Public and private
financing for climate action will need to be scaled up
significantly in the coming years, according to the Paris-based
Organization for Economic Cooperation and Development (OECD)

Indeed, the Cancun Agreements call on developed countries to
provide new and additional resources for climate actions USD $30
billion over 2010-2012 and a longer term goal of $100 billion per
year by 2020.

The OECD is ready to assist countries in their efforts to find
lasting solutions to finance action on climate change, building on
the long-standing work of the organisation to share country
experiences and identify lessons learnt and policy recommendations
for good practice.

In a context of tight governments budgets, the use of market
mechanisms in climate policy frameworks can provide resources to
fund climate action and steer private investment to low carbon
development. Key actions include:

• Use of carbon taxes or emission trading schemes with a
  significant degree of auctioning of permits can provide an
  essential source of public financing to support climate change
  action;
  
  
  
  



• Providing a clear price signal to steer private sector
  investment towards innovation, low-emission technologies and
  practices;
  
  
  
  



• Shifting public financing away from activities that encourage
  greenhouse gas (GHG) emissions, such as subsidies to fossil fuel
  use or production, to ¡§level the playing field¡” and free up these
  resources for public financing of climate actions;
  
  
  
  



• Broadening and deepening carbon markets, for example through
  expanded emission trading scheme (ETS), scaled-up clean development
  mechanism (CDM) or sectoral approaches.

Other policies are also needed to bring clean technology and
practices forward in a timely manner:

• Public research and development (R&D) funding also needs to
  be scaled up ¡V ideally in a technology neutral manner – to
  deliver technology breakthroughs and change;
  
  
  
  



• Timebound, public support for investment in new or ‘immature’
  renewable energy or other low or no-emission technologies can be
  effective to lower the risk premium for these investments and
  promote learning;
  
  
  
  



• Development assistance and international cooperation are needed
  to build capacity and experience to accelerate international
  technology transfer and reduce emissions from deforestation and
  forest degradation (REDD).
  
  
  
  



• Leverage private investments through the development and use of
  innovative financial instruments. Key instruments and actions may
  include:
  
  
  
  



• Exploring the contribution of export credits to climate change
  finance;
  
  
  
  



• Raising incentives for pension funds and other private pools of
  capital to invest in low carbon and ‘climate proofed’
  development;
  
  
  
  



• Encouraging pro-active corporate behaviour by establishing
  international reporting standards. Transparency and accountability
  are key to building trust and to improving the effectiveness of
  international financial support over time. The international
  community should should work together to:
  
  
  
  



• Build on existing multilateral institutions and monitoring
  systems to enhance measurement, reporting and verification (MRV) of
  climate finance both in developed and developing countries;
  
  
  
  



• Enhance co-ordination across different funds or delivery
  channels and explore how existing channels for public / private
  climate finance can be used at a scaled-up level;
  
  
  
  



• Working through country-led systems, identify and support
  policies that most effectively and sustainably boost development
  while also addressing climate change.