Results-based finance in the Paris era

This research paper by the NewClimate Institute examines the use of carbon market mechanisms to deliver results-based finance (RBF) within the framework of the Paris Agreement. It analyzes the strengths of using CO2e as a standardized metric, identifies systemic limitations—such as the bias toward cheap mitigation and risks borne by developers—and proposes strategies to shift from rewarding to enabling climate action. The paper concludes that RBF is most effective for a specific niche: technologies that are proven but not yet mature or widely adopted.

• The primary advantage of utilizing carbon market mechanisms for results-based climate finance is the ability to provide a standardized, verified unit of measurement in CO2e, alongside an infrastructure that allows multiple small donors to 'crowdfund' mitigation projects with transparency.
• Results-based finance faces several limitations, including a tendency to prioritize the cheapest mitigation options over transformative change, a bias against small developers and innovative technologies due to risk distribution, and high transaction costs for monitoring and verification.
• The CO2e metric is poorly suited for least developed countries with low emissions unless 'suppressed demand' assumptions are used to inflate baselines. Additionally, many projects funded via carbon markets have historically ignored or negatively impacted sustainable development goals.
• To improve results-based finance, the paper suggests prioritizing quality over quantity, streamlining transaction costs (provided it does not create a precedent for claiming carbon neutrality), providing long-term reliable finance instead of one-off payments, and combining rewarding mechanisms with enabling measures like grants or loans for upfront costs.
• Results-based finance is not a universal solution; grants are more suitable for nascent R&D technologies, and market rate loans are better for mature technologies. RBF is best suited for the niche where a technology is proven but has not yet achieved significant market penetration.

APA

NewClimate Institute (2020). Results-based finance in the Paris era. http://www.newclimate.org/resources/publications/results-based-finance-in-the-paris-era

Chicago

NewClimate Institute. Results-based finance in the Paris era. 2020. http://www.newclimate.org/resources/publications/results-based-finance-in-the-paris-era.

Wikipedia

{{cite report |author=NewClimate Institute |title=Results-based finance in the Paris era |date=16 December 2020 |url=http://www.newclimate.org/resources/publications/results-based-finance-in-the-paris-era |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{newclimateinstitute2020resultsbased, author = {{NewClimate Institute}}, title = {{Results-based finance in the Paris era}}, institution = {NewClimate Institute}, year = {2020}, month = dec, url = {http://www.newclimate.org/resources/publications/results-based-finance-in-the-paris-era}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }