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Tuesday, June 18, 2013

International Climate Change Financing: The Climate Investment Funds (CIFs

Richard K. Lattanzio
Analyst in Environmental Policy

The United States contributes funding to various international financial institutions to assist developing countries to address global climate change and other environmental concerns. Congress is responsible for several activities in this regard, including (1) authorizing periodic appropriations for U.S. financial contributions to the institutions, and (2) overseeing U.S. involvement in the programs. Issues of congressional interest include the overall development assistance strategy of the United States, U.S. leadership in global environmental and economic affairs, and U.S. commercial interests in trade and investment. This report provides an overview of two of the larger and more recently instituted international financial institutions for the environment—the Climate Investment Funds (CIFs)—and analyzes their structure, funding, and objectives in light of the many challenges within global environmental finance.

The CIFs are investment programs administered by the multilateral development banks (MDBs) 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 $7.6 billion to the funds since September 2008 in support of programs in 49 developing countries. The U.S. pledge in 2008 was for a total of $2 billion. For FY2010, Congress approved $375 million for the CIFs (the Consolidated Appropriations Act, 2010, H.R. 3288; P.L. 111-117); for FY2011, Congress approved $234.5 million (the Department of Defense and Full-Year Continuing Appropriations Act, 2011, H.R. 1473; P.L. 112-10); for FY2012, Congress approved $234.5 million (the Consolidated Appropriations Act, 2012, H.R. 2055; P.L. 112-74); and for FY2013, Congress approved $234.5 million (the Consolidated and Further Continuing Appropriations Act, 2013, H.R. 933; P.L. 113-6). For FY2014, the Administration requested $283.7 million for the funds.

The CIFs are just one set of financial mechanisms in a larger network of international programs designed to address the global environment. Accordingly, their effectiveness depends on how the 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 country-led investment process, and a balanced governance structure with enhanced stakeholder engagement. Proponents of the MDBs’ role in environmental assistance emphasize several advantages to financing climate programs through the MDBs, including its commitment to private sector development, its capacity to leverage large co-financing arrangements, and its possession of fiduciary standards and institutional expertise. However, critics highlight several factors of concern with the CIFs and their Trustee, including a lack of transparency, coordination, and “polluter pay” responsibilities; a potential for increased debt burdens on developing countries; and a prior economic development policy at the development banks that is considered a conflict of interest for environmental protection.

Date of Report: June 3, 2013
Number of Pages: 21
Order Number: R41302
Price: $29.95

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