INTERNATIONAL SUPPORT FOR DOMESTIC ACTION

The document argues that international financial support for climate mitigation in developing countries must shift from simply purchasing cheap carbon offsets to supporting comprehensive low-carbon development strategies. It details a variety of Public Finance Mechanisms (PFMs)—including grants, loans, equity, and risk guarantees—and maps these to the specific needs of project developers, private investors, and governments. The authors emphasize that tailored support is necessary to address incremental costs and high policy and technology risks, suggesting that a 'social value of carbon' could serve as a reference price to stabilize investments. The paper concludes that a combination of bilateral cooperation for flexible grants and multilateral institutions for large-scale loans and guarantees is essential to leverage the private capital needed for a global low-carbon transition.

• International financial support should move away from the objective of "purchasing of cheap tonnes of carbon" and instead focus on "creating a long-term vision for facilitating the implementation of low-carbon development strategies".
• Financial support is most effective when linked to Nationally Appropriate Mitigation Actions (NAMAs), as this creates incentives for countries to maintain a supportive regulatory framework and enhances "regulatory stability".
• Private investors are often deterred from climate finance not just by risk-return ratios, but by a lack of a sufficient "low-carbon project pipeline" caused by inadequate regulatory frameworks in developing countries.
• The choice between grants and loans/guarantees depends on four factors: constraints in capital access, the need to develop sustainable business models, whether incremental costs exceed the grant equivalent value of loans, and the need for simple institutional design for transition policies.
• Up-front grants can lead to project underperformance due to poor location or quality; therefore, spreading support over the project's lifetime is preferred to link support to "project performance".
• Bilateral cooperation is identified as the preferred option for tailoring grants to specific sector or country needs, while multilateral organisations are better suited for managing loans for infrastructure development.
• To ensure fair comparison and accountability, the value of various financial instruments—including loans, equity, and risk guarantees—should be reported as "grant equivalent contribution" under the UNFCCC umbrella.
• The authors suggest using an agreed-upon "social value of carbon" as a reference price to provide certainty for investors and to underpin risk coverage mechanisms.
• The document notes that the scale of funding needed for mitigation and adaptation by 2030 is estimated at nearly $500 billion per year, which is approximately five times the current level of official development assistance.

APA

Neuhoff, K., Fankhauser, S., Guerin, E., Hourcade, J. C., Jackson, H., Rajan, R., & Ward, J. (2009). INTERNATIONAL SUPPORT FOR DOMESTIC ACTION. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/isda-financial-support-september-2009-report-2.pdf

Chicago

Neuhoff, Karsten, Sam Fankhauser, Emmanuel Guerin, Jean Charles Hourcade, Helen Jackson, Ranjita Rajan, and John Ward. INTERNATIONAL SUPPORT FOR DOMESTIC ACTION. Climate Strategies, 2009. https://climatestrategies.org/wp-content/uploads/2014/11/isda-financial-support-september-2009-report-2.pdf.

Wikipedia

{{cite report |last1=Neuhoff |first1=Karsten |last2=Fankhauser |first2=Sam |last3=Guerin |first3=Emmanuel |last4=Hourcade |first4=Jean Charles |last5=Jackson |first5=Helen |last6=Rajan |first6=Ranjita |last7=Ward |first7=John |title=INTERNATIONAL SUPPORT FOR DOMESTIC ACTION |publisher=Climate Strategies |date=September 2009 |url=https://climatestrategies.org/wp-content/uploads/2014/11/isda-financial-support-september-2009-report-2.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{neuhoff2009international, author = {Neuhoff, Karsten and Fankhauser, Sam and Guerin, Emmanuel and Hourcade, Jean Charles and Jackson, Helen and Rajan, Ranjita and Ward, John}, title = {{INTERNATIONAL SUPPORT FOR DOMESTIC ACTION}}, institution = {Climate Strategies}, year = {2009}, month = sep, url = {https://climatestrategies.org/wp-content/uploads/2014/11/isda-financial-support-september-2009-report-2.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }