Innovative mitigation bonds & loans proposed for MENA region
Win-win concept for new climate financial instruments. A proposal for novel climate finance instruments was presented by the EU funded ClimaSouth project at the Regional Finance Cooperation Committee for Climate Action (RFCCC) meeting in Barcelona, Spain, on 26 May 2017. The RFCCC meeting, hosted by the Union for the Mediterranean (UfM), gathered together several International financial institutions and donors active in the sector of climate finance within the Mediterranean region.
A straightforward climate finance deal might seem possible, however, in practice climate finance has been slow in coming. The proposed mitigation bonds & loans have been designed to fill part of this gap. Mitigation loans are zero- or very-low-interest loans, invested in mitigation projects and programs in developing countries. Instead of generating interests as a return on the investment, the proposed instruments would yield a share in the mitigation results obtained, which are transferred to the investors as internationally transferred mitigation outcomes (ITMOs).
Valuable tools to help countries meet their climate finance obligations under the Paris Agreement. Mitigation loans potentially provide developing countries with a cheap and much needed source of finance to green their energy sectors. At the same time they would help deliver the Nationally Determined Contributions (NDCs) which have committed by developing countries. On the other hand, for developed countries, investment in mitigation bonds would help fulfil their own climate finance obligations under the Paris agreement, while achieving greenhouse gas emission reductions at low cost.
Resources: Agenda of RFCCC meeting | Presentation on new financial instruments | Policy brief on mitigation bonds & loans