Financing Mitigation and Adaptation in Developing Countries: New options and mechanisms

This research paper by the International Institute for Sustainable Development (IISD) examines the financial requirements and potential mechanisms for climate change mitigation and adaptation in developing countries. It analyzes investment gaps, reviews existing funding sources under the UNFCCC and other multilateral initiatives, and evaluates various proposals for new funding streams, including market-based levies and institutional reforms, to support a post-2012 global climate regime.

• To return global greenhouse gas emissions to 2005 levels by 2030, an additional annual global investment of US$200-210 billion is required, with approximately US$75 billion of this needed in developing countries.
• Mitigation investment needs are characterized by a massive shift in electricity supply, requiring a reduction of US$156 billion in fossil-fired generation and transmission, with US$148 billion redirected toward nuclear, carbon capture and storage (CCS), and renewables.
• Annual adaptation costs for developing countries in 2030 are estimated to be in the tens of billions of US dollars, with UNFCCC estimates placing the developing country share at US$28 to 67 billion of a global total of US$49 to 171 billion.
• Private finance for clean energy significantly outweighs public funding, growing from US$33.2 billion in 2004 to US$148.4 billion in 2007, though investment is highly concentrated in China, India, and Brazil, which accounted for 82 per cent of this investment in 2007.
• The G-77 and China propose a financial mechanism under the authority of the Conference of the Parties (COP) featuring specialized funds and a board with equitable representation, while China specifically suggests a levy of 0.5 to 1.0 per cent on the GDP of Annex I Parties.
• Proposed new funding sources include international levies on transport, such as an International Air Travel Adaptation Levy (IATAL) estimated to generate US$13 billion annually, and an International Maritime Emission Reduction Scheme (IMERS) estimated to raise US$3 billion annually.
• The World Resources Institute (WRI) proposes a 'new deal' for mitigation financing based on six criteria: accessible, comprehensive, flexible, encouraging leverage, adaptable, and verifiable, specifically targeting barriers like insufficient R&D and inadequate early-stage deployment capital.
• Developing countries, particularly through the G-77, argue that adaptation funding should be provided as grants rather than loans, viewing it as compensation for damages caused by the historical emissions of developed countries.
• The European Commission suggests that funding for developing countries could reach €30 billion by 2020, proposing a combination of a formula based on the polluter-pays principle and the auctioning of a percentage of allowed emissions from developed countries.

APA

Tirpak, D., & Parry, J.-E. (2009). Financing Mitigation and Adaptation in Developing Countries: New options and mechanisms. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/financing_mitigation_new_options.pdf

Chicago

Tirpak, Dennis, and Jo-Ellen Parry. Financing Mitigation and Adaptation in Developing Countries: New options and mechanisms. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/financing_mitigation_new_options.pdf.

Wikipedia

{{cite report |last1=Tirpak |first1=Dennis |last2=Parry |first2=Jo-Ellen |title=Financing Mitigation and Adaptation in Developing Countries: New options and mechanisms |publisher=International Institute for Sustainable Development |date=March 2009 |url=https://www.iisd.org/system/files/publications/financing_mitigation_new_options.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{tirpak2009financing, author = {Tirpak, Dennis and Parry, Jo-Ellen}, title = {{Financing Mitigation and Adaptation in Developing Countries: New options and mechanisms}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = mar, url = {https://www.iisd.org/system/files/publications/financing_mitigation_new_options.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }