The challenge of climate finance

Shannon K. Orr, Bowling Green State University

As arguably the most important test facing the planet today, climate change requires significant financial commitments. The principle of common but differentiated responsibilities reflects a global imperative for developed country parties to provide financial resources to assist developing country parties to implement mitigation and adaptation initiatives.  Estimates of how much financing is needed to tackle climate change are difficult to identify; although the 2010 World Development Report offered a preliminary estimate of $140-175 billion needed per year over 20 years, just for mitigation alone. The scope of the problem and amount of resources required is both extraordinary and unprecedented.

Financing decisions must be thoughtfully made. As negotiations begin at COP 20 we must keep in mind that climate finance needs to be four things: adequate, predictable, transparent and collaborative.


Financing arrangements must take into account both the short-term needs of developing countries, and the demand for longer term initiatives. We cannot focus simply on investments which only deliver short-term benefits; large scale investments are necessary to reduce emissions and establish resilient communities. Addressing climate change is a multi-generational challenge, and financing arrangements must be cognisant of that fact. Financing must be adequate to address the scope of the challenge we are facing.


Developing countries must be confident that financial resources are predictable and sustainable and that they will be able to access the money as needed without great difficulty. This is critical for long-term planning, particularly in areas such as infrastructure and energy policy.


Transactions, investments and projects must be guided by transparency. All parties must be assured that resources will be used effectively and guided by evidence-based decision-making and best practices. Data gathering and information sharing are key to transparency; we must ensure that financing is used in the manner in which it is intended, and that performance measures are in place to determine the effectiveness of every investment.


As direct government funding in many developing countries is limited, successful climate finance must be rooted in a collaborative partnership model. National, regional and international entities, from both the public and private sectors, must work together to support the important mitigation and adaptation projects and programmes that must be developed. Regardless of how these arrangements are structured, they must be done from a collaborative partnership perspective, taking into account the needs of the different stakeholders involved.

We need to reduce greenhouse gas concentrations to safe levels, build resilience in countries that are vulnerable to the effects of climate change, and transition the global economy to a low-carbon alternative. Recent commitments to the Green Climate Fund are a step forward, however a thoughtful and evidence-based approach to climate finance must be a central part of these negotiations.


Dr. Shannon Orr is an Associate Professor at Bowling Green State University and the author of ‘Environmental Policymaking and Stakeholder Collaboration’ (2014, CRC Press). She is also the head of a new project Capacity Building for Sustainable Development – on twitter @CapacityBldg4SD