National Climate Funds: A New Dataset on National Financing Vehicles for Climate Change

The Paris Agreement’s nationally driven structure places the spotlight on financing strategies at the national level. The role of national funding vehicles in mobilizing climate finance, however, has not received extensive attention.

In a new journal article published in Climate Policy, Rishikesh Ram Bhandary remedies this gap by introducing a novel dataset of national climate funds established in developing countries. The National Climate Funds (NCF) Tracker, hosted by the Boston University Global Development Policy Center, creates an inventory of national financing vehicles and tracks their major attributes, including scope, legal form, host and others. It shows that 39 countries have established national climate funds. These funds seek to access and mobilize finance from various sources, domestic and international. Most of the funds have broad mandates to tackle climate change, while a smaller share has a more targeted, sectoral focus, while funding sources vary from taxes to international aid. In all, the funds offer a limited range of financial instruments, primarily awarding grants and differ in how integrated they are with overarching climate plans and strategies.

Bhandary also found that most developing countries use existing budget lines to target finance towards climate change objectives. Only five countries are currently tracking public expenditure on the basis of dedicated budget codes. For policymakers, the limited range of instruments at the disposal of many of these national climate funds suggests a need to ensure the funds have the necessary design features to effectively support the implementation of national policy goals.

Key findings:

• Systematic data on public climate finance are scarce. Most governments do not use climate change codes to track their expenditures related to climate change. Policymakers should adopt practices that will help instill transparency in public expenditure on climate change.

• Policymakers have to revisit the design features of national climate funds, such as legal form and areas of operation as the wider operating context changes.

• Funds accredited with multilateral climate funds are underutilized by fund contributors. The Green Climate Fund’s direct access modality offers one major avenue to foster synergies between national climate funds and multilateral climate funds.

• Policymakers have the opportunity to harvest lessons from existing funds and calibrate climate policies accordingly, especially as countries contemplate setting revenue-generating carbon prices.

‘Accelerating Climate Action through National Climate Funds,’ a November 2021 policy brief by Bhandary also explored the characteristics of national climate funds.