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FEATURE: Financing INDCs – realising opportunities for investment in mitigation and adaptation

The availability of climate finance looms large over the Paris climate talks. It will influence how well developing countries are able to realise their ambitions for climate compatible development in the years ahead. Smita Nakhooda and Darius Nassiry explain.

One hundred and seventy-eight countries submitted offers of action on climate change to the UNFCCC Secretariat – an unprecedented demonstration that countries recognise that climate change requires each country to lower emissions in energy, transportation, agriculture and other sectors and take steps to help ensure their economies are climate resilient. These offers – or Intended Nationally Determined Contributions (INDCs) in UN terms – are to take hold from 2020, and will form the basis for the COP21 climate agreement in Paris.

The offers alone, however, are not enough. Even before the ink is dry on the deal in Paris, attention must turn to ensuring the pledges are realised. Subsequent implementation of INDCs, and enabling action that allows these goals to be exceeded and ambition to increase over time, will be vital to keep climate change below a 2°C, as countries have agreed.

The extent to which the INDCs move global emissions closer to a trajectory that would allow us to avoid the most catastrophic impacts of climate change has been the focus of recent research. A report from the UNFCCC secretariat on INDCs submitted by November 2015 reinforced the conclusion suggested by think-tanks and others in the policy community that the offers made represent a significant but inadequate contribution to addressing climate change. If fully implemented, the current INDC submissions will keep global warming to about 2.7°C above pre-industrial levels (although there are different ways of calculating the temperature estimates – see this blog). But fulfilling the actions proposed in INDCs will take significant political commitment and financial investment in many countries.

As ODI noted in a recent working paper on financing INDCs, the degree of detail in INDCs varies among countries; implementation and finance have also not been consistently considered in the submissions (see “Finance and Intended Nationally Determined Contributions: Enabling Implementation). Earlier this year countries committed to a new set of Sustainable Development Goals (SDGs), which set a wider context for action. Few INDCS have specified the investments that will need to be made in order to achieve the stated levels of emissions reduction, or adaptation and resilience-enhancing measures, or made express links to their SDGs. These inextricable agendas need significant planning, preparation and investment.

Moving from INDC priority areas into identification of investment opportunities and development of project pipelines will be critical to mobilising investment and delivery at current levels of ambition. Demonstrating feasibility of financing investments for implementation of INDCs can have a positive spill over effect on the specific investment as well as the country’s development priorities, and even other INDCs. Many in the climate policy and investment community are beginning to recognise this challenge as an opportunity.

Focusing attention on the opportunity will be vital to ensure that all countries are able to attract sufficient investment to develop implement their INDCs within the relevant timeframe and exceed their goals, particularly for developing countries and emerging economies that can access international support. Countries may have partial implementation plans for INDCs based on previous planning exercises, or related efforts to assess and identify opportunities to attract and mobilise climate finance, but additional steps will be necessary to ensure that INDCs can be fulfilled.

The next five years will be critical for planning, prioritising, and preparing an investment programme that will lead to delivery of INDC commitments. Shifting investment to enable countries to achieve and exceed their INDCs (and reduce investment in business as usual high carbon approaches to development) will be essential to building confidence and momentum. Translating the objectives set out in INDCs into concrete opportunities, and attracting requisite finance from public and private sources will be the paramount challenge for 2016 and beyond.


Image: wind power, credit Vatenfall.


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