By RTCC Staff
A $23.5 billion hole could develop in climate change response budgets as a result of public finance cutbacks, a new report has found.
This figure is based only on the top ten spending governments on climate mitigation and adaptation. The study by Ernst & Young predicts that this number could rise to $45 billion if the crisis in the Eurozone expands and triggers additional national debt defaults.
“The funding gap and the magnitude of the challenge ahead forces us to think of new ways of scaling-up finance for climate adaptation and mitigation,” said Juan Costa Climent, global leader climate change and sustainability services, Ernst & Young.
“Financial innovation is key to unlocking the capital markets. New schemes could drive down the cost of financing and help ensure risk in developing countries is better priced.”
The largest investor in climate change response is Germany with an annual spend of $23.5 billion. Under the extreme economic scenario, this figure could be slashed by $8.3bn.
“Public finance should seek to provide an arena for the private sector to minimise investment risks. It has a key role to play in leveraging private finance, mitigating real and perceived risks and funding R&D climate-related activities,” said Climent.
A number of public finance initiatives are under way to stimulate investment in climate change-related industries including the Green Investment Bank in the UK and the BMVBS retro-fit initiative in Germany.
The most ambitious financing initiative to date, the Green Climate Fund, will be negotiated at the COP17 talks in Durban this month with leaders set to negotiate its design.
The Funding Gap
Source: Ernst & Young