This policy brief highlights that the diversity of European forests excludes a one-size-fits-all list of IFM practices. A risk-based framework is needed to account for disturbance and to tailor eligible practices to biogeographical regions and local conditions. In low-risk contexts, conservation-oriented practices (e.g. extension of rotations period) can increase carbon stocks. In higher-risk contexts, adaptive management approaches (e.g. species diversification, fire management) may be preferable to ensure long-term resilience benefits. 

A credible baseline is essential, as baseline setting remains the main source of over-crediting in IFM projects. This is particularly challenging because quantification must incorporate disturbance risks and demonstrate that project activities deliver greater resilience than the baseline scenario. While emerging concepts such as dynamic baselines may offer useful guidance, they will need to be adapted to the European context to ensure practical applicability. 

Beyond methodological design, financing remains the critical challenge. Forestry projects require long-term investment, while costs are largely upfront and carbon benefits materialise only over decades. The EU buyers’ club could help bridge this gap, provided it supports specific long-term investment use cases. It is also essential to provide market visibility on the gradual integration of compliance-based incentives, complementing voluntary carbon finance, to unlock Europe’s full forest mitigation potential.

L’article Designing a robust carbon certification methodolgy for forest management in Europe est apparu en premier sur I4CE.

A key challenge in funding climate projects is project ticket size, as large investors prefer bigger deals to mitigate risks and maximise returns. A Global Impact Investing Network (GIIN) survey shows that major private and development impact investors have been channelling more capital into fewer but larger transactions (GIIN, 2024). This trade-off between economies of scale and local needs affects funders like the Green Climate Fund and Multilateral Development Banks, which increasingly strengthen a programme funding approach rather than single-project funding.

National and subnational financial intermediaries can bridge this gap by enhancing the bankability of local projects to meet new volume and additionality financial requirements. They can also advance local capacity to address finance and climate issues, development impact, and safeguards, provide tailored guidance, concessionality allocation based on a more holistic and climate-resilient approach, pilot scalable solutions, and innovative financial mechanisms to reduce risks.

There are a wide range of examples, from the Cajas Municipales in Peru to state-owned and managed development banks and agencies in Brazil, including São Paulo’s novel climate fund to the longer-established Deposit and Investment Fund of Quebec and Baden-Württemberg’s bank in Germany. Building on current analysis and understanding of best practice, this Policy Brief will explore how subnational financial intermediaries can continue to channel investments to climate and development goals and otherwise less bankable projects. For instance, by leveraging guarantees and enabling blended and sustainable finance mechanisms, thereby expanding access to finance in critical areas from innovation to climate resilience and adaptation.

More information about the T20 South Africa 2025

L’article Bridging the Finance Gap: Leveraging National and Subnational Public Financial Institutions for Localised Climate and Development Action est apparu en premier sur I4CE.

L’article From targets to action: the climate finance agenda needs a new impetus in Belèm est apparu en premier sur I4CE.

2025 is a pivotal year for the interlocking global agendas of climate and sustainable development, highlighted by major convenings such as the 5th Finance in Common Summit (FiCS), the 4th International Conference on Financing for Development (FfD4), the G20 Summit under South Africa’s presidency, and the UNFCCC COP30. Public development banks (PDBs) will feature prominently across these events, given their integral role in implementing these critical agendas through financial support and stakeholder mobilization.

This policy bulletin summarizes recent research on how PDBs’ contribution to low-emissions and climate-resilient development can be accelerated and scaled to make progress towards the global agenda for sustainable development. Bolstering domestic markets and sourcing local finance is key to addressing the availability and the delivered cost of capital, as well as to reaching decarbonization, adaptation, and sustainability goals. To transition to just, net zero, and climate-resilient economies, a bottom-up approach will significantly accelerate change and effectiveness. Countries and domestic institutions need to be involved at the onset of reforms, to ensure ownership and alignment. 

