Funding: international Environmental Transformation Fund and Climate Investment Funds
What is the international Environmental Transformation Fund (ETF)?
It is a £800m joint DFID/DECC fund, announced in Budget 2007. The aim is to reduce poverty through environmental protection and helping developing countries respond to climate change. The ETF was announced by the Chancellor in the 2007 Budget. £50 million was earmarked to protect the forests of the Congo basin.
What are the Climate Investment Funds?
The Climate Investment Funds (CIFs) were officially launched at the G8 Summit in Hokkaido with a commitment currently standing at over $6 billion from G8 donors. The UK intends to make available £800m ($1.6 billion) from the Environmental Transformation Fund for these Funds. This means the ETF will be used as part of a bigger global effort to help tackle climate change and poverty. At the Pledging Meeting in Washington on the 26 September 2008, a group of ten donors - Australia, France, Germany, Netherlands, Norway, Sweden, Switzerland, Japan, the US – committed a total of $6.14bn to the funds.
These Funds were developed because DFID, Defra and other Whitehall departments have been involved in discussions about using the £800 million ETF to stimulate a bigger global effort to help tackle climate change and poverty. Following an intensive consultation period with developing countries and other donors, this discussion led to the proposal for a multilateral financing mechanism - the Climate Investment Funds - which would receive funding from different donors.
There are two multi-donor Funds - the Clean Technology Fund and the Strategic Climate Fund – which will help developing countries respond to the wide range of challenges posed by climate change, focusing on supporting climate resilient and low carbon development.
- The Strategic Climate Fund will have a number of work programmes. The first programmes will be a Pilot Programme on Climate Resilience (the PPCR) that aims to help vulnerable countries deal with climate impacts such as flooding. The second is likely to be a programme that will aim to avoid deforestation – the Forest Investment Programme.
- The Clean Technology Fund will help developing countries grow in cleaner, more efficient ways, for example by using new and innovative technologies that cut down on carbon emissions.
The Climate Investment Funds will enable the international community to act quickly to tackle the harmful effects climate change is having on the lives of hundreds of millions of people in the world’s developing countries. They will help promote clean technology, tackle unsustainable deforestation, and help developing countries better deal with the impact of climate change.
How will the Funds work in practice?
Both Funds will be administered by the World Bank, but the Bank will not be responsible for deciding how the money will be spent. Governing bodies made up of equal numbers of contributing donors and developing countries will jointly make decisions about where funding is allocated.
The UK Government has worked hard to ensure that the Funds were designed with a strong role for developing countries in the governance structure. Making sure that recipient countries have an equal ‘voice’ is important and consistent with the Paris Declaration on Aid Effectiveness, which commits us to ensuring development is country, not donor, driven. Funding should support country owned investment plans and must be consistent with wider poverty reduction activities at a country level.
Why DECC and DFID support the funds
It is the world’s poorest people who are hit hardest by the impacts of climate change, such as floods and droughts. That is why the UK is pushing for urgent action to cut global emissions and to help developing countries prepare for the impacts and build low-carbon economies.
Our principal goal is that the UN’s climate change deal (which is being negotiated to follow on from the current Kyoto protocol) is fair and credible, and establishes ways to fund clean technology, adaptation and forestry after 2012.
We want to use the Climate Investment Funds to help bridge the funding gap until the UN deal is in place post 2012 and to test new financing options to inform the negotiations on climate finance and the design of future financing mechanisms.
The funds are an interim arrangement. They will help fill the gap before UN agreed mechanisms are up and running, so that money can begin to flow to developing countries to tackle climate change. They are not trying to create a post-2012 financial architecture now, but are about demonstrating and piloting new ways of providing climate finance. The funds will help pilot new programmes which can inform longer term approaches and solutions, giving developing countries real ‘on the ground’ examples of what works best in different situations.
Links:
- DFID (website page on ETF)
- G8 statement
- World Bank approved documents
- Environmental Transformation Fund (UK elements)
Page last modified: 28 November 2008
Page published: 18 July 2008