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
2.4 National climate funds
A potentially important mechanism for countries to manage climate finance is a National Climate Fund. These are nationally driven and nationally owned funds that help countries to collect climate finance from a variety of sources, coordinate them, blend them together, and account for them. In this way, countries are in the driving seat and can make informed choices about how to direct resources towards activities that deliver results. National Climate Funds provide a country driven system that can support climate change goal setting and strategic programming, oversee climate change project approval, measure project implementation and performance, offer policy assurance and financial control of climate change funds, and assist with partnership management on the ground. (Adapted from Blending climate finance through national climate funds: A guidebook for the design and establishment of national funds to achieve climate change priorities, UNDP, 2011.)
This discussion paper synthesizes and analyzes the experiences of Asia-Pacific countries in establishing and managing National Climate Funds, and can provide a starting point for in-country discussions about setting up such a fund. The paper suggests feasibility criteria for setting up funds, explores different design features (including presenting a useful typology of different types of fund), looks at some important management features and makes summary recommendations. Annex 1 of the paper summarizes the advantages and disadvantages of managing climate finance through the national budget system compared with establishing a National Climate Fund.
CDKN commissioned this report from Dalberg to assess the sustainability of National Climate Funds and explore possible approaches to resource mobilization, in response to the mixed experience of National Climate Funds so far. Part 1 of the report introduces its purpose and structure, and its research methodology. Part 2 presents an overview of how National Climate Funds fit into the overall climate finance landscape. Part 3 describes the primary barriers to resource mobilization and the successes of some Funds, and parts 4 and 5 outline a resource mobilization approach for National Climate Funds. The target audience includes existing National Climate Funds, decision makers exploring whether to establish a Fund, and climate policy makers more generally.
Blending climate finance through national climate funds: A guidebook for the design and establishment of national funds to achieve climate change priorities
The purpose of this guidebook is to assist countries in designing a National Climate Fund. It leverages UNDP’s experience with funds at the global, regional, national, and subnational levels, and shares lessons learned about designing and administering National Climate Funds. It also aims to provide a simple, robust, and transparent method for meaningful stakeholder engagement throughout the design process. The principal audience for this publication are decision makers at national and subnational levels, as well as domestic and international experts involved in assisting governments in establishing institutions and frameworks to support the management and delivery of climate finance.
Rwanda’s national climate fund (FONERWA) is seen as one of the most successful national climate funds so far. This website presents information about the fund and numerous other documents.
Project final report—Creation of the national fund for climate and environment (FONERWA): Support to the fund management team
This final report from the DFID funded project to set up Rwanda’s climate fund describes the background and evolution of the fund, the results and achievements of the project, and lessons learned.