At the OECD Paris discussions, for example, developed country governments spent two days discussing methods to quantify how public climate finance dollars can mobilize private sector dollars. This fixation with so-called “leverage ratios” of public to private dollars stems from developed nations’ collective pledge to mobilize -- from public and private sources -- an “additional” $100 billion annually by 2020 to support climate change activities in developing countries. Faced with fiscal tightening, these governments realize that demonstrating progress towards the $100 billion is more easily achieved by reporting the highest possible leverage ratio. This narrow bean-counting fails to acknowledge the real amount of investment needed to shift the world onto a low-carbon economy and acts as a distraction from the bigger challenges related to mobilizing climate finance.
Where should decision-makers focus their attention at the U.S. ministerial meeting on mobilizing climate finance?
In order to truly mobilize the amount of money needed to mitigate and prepare for climate change, we must press the reset button on climate finance discussions. As ministers and other officials gather for the Ministerial Meeting on Mobilizing Climate Finance, three questions should guide their decision-making:
1) Are we focusing on the right investment figures?
The World Economic Forum projects that by 2020, about $5.7 trillion will need to be invested annually in green infrastructure, much of which will be in today’s developing world. This will require shifting the world’s $5 trillion in business-as-usual investments into green investments, as well as mobilizing an additional $700 billion to ensure this shift actually happens. The Climate Policy Initiative estimates that we are currently at roughly $360 billion annually in public and private climate investments, with developed country governments providing somewhere between $10-20 billion per year, according to their fast-start finance reports and OECD estimates.
Next page: Considering the numbers