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"Climate Finance"

"Climate Finance"

Policy Brief 2009-02, Harvard Project on Climate Agreements, Belfer Center

November 2009

Author: The Harvard Project on International Climate Agreements

Issue Briefs

Belfer Center Programs or Projects: Harvard Project on Climate Agreements



The finance of climate mitigation and adaptation in developing countries represents a key challenge in the negotiations on a post-2012 international climate agreement. Finance mechanisms are important because stabilizing the climate will require significant emissions reductions in both the developed and the developing worlds, and therefore large-scale investments in energy infrastructure. The current state of climate finance has been criticized for its insufficient scale, relatively low share of private-sector investment, and insufficient institutional framework. This policy brief presents options for improving and expanding climate finance. These options include:

(1) reforming the Clean Development Mechanism (CDM) offset market to leverage large-scale foreign direct investment in emission-reducing activities in developing countries, most importantly in technology transfer;

(2) allocating emissions allowances in an international cap-and-trade scheme such that developing countries are (partly) compensated for their emission reductions;

(3) establishing an international greenhouse gas charge or other mechanism in major developing countries that creates domestic streams of revenue;

(4) reforming energy subsidies to free funds for government expenditure for climate mitigation and adaptation;

(5) employing export credit agencies to leverage foreign direct investment in climate-related activities;

(6) increasing bilateral and multilateral official development assistance for climate-related projects; and

(7) providing large-scale financing for incremental costs contingent on implementation of emissionreduction policies in developing countries.


For more information about this publication please contact the Harvard Project on Climate Agreements Coordinator at 617-496-8054.

For Academic Citation:

The Harvard Project on International Climate Agreements. "Climate Finance." Policy Brief, Harvard Project on Climate Agreements, Belfer Center, November 2009.

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