This policy brief, published by the International Institute for Environment and Development (IIED), outlines six challenges to delivering the 'climate finance' promised to developing countries at last year's UN climate talks in Copenhagen.

The Copenhagen Accord — an international agreement among 25 countries attending the talks — includes a promise of funds to help developing countries adapt to climate change. Starting at US$10 billion a year from 2010–2012, the funds will rise to US$100 billion a year by 2020.

But six key issues could render these figures meaningless. First there is the question of funding sources. Climate finance flows must be distinguished from other flows such as funds obtained through carbon markets.

Second, climate finance must be 'new and additional' to avoid diverting aid from other key areas such as healthcare or agriculture. But establishing this is extremely difficult, say the authors.

Third is the unresolved question of who decides what constitutes climate finance. Donor agencies currently define their own projects as climate-related or not but there are no standard rules for interpreting the former.

Fourth, the Accord is unclear on whether climate finance includes loans. The risk of including loans is that repayments could end up being counted, resulting in little additional support.

There are also issues of timing. Past experience suggests that developing countries may have to wait several years before receiving the first funds, say the authors.

Finally, there is the question of governance. Who will oversee the implementation of climate finance? Fair governance is critical to making climate finance work for developing countries, say the authors.

The authors suggest two essential tasks for the global community. There must be agreement about what climate finance means — whether it includes public money, how to define 'new and additional', and how to count loans.

Equally important is ensuring transparency, oversight and evaluation of how much money is actually paid and where it is going to. The authors suggest a new oversight system be established in liaison with the UN and the Organisation for Economic Co-operation and Development.

Link to full policy brief from IIED

This policy brief was written by J. Timmons Roberts, director of the Center for Environmental Studies at Brown University, Martin Stadelmann, researcher at the University of Zurich, and Saleemul Huq, senior fellow at IIED.

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