The webinar series will target the progress of innovative financial instruments related to two key finance source perspectives:
- Climate Finance in the form of flows to address mitigation, adaptation and natural capital including the forestry sector challenges in LAC.
- Carbon Finance in the form of flows as payments for reducing emission reductions in the AFOLU sector in LAC.
Global climate finance reached USD 1.3 trillion on annual average in 2021/2022. Climate finance is uneven across sectors, while mitigation accounted for 91% of the overall flows, adaptation accounted for the remaining 9%. Energy (USD 515 billion), transport (USD 336 billion), and infrastructure (USD 240 billion) are among the sectors accounting for the largest flows. The agriculture, forestry, and land-use (FOLU) sector accounted for USD 43 billion globally. While the source of financial flows is almost even between public sources including governments, national and multilateral development finance institutions, among others (USD 536 billion) and private sources including commercial financial institutions, corporations, others (USD 614 billion); debt instruments (USD 609 million) are the most representative for their use[1].
In LAC, despite the average annual finance flows for climate reached almost USD 59 million in 2021/2022, there is a significant gap between the needs of developing countries and available funds. Scaling up finance is a priority for countries in LAC to advance on climate action.
Global carbon finance flows are also advancing. Carbon pricing instruments including carbon taxes, emission trading schemes and carbon markets continue to evolve and grow. Revenues from these reached USD 104 billion in 2023[2]. While issuances of carbon credits continued to deaccelerate from 2021 reaching 250 million of credits issued because of integrity concerns in the market; initiatives addressing integrity have emerged on both the supply and demand sides to reinforce confidence in the voluntary carbon market (VCM). Paralelly, in the context of forestry and land use credit issuance, jurisdictional REDD+ credits are emerging as an additional source of carbon credit supply that seeks to address integrity concerns and bring finance to forests.
Given this context, governments and development finance institutions as public sources, and corporations and commercial financial institutions as private ones, play a crucial role in driving and channeling climate and carbon financial flows for NDCs consecution and Net Zero commitments globally and in LAC.
[1] CPI (2023). Global Landscape of Climate Finance. Available in: https://www.climatepolicyinitiative.org/wp-content/uploads/2023/11/Global-Landscape-of-Climate-Fina…
[2] World Bank (2024). State and Trends of carbon pricing. Available in: https://openknowledge.worldbank.org/server/api/core/bitstreams/de3e6372-811f-47b3-989e-70ced694f9a8…
