Climate Policy Initiative has just released our Global Landscape of Climate Finance 2014. By providing the most comprehensive overview available of climate finance, this series of reports helps decision makers to measure progress against policy goals, identify barriers to the smooth flow of climate investments, and find opportunities to reallocate scarce public resources to drive more investment.
Doing all this well requires effective tracking of climate finance. The climate community has clearly made progress in tracking climate finance over the last year, and Landscape 2014 has benefited from this progress. This year’s edition of the Landscape contains the following improvements:
- Tracking flows in more detail: We have extended our coverage of climate finance to 12,000 projects, mainly due to more detailed tracking of private renewable energy finance. A further improvement in granularity was that, for the first time, several Multilateral Development Banks (MDBs) provided us with project-level data. The fresh data is based on the work undertaken for the 3rd Joint Report on MDB Climate Finance, and shows advancement in harmonizing climate finance tracking: MDBs are now also reporting project-level data to the Organization of Economic Development and Cooperation (OECD), who is already tracking bilateral development assistance with climate change objectives. This is a great development. Project-level data is the gold standard of tracking to get a comprehensive picture of climate finance and avoid double counting of public flows.
- Increased clarity on the size of data gaps: Our collaboration with the Ministry of Finance in Indonesia to capture its public climate finance flows demonstrates that domestic budgets for climate change can be substantial. An extensive review of the literature, which includes new efforts to gauge energy efficiency finance and domestic climate budgets in France, and several other developing countries, helped us further narrow down both where we are missing information, and its potential volume. We estimate there is at least an additional USD 170 billion in private energy efficiency, private forestry and public domestic finance that we do not track, as we are missing reliable project-level data. Furthermore, we have major data gaps in private climate investments in adaptation, and transport (see figure below).
Clearer definitions and more transparency on data sources and breakdowns will help to continue to make progress on climate finance tracking. We do this in Landscape 2014 and clarified our approach in a recent brief on our climate finance definition, explaining, for instance, how we track total investments and public framework expenditures to track progress towards investment needs but we exclude revenue streams to avoid double counting. The Joint Report on MDB Climate Finance is a good example of a report that offers a great deal of transparency on what type of sectors, technologies, and projects reporting institutions are including. We need even more progress in transparent definitions and harmonization of tracking, particularly in case of adaptation finance where different definitions and reporting system make it very difficult to compare numbers from different sources.
Ultimately, improved tracking matters because it is an important step in evaluating whether public money is delivering policy objectives effectively. Our collective understanding of this central concern of policymakers is improving. However, this knowledge is scattered across projects, technologies, and regions. We still lack a systematic understanding of how effectiveness can be ascribed to different parts of the climate finance landscape. Climate Policy Initiative is working on our understanding of climate finance effectiveness through a series of case studies under the San Giorgio Group.
Martin Stadelmann is a senior analyst at Climate Policy Initiative, where he focuses on climate finance effectiveness and the private sector. Martin previously managed a portfolio of carbon offset projects in developing countries for the Myclimate foundation, worked at the Global Environment Facility, and consulted governments on international climate policy during his PhD.