The role of climate finance beyond renewables: demand-side management and carbon capture, usage and storage

Mobilizing climate finance for climate change mitigation is a crucial part of meeting the ‘well-below’ 2°C goal of the Paris Agreement. Climate finance refers to investments specifically in climate change mitigation and adaptation activities, which involve public finance and the leveraging of private finance. A large proportion of climate finance is Official Development Assistance (ODA) from OECD countries to ODA-eligible countries. The evidence shows that the largest proportion of climate finance for climate change mitigation has been channelled to the development of renewable energy, with a much smaller proportion flowing to other crucial forms of clean energy-related measures, such as demand-side management (DSM) (particularly sustainable cooling) and carbon capture, usage and storage (CCUS). This forms the rationale and aim of this synthesis paper: to review the role of climate finance to develop clean energy beyond renewables. In doing so, the paper draws on practical policy and programme experiences of some donor countries, such as the UK, and Development Finance Institutions (DFIs). This paper argues that a greater amount of climate finance from OECD countries to ODA-eligible fossil fuel-intensive emerging economies and developing countries is required for sustainable cooling and CCUS, particularly in the form of technical assistance and clean energy innovation.Key policy insights Demand-side management (DSM) and carbon capture, usage and storage (CCUS) are underfunded in climate finance compared with the promotion of renewables.Climate finance for sustainable cooling, in particular, represents just 0.04% of total ODA, despite cooling projected to represent 13% of global emissions by 2030.Public investment in CCUS is limited at US $28 billion since 2007, despite the costs of meeting the Paris Agreement estimated to be 40-128% more expensive without CCUS.Additional climate finance for these sectors should not come at the expense of funding for renewables but should be complementary to it.