Search Penny Hill Press

Tuesday, June 29, 2010

Climate Investment Funds (CIFs): An Overview

Richard K. Lattanzio
Analyst in Environmental Policy

For political, social, economic, and environmental reasons, the United States helps finance programs in developing countries to address global climate change and other environmental issues. Several factors are important in structuring the U.S. agenda, including, among others, the choice of recipient countries, financial mechanism, level of funding, and type of program or technology, as well as the choice between bilateral or multilateral assistance. Congress is responsible for several activities in regard to global environmental finance, including (1) authorizing periodic appropriations for U.S. financial contributions and enacting those appropriations, and (2) overseeing U.S. interests in the programs. This report provides an overview of two of the larger and more recently instituted mechanisms—the Climate Investment Funds (CIFs)—and analyzes their structure, funding, and objectives in light of the many challenges within the contemporary landscape of global environmental finance.

The CIFs are investment programs administered by the World Bank Group that aim to help finance developing countries' transitions toward low-carbon and climate-resilient development. Formally approved by the World Bank's Board of Directors on July 1, 2008, the CIFs are composed of two trust funds—the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF)—each with a specific scope, objective, and governance structure. The CTF provides financing for demonstrating, deploying, and diffusing low-carbon technologies that have the potential for long-term avoidance of greenhouse gas emissions. The SCF—a suite of three separate funds, including the Pilot Program for Climate Resilience (PPCR), the Forest Investment Program (FIP), and the Scaling Up Renewable Energy Program in Low Income Countries (SREP)—supports the least developed countries in their efforts to achieve low-carbon, climateresilient development. Overall, donor countries have pledged $6.1 billion to the funds since September 2008. The U.S. pledge is $2 billion. For FY2010, the U.S. government approved $375 million for the CIFs (H.R. 3288, the Consolidated Appropriations Act, 2010, signed into law December 16, 2009, as P.L. 111-117), and for FY2011, the Administration has requested an additional $635 million for the program.

As the CIFs are just one set of financial mechanisms in a larger network of international programs designed to address the global environment, their effectiveness depends on how the trust funds address programmatic issues, build upon national investment plans, react to recent developments in the financial landscape, and respond to emerging opportunities. Proponents of the CIFs point to several factors in support of the funds, including an innovative programmatic design, a countryled investment process, and a balanced governance structure with enhanced stakeholder engagement. Proponents of the multilateral development banks' (MDBs') role in environmental assistance emphasize several advantages to financing climate programs through the World Bank Group, including its commitment to private sector development, its capacity to leverage large cofinancing arrangements, its responsiveness to donor countries, and its possession of fiduciary standards and institutional expertise. However, critics highlight several factors of concern, including a lack of transparency, coordination, and "polluter pay" responsibilities; a potential for new conditionalities, additionalities, and increased debt burdens on developing countries; and a prior economic development policy at the World Bank that serves as a conflict of interest.

Date of Report: June 23, 2010
Number of Pages: 18
Order Number: R41302
Price: $29.95

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.