Final Report September 2021

Attribution: A practical guide to navigating the blending of climate finance and carbon markets

  • R. Spalding-Fecher
  • A. Kohli
  • Peter Brown
  • Jörg Füssler
  • Jürg Broekhoff
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Meeting the goals of the Paris Agreement will require an unprecedented scale of financing for low-carbon and climate-resilient development. This poses a particular challenge to developing countries. The current financial flows from carbon markets and climate finance do not come close to meeting the incremental investment needs for these ambitious goals. Historically, climate finance and carbon markets have worked almost entirely independently. This landscape is starting to shift, however, because of the overwhelming need for mobilizing new investment and also the need in both carbon markets and climate finance to target larger-scale interventions, which are then more likely to require multiple streams of financial support. Blending different sources of finance provides more flexibility, because it allows multiple international actors to provide support for the same program and to combine different financial instruments. Blending climate finance instruments with international carbon market mechanisms is still in its early days, with limited practical experience even in the emerging piloting activities for Article 6. This report assesses both the principles of attribution of emission reductions to climate finance and carbon markets and the practical applications of these principles in Article 6 pilot activities.