NAMA finance is a critical component of the NAMA mechanism and is essential to getting NAMAs off the ground and into the next stage of implementation. Already at least 33 developing countries are in various stages of developing more than 55 NAMAs and 34 feasibility studies, exhibiting a high level of interest and engagement. Furthermore, this week, the Danish Ministry of Climate, Energy, and Building and CCAP organized the Global NAMA Financing Summit bringing together high-level government officials across developing countries, key contributing countries, multilateral development banks, and international and national development banks to discuss the role that financing institutions have in support of NAMA development.
By linking financial support with effective government policies and sustainable development outcomes, the NAMA mechanism offers a way for international financial support to enable emissions reductions on a sector-wide scale, and offers the ability to mainstream climate into development finance.
The Identifying Potential Sources of NAMA Finance paper highlights a number of institutions and countries, including new and innovative NAMA financing sources, which have previously funded or are funding programs that could support NAMAs across different stages of development.
Four stages of NAMA development generally need support to ultimately achieve implementation of low-carbon projects: capacity building in the developing country, NAMA design, NAMA implementation, and investment in low carbon technology or infrastructure projects. See Figure 1 below.
Figure 1. Types of NAMA Funding (An Emerging Architecture for NAMA Finance, May 2013, CCAP)
Different types of financial support are required to advance NAMAs through these different stages of development. (See An Emerging Architecture for NAMA Finance paper for details on the four stages.) Some of this support is specific to NAMAs, while other support is more general, and can be dedicated to NAMAs or NAMA-like actions. The different types of support are given in different forms (e.g., grants, loans, loan guarantees, equity investments, and other instruments) to both the public and private sectors and exhibit different characteristics in terms of criteria, lending rates, duration, etc. Developing country governments will need to assess their current capacities and the status of each of their NAMAs to identify which types of funds are needed to move toward implementation and attract the public and private resources required to meet their low carbon development goals. To realize the desired sector-wide climate mitigation action, financial support is needed in each of four critical stages in the NAMA development process.