How the United States Can Remain Engaged in International Climate Finance

Discussion Paper Supplement

The relocated village Vunidogoloa in Fiji, January 2014.

In recent months, thousands of groups across the United States—including cities, states, companies, tribes, and nongovernmental organizations—have launched initiatives in support of the Paris Agreement. These initiatives, such as the U.S. Climate Alliance, We Are Still In, and America’s Pledge, were a major part of the U.S. presence at last month’s U.N. climate negotiations in Bonn and demonstrated that millions of Americans remain committed to climate action. Indeed, states and cities supporting the agreement now represent nearly half of the U.S. population and, combined, make up more than half of U.S. GDP.

So far, these initiatives have rightly focused their efforts on reducing U.S. greenhouse gas emissions. Less attention has been paid to international climate finance. And yet, developing a substantive workstream in this area is vital for these efforts to succeed. Mobilizing finance for low-income and highly vulnerable countries to pursue low-carbon development and to prepare for the effects of climate change is central to the grand bargain at the heart of the Paris Agreement. Multilateral climate funds, such as the Adaptation Fund, the Least Developed Countries Fund (LDCF), and the Green Climate Fund (GCF), hold particular significance internationally due to their inclusive participation, concessional resources, and focus on implementation of the agreement.

With the current U.S. presidential administration retreating from international climate finance, nonfederal actors need to step in, at least for now, to help fill the vacuum. As the U.S. climate movement gains strength in the coming year—in particular, between the One Planet Summit in December 2017 and the Global Climate Action Summit in September 2018—the credibility of the movement will hinge, in part, on whether it delivers on finance initiatives for climate-vulnerable developing countries.

A recent discussion paper by the Center for American Progress and the World Resources Institute proposed creating a finance vehicle, which it referred to as “America’s Climate Fund,” that could accept contributions from a variety of U.S. sources—including via a crowdfunding campaign—and channel these contributions to support low-carbon development and climate resilience in developing countries.

The discussion paper considered the goals and design possibilities for such a fund, including its institutional form and disbursal options. After consultation with stakeholders—including representatives from city and state governments, multilateral climate funds, nongovernmental groups, the private sector, and the faith community—and with the help of legal experts who generously volunteered their time, the goals and design possibilities of America’s Climate Fund have come into sharper focus.

Goals of America’s Climate Fund

America’s Climate Fund would not replace federal finance, nor would it be the sole effort for maintaining climate finance during the current administration. The fund would be unlikely to fill the $2 billion gap, for example, between the amount of funding the United States has promised and has delivered to the GCF. Moreover, the effort should not be viewed as letting the federal government off the hook in meeting its international pledges.

However, the fund would serve a number of important purposes, both domestically and internationally. An initial goal of several tens of millions of dollars, for example, would be a meaningful signal.

  • Domestically, the fund would give Americans and U.S. organizations a way to contribute meaningfully to the global climate effort and assist the poorest and most vulnerable populations. It would also serve as an opportunity to educate Americans about the global climate effort and the role of finance in developing regions.
  • Internationally, the fund would demonstrate that the United States remains a player in the global fight against climate change—and that the U.S. nonfederal climate movement realizes the important role of finance in the Paris Agreement and is supporting vital adaptation and mitigation projects for low-income and climate-vulnerable populations around the world. The fund could also potentially facilitate increased climate finance from other donor countries.

Key actors for America’s Climate Fund

The success of the fund will require the help of several actors playing different roles:

  • If a nonprofit organization, rather than a city or state government, housed the fund and channeled contributions, it would protect the effort from the political cycle and make contributions tax deductible in the United States. A nonprofit organization with experience accepting and disbursing contributions to support international climate efforts could be ideal for the role. 
  • Coalitions such as the Under2 Memorandum of Understanding and the U.S. Climate Alliance, as well as state, city, philanthropic, or private sector leaders, would be crucial for galvanizing contributions, helping guarantee the success of the effort, and serving as the fund’s most high-profile champions. 
  • The fund could accept both large contributions from corporations or philanthropies and smaller contributions through a crowdfunding platform and campaign. It is worth noting both that more than 1,800 businesses and investors are signatories to We Are Still In and that companies with global supply chains are motivated to support climate resilience in the most vulnerable regions.

Disbursing contributions from America’s Climate Fund

There are two promising ways the fund could disburse contributions, which are not mutually exclusive:

  • Direct contributions. The fund could disburse contributions directly to existing multilateral funds. For example, it could disburse 50 percent of funding raised to the Adaptation Fund and 50 percent to the GCF. The GCF board would need to approve guidelines in order to accept contributions from nongovernmental sources. In the absence of such a decision, contributions would be disbursed to other multilateral funds. The Adaptation Fund can already accept such contributions, provided the entity has signed a donation agreement. During the recent U.N. climate negotiations, countries designated the Adaptation Fund as a channel that will serve the goals of the Paris Agreement, and the fund received more than $90 million in new donations, including contributions from the Belgian subnational government of Wallonia.
  • Co-financing. The fund could also support individual projects that promote low-carbon and climate-resilient development. For example, it could co-finance projects from the pipelines of existing multilateral climate funds. This would allow the nonfederal climate movement to support projects that satisfy its priorities, which could include food and water security in the poorest nations or the phaseout of coal-fired power plants. However, this approach would entail higher costs for staffing, administration, governance, and monitoring and evaluation than direct contributions to existing funds.

Conclusion

In partnership with other organizations and coalitions, we will continue to develop the concept of an American climate fund in 2018. This effort would show the world that the United States is “still in,” supporting the Paris Agreement not just by reducing its emissions, but also by assisting developing countries—including the poorest and most vulnerable countries—to meet the climate challenge.

Gwynne Taraska is the associate director of energy and environment policy at the Center for American Progress. Leonardo Martinez-Diaz is the global director of the Sustainable Finance Center at the World Resources Institute. Joe Thwaites is an associate in the Sustainable Finance Center at the World Resources Institute.