Selecting effective financial instruments to support action on climate change
This guide presents a curated selection of resources on finance for Nationally Determined Contributions (NDCs) and Long-term Strategies (LTS). It is designed to help Global Climate Action Partnership practitioners find high-quality resources that meet their specific needs, avoiding time-consuming searches on the internet. It will be useful to individuals working on, or interested in, NDC and LTS finance in both developed and developing countries.
- 1. Understanding the situation
- 1.1 Understanding current flows
- 1.2 Assessing financing needs
- 1.3 Assessing capacity
- 1.4 Identifying and overcoming barriers
- 2. Planning and coordinating
- 2.1 Institutions and governance
- 2.2 National finance strategies
- 2.3 Investment plans
- 2.4 National climate funds
- 2.5 Green investment banks
- 4. Using public finance
- 4.1 Managing national finance
- 4.2 International climate finance
- 4.3 Climate finance readiness
- 4.4 The Green Climate Fund
- 4.5 Direct access
- 5. Designing financial instruments
- 5.1 General resources
- 5.2 Sources of private finance
- 5.3 Risk mitigation
- 5.4 Guarantees
- 5.5 Feed-in tariffs and auctions
- 5.6 Taxes and tax incentives
- 5.7 Carbon pricing
1.2 Assessing financing needs
A key challenge countries face is identifying the finance needed to implement the actions identified in their NDC and LEDS plans. Once the portfolio of priority measures has been determined, the cost of implementing the measures must be evaluated. Some data required for such an assessment will likely already be available from other LEDS development activities; for example, simple cost data may be available from marginal abatement cost analyses. While such an approach provides a good starting point, it is important to expand the analysis to account for not only the technology related costs, but also costs associated with setting up the programs and policies, monitoring, enforcement costs, data collection, studies, research, training, and other capacity building and awareness programs that will be incurred in order to implement the chosen measures. (Adapted from How-to guide: Low-emission development strategies and Nationally Appropriate Mitigation Actions: Eastern Europe and CIS, UNDP, 2010.)
Methodology guidebook for the assessment of investment and financial flows to address climate change
UNDP commissioned this guidebook to support developing countries in undertaking bottom-up, national, and sectoral analyses of the costs of mitigation and adaptation. It provides step by step guidance on assessing the changes in investments in physical assets and in programmatic measures needed to mitigate greenhouse gas emissions and adapt to climate change in key sectors. Investments range in type and scale from household investments in appliances, and corporate and government investments in infrastructure, to government investments in education and outreach. The approach is designed to be implemented at national level, and is flexible so that it can be adapted to country specific needs and conditions. The guidebook provides a good basis for evaluating financing needs in the context of LEDS. Developed by UNDP with a group of international experts and regional centers of excellence, this guidebook is one of a series of three guidance documents; the other two are Preparing a workplan for the investment & financial flows assessment, and Reporting guidelines for the assessment of investment and financial flows to address climate change.
The methodology guidebook is also available as single chapters (including French, Spanish, and Russian versions), along with the workplan guidance, and reporting guidelines, on the UNDP’s Climate Community website under Financial Analysis > Methodology.
Enhancing implementation of technology needs assessments: Guidance for preparing a technology action plan
This is a general guidance document to support developing countries in the preparation of a technology action plan. Section 4.2 (3 pp) provides high level guidance on how to estimate the costs and funding needs of specific technology related mitigation actions, and makes a distinction between the funding required to prepare an action and the funding needed to implement it.
Summary briefs and final investment and financial flow (I&FF) assessments country reports for 15 countries that participated in UNDP’s I&FF programme are available on this page. The summary briefs present contextual information and key results, and the I&FF assessment documents present the detailed results for the sectors studied in each country, including discussion of policy implications and uncertainties and methodological challenges and limitations. NB some of the documents are in Spanish, French or Russian.
The main objectives of the NEEDS project were to support participating countries in selecting priority mitigation and adaptation measures, assessing the financing required to implement those measures, and identifying appropriate financial and regulatory instruments to support these measures. Eleven countries participated in the project, each producing a country report presenting their identified priority actions and the financing required to implement them. These reports are useful as examples of how other countries have approached this challenge, if not necessarily best practice in all cases.