What is climate finance?

The document outlines CPI's approach to defining climate finance, distinguishing between project-level costs and revenues and broader whole-economy expenditures. It defines climate finance as the sum of total investment costs and public framework expenditures, explicitly excluding revenue support to avoid double counting. The brief also identifies three primary entry points for public intervention to close 'viability gaps'—the difference between total project costs and generated revenues—which include increasing revenues, reducing project costs, and improving the overall investment climate through framework expenditures.

• CPI defines climate finance as the sum of total investment costs and public framework expenditures, including both public and private finance.
• To prevent double counting, CPI's definition of climate finance excludes policy-induced revenues, such as carbon credits and feed-in tariffs, because these mechanisms serve to pay back investment costs.
• A 'viability gap' exists when a project's total costs exceed the revenues it can generate, acting as a primary barrier to profit-oriented public or private investment.
• Public sector interventions to scale up climate finance can target viability gaps in two ways: by increasing project revenues (e.g., through subsidized power purchase agreements) or by reducing project costs (e.g., via investment grants, concessional loans, or risk mitigation instruments).
• Public framework expenditures are essential for the transition to low-carbon economies as they address system-wide needs not captured at the project level, such as capacity building, the development of national climate strategies, and the creation of monitoring, reporting, and verification systems.
• CPI distinguishes between total investment costs and 'incremental investment costs', the latter being the cost difference between a 'green' (low-carbon) project and a comparable 'brown' (high-carbon) project.

APA

Falconer, A., & Stadelmann, M. (2014). What is climate finance? Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf

Chicago

Falconer, Angela, and Martin Stadelmann. What is climate finance? Climate Policy Initiative, 2014. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf.

Wikipedia

{{cite report |last1=Falconer |first1=Angela |last2=Stadelmann |first2=Martin |title=What is climate finance? |publisher=Climate Policy Initiative |date=July 2014 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{falconer2014what, author = {Falconer, Angela and Stadelmann, Martin}, title = {{What is climate finance?}}, institution = {Climate Policy Initiative}, year = {2014}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }