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April 10, 2024

An EU results-based climate fund could boost developing countries’ clean energy transition

Besides the creation of a results-based climate fund, the Future Matters report’s other recommendations include developing an industry partnership with India to promote low-carbon steel and cement production (Photo: Dhiraj Singh/Bloomberg)
Besides the creation of a results-based climate fund, the Future Matters report’s other recommendations include developing an industry partnership with India to promote low-carbon steel and cement production (Photo: Dhiraj Singh/Bloomberg)

A European climate fund for low and middle-income countries would benefit both the EU and poorer nations, says a report by a non-profit

The EU should support low and middle-income countries in their transition to a renewable energy system by providing funding through a new climate fund, says German non-profit and think-tank Future Matters. 

About 75 per cent of global greenhouse gas emissions produced by the end of the century will originate from LMICs, according to a report in which the non-profit outlines how the EU can support global decarbonisation. 

The report recommends the climate fund should be results-based, so that LMICs only receive the full payment once renewable projects have proven results. Financing for the fund would come from “new climate finance pledges and novel financial instruments, ideally complemented by philanthropic contributions”, it adds. 

Renewable project developers in LMICs would submit bids to an auction and be awarded sufficient funds to design and construct the project. Following the construction phase further subsidies would be distributed on a results-based basis, depending on the amount of clean energy the projects successfully generated or stored.

Future Matters says the fund would also bring benefits for the EU, including easing the access of European companies to new markets; aligning the EU’s decarbonisation efforts with global efforts thus increasing overall emissions reductions; and deepening diplomatic ties between the EU and LMICs to secure access to critical raw materials for the bloc’s own decarbonisation.

The creation of a results-based climate fund is one of eight policy recommendations Future Matters makes in the report. They also include updating the Global Methane Pledge; developing an industry partnership with India to promote low-carbon steel and cement production; and new funding to reduce emissions from the global food system.

The report is available to read here.

A service from the Financial Times