Fossil fuels powered the industrial revolution and the economic success of many countries. But burning oil, gas and coal produces greenhouse gases that warm the atmosphere and warp the climate.
Advanced industrialized nations have historically contributed most to the human-induced climate crisis because they’ve burned fossil fuels for so long to grow their economies.
And many analysts, activists and heads of state in low-income countries argue big historical emitters like the United States and Europe should largely foot the bill for climate change.
But what does that mean exactly?
What is climate finance? One of the ideas behind climate financing is to support developing countries in steering their economies clear of climate-wrecking fossil fuels. Another is that wealthy nations should help poorer ones hit hardest by global heating to adapt to the changing climate.
These ideas have been central to global climate negotiations in some form or another since the 1992 World Climate Summit in Rio de Janeiro.
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But climate financing is perhaps most commonly associated with the pledge made by industrialized countries at the 2009 Copenhagen UN Climate Summit to raise $100 billion (€95 billion) a year by 2020. In 2015 in Paris, delegates agreed to keep paying this amount annually until 2025 and then set a new figure.
How climate financing will be implemented To implement the $100 billion pledge, industrialized countries are primarily committing public funds. But increasingly they want to raise cash through private investment.
Public funds from donor countries account for the largest share of climate financing. About half of this flows bilaterally from donor to recipient state, largely in the form of development aid. The other portion is multilateral money, meaning that multiple states give money to multiple other states.
This money either comes from climate programs run via multilateral banks, like the World Bank and the African and Asian Development Banks. Or the money is allocated through multilateral climate funds.
Green Climate Fund The most prominent of the multilateral money pots is the Green Climate Fund (GCF). Its resources are intended both for measures to slow climate change, such as the expansion of renewable energy, and for adapting to extreme weather and other impacts of planetary heating.
To date, donor countries have pledged about $20 billion. So far, $12.8 billion of has been approved for projects and $3.6 billion has already been spent on specific programs.
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