In particular, the bulletin synthesizes key findings across publications from our respective organizations to provide PDBs, shareholder governments, and other relevant stakeholders with actionable recommendations across the following topics:

• Operationalizing Paris Alignment and Impact Measurement
• “Public-Public” Collaborations for Climate Finance
• Mobilizing Private Finance to Meet Climate Investment Gaps
• Building Platforms for Just Transition and Sustainable Development
• Financing the Energy Transition
• Other Emerging Themes (e.g., nature finance, carbon markets, digital technology) 

On an ongoing basis, this document will be updated as a reference point for evidence-based discussions on each of these topics, bringing together practitioners, policymakers, investors, and the broader research community to coordinate activities and develop solutions around common understanding and objectives.

L’article Climate Finance for Development: Empowering the Ecosystem of Public Development Banks est apparu en premier sur I4CE.

Proactively managing stranding risks would help mitigate economic disruptions from a disorderly transition, reduce banks’ vulnerability to future shocks, and reinforce resilience and financial stability. Timely transition finance is essential to help retire, retrofit, and transform emission-intensive assets before they face sudden stranding.

By adopting a proactive precautionary approach, supervisors can enhance banks’ capitalisations to absorb stranding risks effectively, safeguard financial stability (by reducing carbon build-up), and finance the transition needs of the European economy. The European Banking Authority (EBA), through its upcoming guidelines, should mobilise banks to integrate stranding risk considerations within their broader transition risk frameworks and practices.
The EBA should enhance key microprudential tools such as:

• Prudential Transition Plans: Assess risk exposures to vulnerable firms with quantum and direction of credit flows toward transitionary activities.
• Supervisory Review and Evaluation Process (SREP): Holistically integrate asset stranding risks with bank-specific outcomes.
• Expected Credit Losses (ECL): Account for transition risks to better absorb future uncertain stranding losses.
• Non-Performing Exposures (NPE) and Collateral Valuation: Reflect future repricing effects on energy-inefficient real estate assets, impacting credit and market portfolios.
• Fair Value Adjustments (or AVAs): Calibrate market instrument valuations with credible, forward-looking parameters to address transition risk mispricing.

But the systemic risk consequences of transition shocks, necessitate a macroprudential response. Some useful tools include:

• Systemic Risk Buffer (SyRB): Flexibility to be applied generally, sectorally and specifically to banks to help proactively finance emission reductions
• Dynamic provisioning: Counter the procyclicality of loss provisions, protecting banks’ capital and lending capabilities during economic shocks.
• Other macroprudential tools: Appropriate tools such as carbon-related concentration limits and system-wide stress tests to better identify and limit high-risk exposures

This brief policy paper attempts to explore some of the existing tools in the supervisory toolkit that could be leveraged to better identify and mitigate stranded asset risks for the European banking industry. It highlights the importance of stranding losses in the context of the transition, aiming to further enrich regulatory and supervisory policy dialogues, especially around the novel ‘proactive precautionary’ principle.

It’s time to reframe the way private financial institutions think about stranded assets.

In this video, I4CE highlights the limitations of the current narrow approach used by private financial institutions (FIs) to capture stranded asset risk in their portfolios. We argue for a ‘whole of economy’ lens with a proactive approach to better identify and mitigate stranding losses on ‘assets-at-risk’. Financial regulators and supervisors must leverage their toolkit to encourage FIs to proactively manage stranding risks.

L’article Leveraging the Prudential Toolkit for Effectively Managing Stranding Risks: A focus on the European Banking Industry est apparu en premier sur I4CE.

What does it mean to become aligned with the Paris Agreement ?

Public development banks (PDBs), development and climate change

The climate crisis and the lack of articulation between climate and development threaten to slow down and even revert hard-won sustainable development gains, affecting the ability of PDBs to accomplish their development mandate. Alignment of PDBs with the Paris Agreement allows development action to support the climate transformation, while ensuring that equity issues and development benefits are enhanced. When PDBs align with the Paris Agreement, they support their main shareholders – governments – to achieve climate adaptation and mitigation commitments in a fair and just manner that underpins these countries’ social contracts. To ensure their positive contribution to climate transformation and development, PDBs must leverage climate opportunities, systematically address greenhouse gas (GHG) emissions, and improve resilience against climate impacts, whilst managing financial risks – physical and transition – associated with climate change.

