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Financing climate action

Germany, a responsible partner

View of the conference room at the international pledging conference of the Green Climate Fund (GCF), hosted by the German Federal Government on 20 November 2014 in Berlin

Climate change is already posing a threat to the development of the poorest countries and will make it far more difficult to achieve progress in future. Climate action and development policy are thus inextricably linked. It is an important part of Germany's development cooperation activities to help developing and newly industrialising countries undertake measures that contribute to the reduction of greenhouse gas emissions and promote adaptation to the consequences of climate change.

Development cooperation has an important part to play in enabling the global objective of decarbonisation – the transition to a low-carbon economy and lifestyle – to be achieved in the course of the 21st century. To this end, public funds for climate change mitigation must be deployed in ways that reduce greenhouse gas emissions and increase climate resilience – that is, resilience to the consequences of climate change. All other finance flows – including private investment in all sectors of the economy, financial market transactions and foreign direct investment – must do likewise. The parties to the Paris Climate Agreement, which include Germany, all committed themselves to this in 2015.

Commitments significantly increased

Germany has significantly increased its contributions to climate financing in recent years. In 2016, the German government committed around 3.4 billion euros in official budget funds for climate change mitigation and adaptation. 83 per cent of this sum comes from the budget of the Federal Ministry for Economic Cooperation and Development (BMZ).

Germany provides not only money from official budget funds but also funds that it raises on the capital market. In 2016, for example, KfW Bankengruppe and its subsidiary Deutsche Investitions- und Entwicklungsgesellschaft (German Investment and Development Company, DEG) committed a further 5.2 billion euros in the form of "development loans" and "promotional loans", equity investments and other financing from capital market funds. Germany's official contributions to international climate finance in 2016 thus totalled 8.5 billion euros.

Last but not least, Germany mobilised private climate funding, involving mainly revolving credit lines for local (development) banks, investments in structured funds and public-private partnerships (through Deutsche Investitions- und Entwicklungsgesellschaft (DEG) alone, 1.4 billion euros were mobilised in 2016). In total, Germany's contribution in 2016 amounted to roughly ten billion euros.


Germany leads the way

In 2009, the industrialised countries made a commitment to provide, from 2020, an annual 100 billion US dollars from public and private sources for climate change mitigation and adaptation of developing countries to the consequences of climate change. During the climate negotiations in Paris, that commitment was confirmed and expanded: a new financing target is to be adopted before 2025 that will exceed the current volume of 100 billion dollars.

In 2014, the contributions of the industrialised countries totalled around 62 billion US dollars. To accelerate the process, German chancellor Angela Merkel announced in May 2015 that the German government is planning to double German climate finance, increasing it to four billion euros annually by 2020. In addition, Germany will make further contributions through public loans (via KfW and DEG) and by mobilising private funds.

Germany led the way: in October 2015, almost all multilateral development banks and many other countries, including France and the UK, announced that they, too, would be significantly increasing their contributions to climate finance. With this increase and the additional private funding that can be obtained as a result, the target of 100 billion dollars from 2020 onwards is now within reach.


Bilateral commitment

Germany’s climate financing focuses on bilateral cooperation. Between 2013 and 2016, bilateral activities accounted for 86 per cent of German climate finance from budget funds. Most of this money comes from the BMZ’s budget.

The BMZ supports climate change mitigation and adaptation projects in almost all its partner countries. Its activities are aligned with partner countries’ efforts to incorporate climate action into their national development strategies. In addition, the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) supports extensive climate action through its International Climate Initiative (IKI). The Federal Ministry for Economic Affairs and Energy (BMWi), the Federal Ministry of Education and Research (BMBF) and the Federal Foreign Office (AA) also contribute to climate finance.

Bilateral climate finance is being used for adaptation to climate change, reduction of emissions and forest and biodiversity conservation, including through REDD+.



Multilateral commitment

When large-scale change is needed, multilateral organisations are important partners: they implement programmes of significant scale and reach in developing and newly industrialising countries and can coordinate inputs from different donors. In addition, multilateral institutions often play a key part in policy dialogue at national and international level. To complement its bilateral activities in the climate sector, BMZ therefore has an ambitious multilateral portfolio. The Ministry is a dynamic player in international institutions, where it voices Germany's positions and values in the field of development.

The BMZ is working with the multilateral development banks to help put in place an enabling environment for effective climate policies. Multilateral banks can act as global pioneers, in particular by channelling global financial flows into low-emission and climate-resilient investment pathways. To achieve this, they need to take climate change issues into account in all their operations. Among other things, the BMZ has successfully campaigned for the International Development Association (IDA), the World Bank’s financing instrument for the poorest countries, to mainstream climate change mitigation and adaptation in its core business.

