Rising to the climate change challenge: the Environmental Transformation Fund and the Climate Investment Funds
In response to the growing recognition that climate change and development are
inextricably linked, the G8 have committed to provide approximately $6 billion
to the new Climate Investment Funds (CIFs).
The CIFs will enable the international community to act quickly to tackle the
harmful effects climate change is having on the lives of hundreds of millions of
people in developing countries. They will help promote clean technology, tackle
unsustainable deforestation, and help developing countries deal better with the
impact of climate change.
The announcement, made at the G8 Summit in Japan, includes an £800 million ($1.6
billion) contribution from the UK’s Environmental Transformation Fund (ETF).
This means the ETF will be used as part of a bigger global effort to help tackle
climate change and poverty.
What is the Environmental Transformation Fund?
The aim of the £800 million joint DFID/Defra Fund is to reduce poverty through environmental protection and help developing countries respond to climate change. The ETF was announced by the Chancellor in the 2007 Budget, where £50 million was earmarked to protect the forests of the Congo basin.
What are the Climate Investment Funds?
During recent months, DFID, Defra and other Whitehall
departments have been involved in discussions about using the ETF to stimulate a
bigger global effort to help tackle climate change and poverty.
Following an intensive consultation period with developing countries and other
donors, this led to the proposal for a multilateral financing mechanism - the
CIFs - which would receive funding from different donors.
Included within the CIFs will be a Clean Technology Fund (CTF) and a Strategic
Climate Fund (SCF). The CTF will help developing countries grow in cleaner, more
efficient ways, for example by using new and innovative technologies that cut
down on carbon emissions.
A number of work programmes will be contained within the SCF.
The first will be a Pilot Programme on Climate Resilience (PPCR) aimed at
helping vulnerable countries deal with climate impacts such as flooding, and the
second is likely to be aimed at avoiding deforestation (the Forest Investment
Programme).
The CIFs were officially launched at the G8 Summit in Japan with a commitment of
$6 billion from G8 donors. Read more about
the G8 in Japan.
How will the Funds work in practice?
Both Funds will be administered by the World Bank, but the
Bank will not be responsible for deciding how the money will be spent. Governing
bodies made up of equal numbers of contributing donors and developing countries
will jointly make decisions about where funding is allocated.
The UK Government has worked hard to ensure that the Funds were designed with a
strong role for developing countries in the governance structure. Making sure
that recipient countries have an equal voice is not only important, but
consistent with the Paris Declaration on Aid Effectiveness, which commits us to
ensuring development is driven by countries, not donors. Funding should support
country-owned investment plans and must be consistent with wider poverty
reduction activities at a country level.
What happens next?
Following the G8 announcement, the Climate Investment Funds are now open to pledges from other donors. The first meetings of the governing bodies will take place in October.
Why DFID and Defra support the funds
It is the world’s poorest people who are hit hardest by the
impacts of climate change, such as floods and droughts. That is why the UK is
pushing for urgent action to cut global emissions and to help developing
countries prepare for the impacts and build low-carbon economies.
The UK Government’s principal goal is that the UN’s climate change deal (which
is being negotiated to follow on from the current Kyoto protocol) is fair and
credible, and establishes ways to fund clean technology, adaptation and forestry
after 2012.
We want to use the CIFs to help bridge the funding gap until the UN deal is in
place post 2012 and to test new financing options to inform the negotiations on
climate finance and the design of future financing mechanisms.
There is no time to waste - this is about action at scale and now. The funds are
an interim arrangement to help fill the gap before the UN-agreed mechanisms are
up and running, so that money can begin to flow to developing countries to
tackle climate change. They are not trying to create a post-2012 financial
architecture now, but are about demonstrating and piloting new ways of providing
climate finance. The funds will help pilot new programmes which can inform
longer term approaches and solutions, giving developing countries real,
on-the-ground examples of what works best in different situations.
Last updated: 17 July 2008
