European Capacity Building Initiative

Two Unconventional Options to Enhance Multilateral Climate Finance

by Benito Müller, with Alexandra Kornilova, Ritika Tewari, and Carsten Warnecke

Predictability of multilateral climate finance is a key concern for developing countries, as a prerequisite for longer-term planning. Currently, however, multilateral climate finance is provided through national budgets, and governments generally cannot make multi-year pledges beyond a budget period, except in the context of replenishments. This policy brief considers two unconventional sources that can overcome this hurdle, and enhance both the predictability and magnitude of multilateral climate finance: a ‘share of proceeds’ from national and sub-national emission trading schemes (for the Least Developed Countries Fund, or LDCF); and crowdfunding from corporate air passengers (for the Adaptation Fund). It also considers the application of shares of proceeds to sub-national trading schemes; and the application of crowdfunding on air passengers who purchase voluntary offsets for their international flights. Both have considerable potential. For instance, the brief finds that if only one in ten of the corporate air passengers that offset their emissions switch to a “solidarity contribution” of 1% of their ticket price, over US$ 100 million could be raised annually.

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