Germany also makes significant monetary contributions to multilateral climate financing. For example, the BMZ is the third-largest donor to the Global Environment Facility (GEF), after Japan and the United States. The BMZ has so far paid more than any other donor into the Least Developed Countries Fund, the GEF’s fund for the poorest nations, and into the Special Climate Change Fund.


The Green Climate Fund

The central instrument for multilateral climate finance is the Green Climate Fund (GCF). The BMZ has been contributing to the establishment of the Fund through strategic input, financial support and human resources. The mission of GCF is to facilitate the transition to low-emission, sustainable development. To this end, the Fund supports programmes that promote low-carbon economic development or make a substantial contribution to adaptation to climate change. Furthermore, the Fund will encourage the private sector to invest additional funds in mitigation and adaptation activities.

Germany has committed 750 million euros for the Fund's initial capitalisation. All of this funding comes from the budget of the BMZ. Germany envisages making a significant contribution once again when the Fund is replenished.


Using climate finance to maximum effect: The Climate Finance Readiness programme

The funding available for climate change adaptation and mitigation is growing constantly. Yet many developing countries are finding it difficult to access international climate finance or to make effective use of such funding. The countries in this position are often the poorest and smallest states with weak government capacity, such as the small island states on which climate change impacts particularly harshly. This challenge is addressed by the BMZ's Climate Finance Readiness programme (CF Ready). It supports countries in building the organisational, technical and human resource capacity needed to apply for international funding from organisations such as the Green Climate Fund and to use these resources strategically.

The CF Ready programme is jointly administered by KfW Development Bank and GIZ. Since 2014 GIZ has been supported financially in this by the U.S. Agency for International Development (USAID) and the Czech Environment Ministry. Since early 2017 GIZ has also been acting as an implementing partner for the Readiness and Preparatory Support Programme of the GCF.

The CF Ready Programme works closely with the secretariats of the major climate funds, such as the GCF and the Adaptation Fund. It operates in the following 13 countries: Bangladesh, Grenada, Jamaica, Cambodia, Morocco, Namibia, Peru, Zambia, South Africa, Tajikistan, Tanzania, Uganda, and Viet Nam. The GIZ is implementing GCF readiness funds in Bangladesh, Georgia, Thailand and Vanuatu, more countries are to follow. In future, even more countries will receive support through KfW.


Concrete climate figures – the methodology behind the BMZ's reporting

Since 2011, the BMZ has been calculating its bilateral climate finance on the basis of the "Rio markers" defined by the Organisation for Economic Co-operation and Development (OECD). A distinction is made between markers for 'climate change mitigation' and those for 'climate change adaptation'.

Using the Rio markers, activities can be assigned three different significance scores. A score of 2 means that mitigation or adaptation is a 'principal' objective of the project. In this case, the full 100 per cent of the project's financial volume is reported as being for the climate sector in question. A score of 1 means that mitigation or adaptation is a 'significant' objective of the project. For such projects, only 50 per cent of the financial volume is reported as being for the climate sector in question. A score of 0 means that the activity does not significantly contribute to climate goals. The funding for such projects cannot be reported as climate finance. This German procedure thus differs from the approach of the OECD, which counts the full volume of such projects even if mitigation or adaptation is only a 'significant' objective.

In line with international standards, the BMZ reports its bilateral climate finance in terms of annual funding committed. For its multilateral activities, by contrast, it reports in terms of funding disbursed. Based on agreement with the German Environment Ministry, contributions from Germany's Special Energy and Climate Fund and from its successor budget lines are also reported in terms of disbursements.

The BMZ has, since 2014, been reporting what share of the funding it provides to various multilateral organisations can be counted as climate finance ('imputed multilateral contributions'). The organisations concerned are the World Bank’s International Development Association (IDA), the African Development Bank (AfDB) and the Asian Development Bank (ADB). At the end of 2014, these funds had for the first time reported the share of climate-related activities in their portfolios. At the OECD, donors agreed that these figures reported by the organisations would be used as a basis for calculating how much of their donors' contributions could be regarded as climate-related. The Global Environment Facility (GEF), too, announces a figure for such a share. As a result, the amount of German contributions to the GEF that can be reported as climate-related has changed.

Since 2015 the tables published by BMZ have been showing the climate finance mobilised by KfW from public funds on a project-by-project basis. In order to avoid double-counting, the development loans reported do not include the interest subsidy from budget funds. For reasons of bank confidentiality, the subsidy elements included in the individual development loans cannot be published. The interest subsidies are therefore reported as a total for each region. For the public climate finance mobilised by the DEG, details are provided of climate finance per region.


BMZ climate activities in 2015


BMZ climate activities in 2014


BMZ climate activities in 2013


BMZ climate activities in 2012


BMZ climate activities in 2011


BMZ climate activities in 2010


Fast-start climate finance from 2010 to 2012


Cooperation in action


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