Public and private financing for climate action will need to be scaled up significantly in the coming years, according to the Paris-based Organization for Economic Cooperation and Development (OECD)
Indeed, the Cancun Agreements call on developed countries to provide new and additional resources for climate actions USD $30 billion over 2010-2012 and a longer term goal of $100 billion per year by 2020.
The OECD is ready to assist countries in their efforts to find lasting solutions to finance action on climate change, building on the long-standing work of the organisation to share country experiences and identify lessons learnt and policy recommendations for good practice.
In a context of tight governments budgets, the use of market mechanisms in climate policy frameworks can provide resources to fund climate action and steer private investment to low carbon development. Key actions include:
- Use of carbon taxes or emission trading schemes with a significant degree of auctioning of permits can provide an essential source of public financing to support climate change action;
- Providing a clear price signal to steer private sector investment towards innovation, low-emission technologies and practices;
- Shifting public financing away from activities that encourage greenhouse gas (GHG) emissions, such as subsidies to fossil fuel use or production, to ¡§level the playing field¡¨ and free up these resources for public financing of climate actions;
- Broadening and deepening carbon markets, for example through expanded emission trading scheme (ETS), scaled-up clean development mechanism (CDM) or sectoral approaches.
Other policies are also needed to bring clean technology and practices forward in a timely manner:
- Public research and development (R&D) funding also needs to be scaled up ¡V ideally in a technology neutral manner -- to deliver technology breakthroughs and change;
- Timebound, public support for investment in new or 'immature' renewable energy or other low or no-emission technologies can be effective to lower the risk premium for these investments and promote learning;
- Development assistance and international cooperation are needed to build capacity and experience to accelerate international technology transfer and reduce emissions from deforestation and forest degradation (REDD).
- Leverage private investments through the development and use of innovative financial instruments. Key instruments and actions may include:
- Exploring the contribution of export credits to climate change finance;
- Raising incentives for pension funds and other private pools of capital to invest in low carbon and 'climate proofed' development;
- Encouraging pro-active corporate behaviour by establishing international reporting standards. Transparency and accountability are key to building trust and to improving the effectiveness of international financial support over time. The international community should should work together to:
- Build on existing multilateral institutions and monitoring systems to enhance measurement, reporting and verification (MRV) of climate finance both in developed and developing countries;
- Enhance co-ordination across different funds or delivery channels and explore how existing channels for public / private climate finance can be used at a scaled-up level;
- Working through country-led systems, identify and support policies that most effectively and sustainably boost development while also addressing climate change.