Finland's climate finance and advocacy work
Finland supports developing countries' climate action as part of development cooperation. Funding is directed to both climate change mitigation and adaptation. Finland will use investment-based and loan-based funding to effectively accelerate private sector investments in climate solutions.
Developing countries need support for their national climate actions. They need support, for example to develop legislation, to improve climate officials’ knowhow and to strengthen climate institutions. It is also important to build citizens’ resilience to cope with the effects of climate change in both rural and urban environments.
Industrialised countries support the poorest countries by various means. They provide funding and expert assistance so that developing countries can develop their own capacity to respond to climate change. Technological development and technology transfers also play important roles. Overall, development cooperation has an important part to play.
Finland uses a variety of channels to provide this support, including such funds established under the UN Framework Convention on Climate Change (UNFCCC) as the Global Environment Facility (GEF) and the Green Climate Fund (GCF), as well as bilateral development cooperation projects and CSOs’ projects. In 2017 and 2019, development policy investments were directed to the Finland–IFC Blended Finance for Climate Program, set up jointly by Finland the International Finance Corporation (IFC), which belongs to the World Bank Group. The climate perspective is also taken into account in Finnfund’s funding.
- International organisations and development finance institutions
- Finland–IFC Blended Finance for Climate Program
Important actions to help reduce deforestation
Forests bind carbon dioxide. Greenhouse gas emissions, which are caused by deforestation or disappearance of forests, account for more than ten per cent of global greenhouse gas emissions.
Reducing deforestation and forest degradation also yields many other benefits, which show in protected water reserves and biodiversity and the prevention of soil erosion.
Finland has vast areas of forest and the long-term expertise in forests is used when supporting sustainable forestry in developing countries. Climate change is taken into account in the planning of forestry projects in developing countries, funded by Finland.
Examples of Finland’s support for climate action in developing countries:
- Developing countries’ adaptation is supported through meteorology projects carried out by the Finnish Meteorological Institute (FMI). They focus on improving developing countries’ own weather and climate services and early warning systems.
- Finland is funding the REDD+ programmes (Reducing emissions from deforestation and forest degradation) for example in Tanzania, where Finland supports reforestation.
- Free software packages have been developed in cooperation with FAO to provide tools to facilitate the processing, analysis and reporting of data acquired from forest inventories. Over a hundred countries are currently carrying out reliable forest inventories.
- Finland supports transfer to clean energy in southern and eastern Africa through the Energy and Environment Partnership Trust Fund (EEP Africa). Examples of the results include, for example, a plant manufacturing energy-efficient cookers (video, 1:52)(layout.types.url.description).
- See examples of Finland's support for climate action (video, 2:00)(layout.types.url.description).
Carbon markets provide cost-effective emissions control
Climate change mitigation needs cost-effective ways of reducing emissions. One means to do this is setting a price for greenhouse gas emissions. Effective carbon pricing creates a financial incentive to reduce emissions and helps in directing investments to lower carbon alternatives.
Finland was the first country in the world to set a carbon tax in 1990, and Finnish power plants and industries have participated in the EU Emissions Trading System since 2005. We support the development of carbon markets also around the world and promote the gradual phase-out of fossil fuel subsidies.
Comprehensive and ambitious carbon pricing schemes are also in Finland's interest, because they open up markets for climate-friendly solutions and foster the development of international regulations and institutions. Thus Finland’s climate-resilient “carbon handprint” can be globally influential.
We have been participating in the development of international collaboration mechanisms in the context of international climate change agreements from their beginning. We also support developing countries in their efforts to use carbon pricing in their own climate policy.
Finland has channelled funding to the Partnership for Market Implementation (PMI), administered by the World Bank, which promotes the development of carbon markets, as well as to its predecessor. These funds support developing countries to design and implement carbon pricing, for example through emissions trading systems and emissions taxes.
We are also involved in several cooperative initiatives related to carbon pricing between the Nordic countries and other countries pursuing an active climate policy. By way of example, in 2019, Finland and Chile established the Coalition of Finance Ministers for Climate Action. The aim of this new form of cooperation is to harness the input of the Ministries of Finance and fiscal policy tools to combat climate change: taxation, budgeting, financing and public procurement. One of the Coalition’s key goals is effective carbon pricing.