Search Climate Insights Directory

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.