Of the three Rio Conventions, the United Nations Convention on Climate Change (UNFCCC) is the one that has received much attention and subsequently funding for its objectives. In 2007, DAC members allocated approximately USD 4.3 billion in climate change related aid against USD 3.5 billion and USD 1.7 billion in biodiversity and desertification related aid, respectively (OECD-DAC, 2009).
The Kyoto Protocol of the UNFCCC is active since 2005 with the objective of tackling global warming and its negative impact on the environment through the reduction of greenhouse gas emissions by a set group of countries (the Annex I).
In order for the countries to meet the established commitment, the protocol allows for the so-called “flexible mechanisms” of Joint Implementation (JI) and Clean Development (CDM). Through this system, Annex I countries can invest in emission reduction in other countries of the same group (JI) or in non-Annex I countries (CDM). The second mechanism thus promotes climate change-related investments in developing countries. Emission Trading is an additional system that allows countries to buy and sell their emission units in order to meet their national target.
As the synergies between the issues of the three Conventions and the Kyoto Protocol are highly interlinked there are great opportunities for building joint activities targeting climate change mitigation and mitigation, sustainable land management and biodiversity, supported by the climate change funds.
The following financing opportunities were listed as grouped into three different categories: (i) adaptation and mitigation funds; (ii) REDD+ funds; and (iii) carbon funds, according to their main area(s) of focus. However, it is not always possible to make a clear distinction between the different categories, as a single fund can encompass different sectors and priorities.
Adaptation and mitigation funds
Adaptation funds are funds through which investors can implement projects and programmes having adaptation to climate change as their objective.
Adaptation activities are those that seek to provide adjustment to the adverse impact of climate change on the environment, and they revolve around the development of coping strategies.
Complementary to the adaptation funds, the mitigation funds provide financing to initiatives associated with the reduction of the causes of climate change itself.
REDD+ is a mechanism intended to create incentives for developing countries to protect, better manage and sustainably use their forest resources. REDD+ seeks to create a financial value of the carbon stored in the trees and make the forest more valuable standing than cut down. With the REDD+ mechanism the countries are presented incentives to invest in low-carbon technologies and activities which can lead to sustainable development.
Several financing options are available to support REDD+.
Carbon funds are funds established with the objective of allowing participants to invest in projects that seek to reduce greenhouse gas emissions worldwide. They operate in compliance with the flexible mechanisms of the Kyoto Protocol and the Emission Trading system, and they provide investment opportunities for different stakeholders.