries, by the UN Environment Program (UNEP) and partners focuses on the kinds of public finance mechanisms needed to incentivize and scale up private sector investment.

In the near future, appropriate action plans must be implemented at country level to create the demand, to absorb the amounts of investment necessary to mitigate and adapt to climate change, while appropriate financial instruments must be designed to supply the funds.

Combating climate change is not about costs to the economy but an investment in the kinds of renewable, clean-tech and natural resource management economies able to generate low footprint wealth and employment for over one billion people unemployed or under employed.

The total investment required to avoid dangerous climate change is more than USD 1 trillion per annum, according to the International Energy Agency (IEA). Half of this amount could be redirected from business-as-usual investment in conventional technologies to low carbon alternatives. The remainder (USD 530 billion) is required in the form of additional investment.

The challenge can be met. USD 530 billion would represent less than 3% of global investment in 2030. In 2007, energy subsidies were USD 300 billion per annum.

Developing countries will be most advantaged if public finance contributions are designed to maximize the leverage of additional private finance. Demands on public finance are acute, especially following the recent financial crisis. It is estimated that existing public contributions to developing world climate-change investment total around USD 9 billion per annum, less than 2% of USD 475 billion. The World Economic Forum (WEF) estimates that the sum of climate-related public sector commitments currently under negotiation, even if delivered to their maximum ambition, totals around USD 110 billion. The shortfall is potentially more than USD 350 billion.

Read the report: Catalyzing low carbon growth in developing countries.