Supporting a system’s transformation

Alignment with the Paris Agreement implies an organisation-wide effort to facilitate the transformation of the broader national systems towards a low-emission and climate-resilient economy. In terms of mitigation of climate change, this means to not only to avoid or reduce immediate emissions from operations, but to fund the activities that contribute to positive and longer-term transformation of a sector or a value chain. Some high GHG-emitting sectors and activities might need special attention in this process. ‘Transition finance’ can support shifting away from these polluting business modelsand enable real economy transitions. In terms of climate resilience, while for Paris alignment all activities should be proofed against physical climate risks and prevent maladaptation, a higher ambition approach should also focus on triggering positive system-wide transformations (on communities, regions, sectors, etc.). This requires PDBs to think about their investments in a systematic way to identify such opportunities at every level of engagement, thus ensuring that they inform country dialogue process and programmatic work. Finally, all PDBs’ operations should be at least bound to the minimum principle of ‘doing no harm’ whilst ideally seeking to apply a principle of “doing good beyond do no harm” to promote positive transformations and identifying co-benefits. Doing no harm implies not supporting activities and assets that are inconsistent with global sectoral shifts and individual countries’ low-emission and climate-resilient development pathways. This may work as a filter either to avoid funding inconsistent activities or to ensure that credible strategies are in place to support the transition of assets, beneficiaries, and counterparties.

A dynamic process

Ultimately, Paris alignment should not serve a static function of stamping PDBs’ activities as aligned, but rather work as a dynamic and evolving process to promote internal and systemic change.

L’article Ambitious alignment with the Paris Agreement in public development banks est apparu en premier sur I4CE.

This paper looks at the major opportunity represented by prudential transition plans and the decisive role that the European Banking Authority will play. It explains why the Authority should adopt a comprehensive definition of banking transition plans and how these plans should be consistent with the European directives on Corporate Sustainability Reporting (CSRD) and on Due Diligences (CSDDD).

Lastly, this paper looks at four key issues for the structural transformation of banks:

• the link between prudential plans, European strategies and corporate plans;
• consistency of remuneration scheme;
• training and skills issues;
• stranded assets.

This post will be of particular interest to those actively following European banking and climate change news, especially banking regulators and supervisors.

L’article Prudential transition plans: what’s next after the adoption of the Capital Requirements Directive? est apparu en premier sur I4CE.

74 As of August 1st, 2023, 74 carbon pricing mechanisms have been identified worldwide, in either the form of carbon taxes or emissions trading schemes (ETS). These mechanisms can operate at different levels: 31 of them operate at the provincial level, 42 at the national level, and 1 at the interstate level (EU ETS). The jurisdictions covered by carbon pricing mechanisms accounted for 54% of global GDP in 2023 and 50% of global greenhouse gas (GHG) emissions.

USD 0,01-154 The range of explicit carbon prices is very wide: as of August 1st, 2023, they ranged from 1 cent per ton in Baja California (in Mexico) to USD 154 in Uruguay. Currently, over 70% of the covered GHG emissions are still priced at less than USD 20 per tCO2e. However, in 2017, the Stern-Stiglitz report estimated that the incitative effect of these mechanisms could only be fully achieved with prices ranging from USD 40 to 80 per tCO2e in 2020 and from USD 50 to 100 per tCO2e in 2030.

USD 93 Bn After reaching USD 97 billion USD in 2021, carbon pricing revenues have since stabilized at USD 93 bn in 2022. This relative decrease between 2021 and 2022 is mainly due to exchange rate movements over the same period and the reduction in auctioned allowances. More than 50% of carbon revenues are earmarked to green or development projects, 10% are redistributed to households or companies affected by carbon pricing, while the remaining (32%) goes into the general budget of each jurisdictions without any specific allocation (see p.10).

Although there has been an increase in the number of carbon pricing mechanisms within recent years, the majority of carbon revenues comes from 5 mechanisms which account for three-quarters of the revenues: the European, British and German ETS (44%, 8% and 7% respectively), and the carbon taxes in France and Canada (9% and 7% respectively).

24% This figure represents the share of emissions covered by a carbon pricing mechanism and includes emissions taxed at a either reduced price or covered by free allowances. If we only consider emissions taxed at the explicit price, this figure drops to 6%.

