Channels of German climate finance

The funding for climate finance in Germany are coming mainly from the federal budgets of the Environment Ministry (BMUB) and the Development Ministry (BMZ) and a large share is channeled through bilateral development cooperation. In addition, Germany makes regular payments to multilateral climate funds and participates in multilateral initiatives.

Bilateral channels

The largest share of German funds for climate change financing (approximately 85% in 2015/2016) are disbursed at the bilateral level. In addition to “traditional” bilateral development cooperation, pursued above all by the Gesellschaft für internationale Zusammenarbeit (GIZ), which is responsible for technical cooperation, and the KfW Development Bank, which manages financial cooperation, special bilateral instruments also exist:

Multilateral climate funds

The other share of the German climate finance (around 15% in 2015/2016) is covered by contributions to several multilateral climate funds. Some of these funds were established directly under the UN Framework Convention on Climate Change (UNFCCC):

Other funds exist outside of the UNFCCC, but follow similar goals:

  • The Climate Investment Funds of the World Bank which support the dissemination of climate friendly technologies for mitigation and more comprehensive programmes on adaptation to climate change. This includes the Pilot Programme for Climate Resilience (PPCR).
  • The Forest Carbon Partnership Facility which is supporting developing countries in reducing emissions from deforestation.
  • The Global Environment Facility (GEF) which is providing financing for the implementation of the Rio conventions in developing countries including the UN Framework Convention on Climate Change (UNFCCC).
  • The Montreal Protocol Fund which is supporting measures for reducing ozone depleting substances in developing countries.

Multilateral initiatives

A relatively recent development in international climate finance are multilateral initiatives where countries rally together around a common issue. They often consist of both donor and recipient countries. And they are an important means for  industrialized countries to fulfill their international climate finance obligations, even though not all pledges to these initiatives is actually additional money. Germany is an important actor in two initiatives:

  • the InsuResilience Initiative for climate risk insurance which was founded as part of the G7 and extended through the InsuResilience Global Partnership.
  • the African Renewable Energy Initiative (AREI), an Africa-led  effort to accelerate and scale up the continent’s renewable energy potential.

Climate financing through leveraging private capital

Another new development in international climate politics is that public actors have started targeted actions for the mobilization of private capital. One initiative is the Global Energy Efficiency and Renewable Energy Fund (GEEREF). GEEREF is an instrument which the European Commission initiated for mobilizing risk capital for investments in energy efficiency and renewable energies in developing countries. Another instrument is the Global Climate Partnership Fund, which the German government initiated together with Denmark, Austria, the World Bank and the Deutsche Bank.