Financing climate action
Germany, a responsible partner
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 therefore inextricably linked. This is why BMZ seeks 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, have all committed themselves to this.
German international climate finance from budgetary sources 2005-2015 (in million euros)
|Amount (millions of euros)||471||515||648||881||1,062||1,431||1,563||1,664||1,950||2,344||2,684|
Figure: German climate finance from budgetary sources 2005–2015 (in million euros)
Commitments significantly increased
Germany has significantly increased its contributions to climate financing in recent years. In 2015 the German government committed around 2.7 billion euros in official budget funds for climate change mitigation and adaptation. Approximately 90 per cent of this sum comes from the budget of the Federal Ministry for Economic Cooperation and Development (BMZ). This means that Germany has increased its commitments more than fivefold since 2005 (when the figure was 471 million euros); in 2014 the country became, for the first time, the largest bilateral donor of climate finance.
Germany provides not only money from official budget funds but also funds that it raises on the capital market. For example, in 2015 KfW Bankengruppe and its subsidiary DEG were able to commit a further 4.7 billion euros in the form of development and promotional loans, shareholdings and other financing from capital market funds. Germany’s public contributions to international climate finance in 2015 thus totalled 7.4 billion euros.
Not least, the German government contributes to international climate finance by mobilising private capital (more than 900 million euros in 2015). This means that the German contribution from all sources in 2015 was at least 8.3 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, the 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.
BMZ’s bilateral commitment
BMZ bilateral climate finance from budgetary sources by region 2015 (in million euros)
|Region||Africa||Asia/Middle East/South-East Europe/||Latin America/Caribbean||Global supra-regional interventions|
|Amount (millions of euros)||887||626||281||135|
Figure: BMZ's bilateral climate finance in 2015 by region (in million euros)
Germany’s climate financing focuses on bilateral cooperation. Between 2010 and 2015, bilateral activities accounted for 86 per cent of German climate finance from budget funds. Most of this money comes from BMZ’s budget.
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+.
Distribution of BMZ’s bilateral climate finance in 2015 by sectors (in percentage)
|Bilateral climate finance by area||Percent|
|* Forest and biodiversity conservation including REDD+ account for 21 percent (apportioned between adaptation and mitigation).|
Figure: Distribution of BMZ’s bilateral climate finance in 2015 by sectors (in percentages)
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.
BMZ works 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, 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, BMZ is the third-largest donor to the Global Environment Facility (GEF), after Japan and the United States. BMZ has so far paid more than any other donor into the Least Developed Countries Fund, the GEF’s fund for the poorest nations.
The Green Climate Fund
The central instrument for multilateral climate finance is the Green Climate Fund (GCF). BMZ has been contributing to 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 BMZ. Germany is planning to increase its contribution when the Fund is replenished.
Using climate finance to maximum effect: The Climate Finance Readiness programme
The funding available for adaptation to climate change and reduction of greenhouse gas emissions 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 BMZ's Climate Finance Readiness programme (CF Ready). It supports countries in building the technical and human resource capacity needed to apply for international funding from organisations such as the Green Climate Fund and to manage these resources effectively.
The CF Ready programme is administered jointly by KfW Entwicklungsbank 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.
The programme works closely with the secretariats of the major climate funds, such as the GCF and the Adaptation Fund. It currently operates in 15 countries: Bangladesh, Cambodia, Grenada, Jamaica, Morocco, Namibia, Peru, South Africa, St. Kitts and Nevis, St. Lucia, Tajikistan, Tanzania, Uganda, Viet Nam and Zambia. In future even more countries will receive support through KfW.
Since 2011, 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, 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.
BMZ has, since 2014, started 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.
For the first time, the tables published by BMZ for 2015 show the climate finance mobilised by KfW from public funds on a project-by-project basis. In order to avoid double-counting, the amounts 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.
- Report to the EU Commission regarding the total German contribution to international climate finance in 2015
Germany distinguished for its climate finance as most transparent donor in the international ranking of AdaptationWatch – partnering with Transparency International! Find more information here (PDF 4.2 MB).
- Website of the Green Climate Fund (GCF) - external link, new window - Visit website
- Together for a common cause: Germany's contribution to international climate financing (PDF 1.1 MB) - external link, new window - Visit website
- German Fast Start: Lessons Learned for Long Term Finance (PDF 2.5 MB) - external link, new window - Visit website
- International Climate Finance - external link, new window - Visit website
- Climate Investment Funds (CIF) - external link, new window - Visit website
- Website of the UN Climate Summit 2014 in New York - external link, new window - Visit website
- Intergovernmental Panel on Climate Change (IPCC) - external link, new window - Visit website
- IPCC Fifth Assessment Report - external link, new window - Visit website
- Financing climate action – Germany as a responsible partnernew window, PDF 388 KB 11/2016 | pdf | 388 KB
International climate finance:
Germany’s contributionnew window, PDF 320 KB, accessible 11/2015 | pdf | 320 KB | 2 P. | accessible
- REDD+: Protecting forests and climate for sustainable developmentnew window, PDF 3 MB, accessible 11/2015 | pdf | 3 MB | 32 P. | accessible
- Climate Finance Readiness Programme | Early Action for Ambitious Goalsnew window, PDF 483 KB | pdf | 483 KB
Fast start finance
Review and lessons learned for long term finance new window, PDF 763 KB, accessible 06/2013 | pdf | 763 KB | accessible
Climate action in practice
The contribution of German development policynew window, PDF 2.6 MB, accessible 04/2015 | pdf | 2.6 MB | 32 P. | accessible
Climate change – Time to act
Climate policy in the context of the 2030 Agendanew window, PDF 5.4 MB, accessible 10/2016 | pdf | 5.4 MB | 48 P. | accessible