Reducing Climate Risk

Climate finance and carbon markets

A negotiating session during COP17 in Durban. Flickr / UNclimatechange

SEI has considerable expertise in climate finance, market mechanisms, and related issues of transparency, accountability, equity and efficiency.

A great deal of the United Nations Framework Convention on Climate Change (UNFCCC) process comes down to money. Mitigation and adaptation are both expensive, with estimated needs in the hundreds of billions of dollars; securing public- and private-sector finance to meet those needs – and then allocating the funds in an equitable and efficient manner – is a central challenge in the UNFCCC process.

SEI researchers have examined climate finance needs, quantified financial flows, considered the interplay between climate and development finance, evaluated the effectiveness of climate finance governance (e.g., the Adaptation Fund) and measurement, reporting and verification (MRV) systems, and gauged the viability of different private-sector finance sources for adaptation, including the potential for an adaptation market mechanism.

SEI also has expertise in the design and implications of market mechanisms to address regional, national, and international greenhouse gas emissions, from the distribution of emissions allowances in emissions trading systems to the administration of emission offset programs. We have provided innovative and influential analyses of market instruments, road-tested GHG offset protocols, and identified flaws in the Clean Development Mechanism (CDM) and potential solutions.

In the U.S., SEI also supported the design of the Western Climate Initiative cap-and-trade system. And as China has begun developing its own carbon markets, SEI has examined the process and offered insights on the implications for global markets.

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Download a synthesis of SEI research on these issues »