Most commentators agree that the additional funding developing countries will need to respond to climate change will require a major flow of finance from richer countries to poorer ones. Whatever solutions are found, these should lead to policies that are effective, efficient and equitable (Stern, 2009). These three criteria provide an overarching framework against which to monitor and judge the delivery of climate change actions.
There have been many commentaries on what climate finance should look like (e.g. Müller, 2008; Newell et al., 2009; Pendleton and Retallack, 2009; Stewart et al., 2009; Craeynest, 2010; OECD, 2010). Far less attention has been paid to the delivery mechanisms required at country level for climate actions to be effective, efficient and equitable. Nor is there clarity on what kind of investments will be made with climate finance, a key question if decisions about modalities are to be sensible.
This ODI Background Note compares aid and climate finance and the different options available.