Climate technologies face numerous barriers determined by their characteristics, stage of commercialisation, and the investment and market context in which they are to be deployed. Many innovative climate technologies require testing, demonstration and adaptation in a new market, which necessitates some kind of public support until they are able to compete with more mature technologies. Addressing the barriers and risks in climate technology investments requires an understanding of the specific risks, capacity constraints and finance gaps that prevent investments. Public finance actors can provide important support and share the risks of new climate technologies.
The different forms of financial support include publicly backed venture capital to jump-start climate technology investment ecosystems, targeted grants, soft loans, guarantees, insurance products, carbon trading and price support instruments. General guidance for selecting the most appropriate can be found in the LEDS-Global Partnership Resource Guide for NDC Finance. This section of the GTT portal summarises financing opportunities supported by the Government of Japan.
The Green Climate Fund (GCF) is a global fund created to support the efforts of developing countries to reduce their greenhouse gas emissions and adapt to climate change. The GCF was set up in 2010 by the 194 countries that are parties to the United Nations Framework Convention on Climate Change, as part of the convention’s financial mechanism. It aims to deliver equal amounts of funding for mitigation and adaptation, while being guided by the convention’s principles and provisions. At the G20 Summit, held in November 2014, Prime Minister Abe of Japan announced the contribution of USD 1.5 billion to the GCF, and the contribution was confirmed in May 2015. Japan actively contributes to the management of the GCF though its board. The fund aims to maximise the impact of public finances in a creative way, and to attract new sources of private financing to catalyse investments in mitigation and adaptation projects in the developing world.
The GCF funds projects based on six criteria: impact potential; paradigm shift potential; sustainable development potential; the needs of the recipient; country ownership; and efficiency and effectiveness. There is a simplified approval process for smaller-scale projects or programmes.
The Joint Crediting Mechanism (JCM) is a system for cooperation with developing countries to reduce greenhouse gas emissions, in which the results of reductions are assessed as a contribution by both partner countries and Japan. Partnership documents have been signed by 17 countries, including countries in Asia, Africa, Small Island Developing States, Latin America and the Middle East. Consultations are under way to increase the number of partner countries.
Using the JCM, Japan has supported numerous renewable energy and energy efficiency projects in the Philippines, Thailand, Mexico, Indonesia, Vietnam, Mongolia, Poland, Moldova and elsewhere. Further information is available on the Joint Crediting Mechanism website.