Zoom on the latest developments

Between 2022 and 2023, several new carbon pricing mechanism have been introduced worldwide. On a national scale, Indonesia launched the first phase of its ETS, covering 99 electric plants, or 80% of the country’s generating capacity. In Japan, 400 companies volunteered in the new ETS covering 28% of the country’s emissions. Australia has reformed the rules of its Safeguard Mechanism, transforming it into to a Baseline and Credits type ETS to cover 28% of national emissions. Finally, in Hungary, the government has announced the retroactive introduction of a tax, effective from January 1st, 2023, targeting companies that benefit from a significant allocation of free allowances under the EU-ETS. This tax consists of 2 components: a carbon price of EUR 40 per tCO2e, and a 10% transaction fee on the value of the free allowances obtained.

At the provincial level, in Mexico, the states of Guanajuato and Durango have implemented their own environmental taxes in 2023 including a component on GHG emissions. In Tamaulipas, the collection of allowances believed to be due to challenges faced by the state in measuring the emissions of companies are believed to be the reason for this failure. In Baja-California, many appeals have been granted by the Mexican judiciary, exempting the plaintiffs from paying the tax without abolishing it altogether, and stipulating that only the Federation had the power to tax petroleum products such as gasoline or diesel.

In the United-States, Washington State has launched its Cap-and-Trade ETS. The Regional Greenhouse Gas Initiative (RGGI), a multi-state ETS in the eastern United-States, is making news. Indeed, political battles continue in Pennsylvania to determine whether or not the state should join the RGGI, while Virginia is making progress in its efforts to withdraw from the same market. In North Carolina, the recent Senate votes make it highly unlikely that the state will join the RGGI. In Canada, Nova-Scotia, New-Brunswick, Prince Edward Island and Newfoundland and Labrador have abandoned their provincial carbon tax in favour of the federal levy. Nova-Scotia and Saskatchewan have modified their own ETS to meet the federal requirements (see p.3).

Impact of the energy crisis and the war in Ukraine in Europe

To contain the rise in energy prices, some European countries have taken measures targeting their carbon pricing instruments. In Portugal, where the carbon tax rate is linked to the previous year’s EUETS allowance price, it has been decided to freeze its tax rate at the 2021 level as of January 2022. Slovenia, using a similar fiscal instrument, tripled its carbon tax rate between 2020 and 2022, but then suspended its collection from June 21, 2022 until May 9, 2023. Austria delayed the implementation of its ETS by 3 months during the summer of 2022. Germany has frozen the increase in its mechanisms scheduled for 2023 and is using its ETS revenues to contain the rise in energy prices (see p.11). In Ukraine, carbon tax collection still continues in the oblasts unaffected by the conflict with revenues earmarked for a new ‘Decarbonization and energy efficiency Fund’ in 2024.

Map of explicit carbon prices around the world in 2023

To obtain more information or provide feedback regarding the sources used for this 2023 edition of the global carbon accounts, and in particular the national sources: contact@i4ce.org

L’article Global carbon accounts in 2023 est apparu en premier sur I4CE.

For years, the European Union assumed it would lead the cleantech race because it was the only one running in it. Mistakenly so. China has demonstrated its capacity to act decisively. Japan, Korea, Canada and India have also entered the race. And with the Inflation Reduction Act (IRA), the US quickly catches up.

The IRA contains a long‑term climate investment plan, providing sizable public funding (400-800 Bn$), with long term predictability (10 years), the simplicity of having a single federal level scheme, and support along the supply chain.

The IRA is a wake-up call for the European Union, where no comparable climate investment plan exists yet. To match the IRA, the EU does not need to throw its past decisions overboard. Quite the contrary, it must deliver what it has planned, and more.

The EU is well positioned to lead the global cleantech race and seize the opportunities of the green transformation, in a way that benefits global climate action, the EU sovereignty and its economic prosperity. It can build on growing cleantech private investments, an existing pipeline of announced cleantech manufacturing projects, and the political direction set by the European Commission’s Green Deal Industrial Plan presented in February 2023.

