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Putting the Money to Good Use

Policy Brief 02/2015

(Photo: KfW/Rüdiger Nehmzow)

May 2015 - The concept of “additionality” has very different meanings in the climate finance domain on the one hand and international carbon markets, particularly the CDM, on the other hand. But can the CDM’s Additionality Concept inform the climate finance domain and help to increase the efficiency and effectiveness of financing mitigation activities in developing countries? This question is explored in a newly published JIKO Policy Brief.

The CDM to date has been the most successful mechanism to support mitigation activities in developing countries. One of its core concepts is that activities must demonstrate their additionality, i.e. that they represent emission reductions beyond a given baseline scenario to ensure the environmental integrity of the Kyoto system.

Within the climate finance domain, the term ‘additionality’ has developed a fundamentally different meaning. Climate finance is to be additional to existing sources of (development) finance. Thus, additionality in this case does not directly apply to fundable activities, but to the finance donors. Both concepts have in common that additionality points to the seriousness of an effort, be it the level of funding in the latter, or the level of emission reductions in the former case.

Many have hoped that the CDM’s additionality, if applied to the wider climate finance domain, can contribute to standardizing the funding criteria. A new JIKO Policy Brief therefore explore options of applying the CDM's to do just that. The authors highlight issues of environmental system integrity and efficient allocation of funding, and discuss potential limits of the CDM's additionality concept in its current form, if applied to climate finance. The prospects are limited, because a clear attribution of emission reductions is almost impossible in a system that does not have as well-defined borders as the zero-sum-game of tradable emission reductions under a capped environment. The authors propose some inroutes to adapting the current approach to additionality in this context, and pose a number of questions that can help to further discuss and refine the CDM's additionality concept to make it better applicable for a future, globally inclusive climate regime.