Editing IPCC:AR6/WGII/Chapter-12 (section)

==== 12.5.8.5 Financing ====

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Climate-change financing is unequally distributed among CSA countries ( ''high confidence'' ). Financing of climate-change adaptation remains very much delegated to multilateral and bilateral cooperation, and the governments in the region have heavily relied on it. Still, there are some concerns regarding justice in the distribution of these funds ( [[#Khan--2020|Khan et al., 2020]] ). The UNFCCC has created financing mechanisms throughout its functioning years, but a wide range of issues that present challenges for access by recipients ( [[#Hickmann--2019|Hickmann et al., 2019]] ). These include a lack of technical capacity, difficulties in following the procedures established by the various financial entities and low levels of awareness about the need for action, as well as the different sources of funds available. The fiscal policies of various countries have contributed to government financing in the fight against climate change ( [[#World%20Bank--2021|World Bank, 2021]] ). Since the Paris Agreement, countries have pledged NDCs that introduce the need to design and implement carbon budgets with a corresponding consideration of the efficiency and costs and benefits involved in each mitigation or adaptation to climate-change projects ( [[#Fragkos--2020|Fragkos, 2020]] ).

According to UNFCCC, Latin America and the Caribbean, for the period 2015–2016, obtained 22% of climate financing from multilateral climate funds. In this section we use data from https://climatefundsupdate.org/data-dashboard , and most of the reported information for Latin American and the Caribbean includes Mexico, since the scope of this chapter does not include Mexico, so we must rely on the raw data included in the data dashboard mentioned in the link (see also Guzmán et al. [2016]). According to the data, 76% of climate-related financing went to mitigation projects, with the remaining 24% going to adaptation. Of the total financing provided by the multilateral climate funds to the region, 51% took the form of concessional loans, while 47% was provided as grants. For the region, approvals in the 2015–2016 period were concentrated in Argentina, Chile, Brazil and Colombia, where large-scale mitigation projects were launched supported by the Green Climate Fund (GCF) and the Clean Technology Fund (CTF). For the period 2003–2019, the total contribution of climate financing to SA and the Caribbean is about USD 3558 million. The largest contributors to climate financing in the region come from the GCF, which approved USD 824.2 million for 23 projects. Brazil is the top recipient with USD 195 million, followed by Argentina with about USD 162 million. The second provider is the Amazon Fund with USD 717 million allocated to 102 projects in Brazil. In 2018, the CTF became the third largest source of financing, with USD 483 million dollars approved for 24 projects; the main recipient is Chile with USD 16,207 million, followed by Colombia with USD 170 million. The five largest projects approved in the region in 2018 were through the GCF. Brazil (USD 195 million) received support for reducing energy consumption across Brazilian cities, while Argentina (USD 103 million) received support to scale up investments by small and medium-sized enterprises (SMEs) in renewable energy and energy efficiency. In both cases, financing is predominantly provided as concessional loans.

Climate financing in CSA is mainly focused on mitigation actions ( ''high confidence'' ). In SA and the Caribbean, 73% (USD 2579 million) of funding to date has supported mitigation. Only 21% (USD 761 million) of the funding supports adaptation projects, and the remaining 4% (USD 217 million) supports multi-focus projects. Of the 51 new projects in SA and the Caribbean approved in 2018–2019, the GCF financed USD 508 million over ten projects. Amazon Fund was next with USD 81 million for 10 projects. While the GCF focuses on large and transformative projects and programmes, and in connection with broader reform of the policy framework in the region, the Amazon Fund targets smaller project interventions.

Climate financing in the region is concentrated in Brazil, which receives a third of the region’s funding, with 41 mitigation activities receiving more than 6 times that of adaptation from multilateral climate funds. By the size of its GDP, Brazil receives the largest amount of financing; this leaves the poorest countries with little or no financing and therefore reinforces a vicious circle of poverty and vulnerability. Whether this is due to Brazil’s being more successful at presenting eligible projects, a lack of commitment from other developing countries or some other structural factors is an open question. In any case, compensation schemes for the most vulnerable countries appear as needed, given the differences in vulnerability to climate-related damage ( [[#Antimiani--2017|Antimiani et al., 2017]] ). This is aggravated by the fact that fund management is in the hands of supranational entities while inequalities remain in regions within a country, particularly in highly centralised countries, as is the case for countries in the region.

COVID-19 recovery plans can have synergistic effects for climate-change adaptation ( ''medium confidence: low evidence, high agreement'' ). A key decision point for adaptation will be how the world responds to the pandemic. The global recovery can serve as a catalyst to increased and more equitable climate financing. Globally, recovery packages will likely have the power to change the global trajectory towards meeting the targets of the Paris Agreement and building a more just future ( [[#Forster--2020|Forster et al., 2020]] ). Several factors are relevant to the design of economic recovery packages: the long-run economic multiplier, contributions to the productive asset base and national wealth, speed of implementation, affordability, simplicity, impact on inequality and various political considerations ( [[#Hepburn--2020|Hepburn et al., 2020]] ). A key objective of any recovery package is to stabilise expectations, restore confidence and channel desired surplus savings into productive investment. However, ‘business as usual’ implies temperature increases over 3°C, implying great future uncertainty, instability and climate damage. An alternative way to restore confidence is to steer investment towards a productive and balanced portfolio of sustainable physical capital, human capital, social capital, intangible capital and natural capital assets ( [[#Zenghelis--2020|Zenghelis et al., 2020]] ), consistent with global goals on climate change. Finally, any recovery package, including climate-friendly recovery, is unlikely to be implemented unless it also addresses existing societal and political concerns—such as poverty alleviation, inequality and social inclusion—which vary from country to country.

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