This brief argues that, to match the IRA, EU policy makers should think house, not brick. The best EU policy answer is an EU long‑term climate investment plan. As the political appetite for such a plan is currently limited, the European Commission should use the political momentum around the IRA and cleantech, to propose a targeted investment plan that focuses on the development, scale-up, manufacturing and deployment of clean technologies in the EU, from solar panels manufacturing to the offtake of green steel.

Such an EU cleantech investment plan should be presented before the summer of 2023, in the context of the mid-term review of the EU Multiannual Financial Framework. Learning from the positive features of the IRA, it should provide public support at scale, through continental-level schemes, in a long term and predictable manner along the supply chain.

Three first bricks can already be laid out to build this house:

• Ambitiously finalising and implementing the entire “Fit For 55” legislative package are key for the EU to play to its strengths: predictable and ambitious regulations and carbon pricing.
• Member States should increase their support for clean technology offtakes, including through green public procurement. NextGenerationEU should be further used to that effect.
• The European Commission should provide EU‑wide cleantech support schemes that learn from some excellent features of the IRA, such as its predictability and its wide geographical coverage. The planned launch of an EU‑wide tender to support renewable hydrogen production is a positive step, and should be used as a pilot to develop similar schemes for key clean technologies.

With the approaching EU elections of May 2024 and the end of NextGenerationEU in sight, such cleantech investment plan could lead the EU to advance towards an even more ambitious discussion: an EU long‑term Climate Investment Plan. This would include and go beyond cleantech, to ensure EU, national and private investments turn all the Green Deal objectives into tangible realities for businesses, workers and families.

L’article Think house, not brick: building an EU Cleantech Investment Plan to match the US Inflation Reduction Act est apparu en premier sur I4CE.

Report only available in French

The impacts of climate change, such as the worsening of the heat island effect, increased risk of flooding, accelerated coastal erosion, water shortages and reduced snow cover, are felt first and foremost at the local level. Adapting to these impacts is therefore often seen as the responsibility of subnational actors, and local authorities in particular. This Climate Report shows that, while local authorities do indeed have important levers for adaptation and must act now (I4CE 2023), they will only be able to mobilize them if certain conditions are met at national level: the entire effort will not be able to rest on their initiative alone. There is therefore an urgent need for a discussion between the national government and subnational authorities on this critical issue. 

If we look at the adaptation challenges facing local authorities and the levers they have at their disposal, we can see that municipalities, their groupings and the Regions all play a key, multi-faceted role in the planning and implementation of adaptation policies. As owners, organizers and financiers of numerous projects and activities, local authorities are also critical actors in the implementation of adaptation. Playing this role will require them to dedicate financial and human resources and will have budgetary consequences that they must be able to anticipate.  

Click here to see “Adaptation to climate change: a shared responsibility between local and national authorities” in French

However, while this role addresses several of the major adaptation challenges, it does not cover all of them: taking account of climate change in public health policies, in the management of large critical infrastructures (e.g. major seaports, the rail network or electricity transmission) and in the steering of certain economic policies of national interest, such as forestry policy, is above all the responsibility of the central State and national operators. 

In addition to that, even when it comes to issues that fall within their remit, local authorities don’t always hold all the cards when it comes to implementing ambitious adaptation measures:

• They – and the smallest among them in particular – will need to be able to draw on national resources, particularly in terms and to rely on norms and reference frameworks to justify politically difficult decisions such as assets relocation.
• Some adaptation choices go beyond the decisions that can be taken at the level of individual communities. Implementing ambitious adaptation trajectories may, on the one hand, require coordination between different levels of governance, and, on the other, call for resources to which not all territories have the same access, thus raising questions of equity and territorial solidarity.

It is therefore necessary for all local authorities to implement without delay the adaptation measures that fall within their remit, and to dedicate the necessary resources, while at the same time making adaptation an issue for dialogue between the national and local authorities. The aim of such a dialogue would be to collectively define common guidelines, to identify the resources that subnational authorities will have to deploy to achieve them, and to discuss the financial leeway needed at local level to implement them. To move in this direction, adaptation could appear as an explicit objective in future contractual arrangements between the national and local governments.  

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L’article Putting adaptation to the impacts of climate change on the French agenda of discussions between local and national authorities est apparu en premier sur I4CE.