Climate Change Mitigation Finance
Explicit Exclusions
Mitigation finance focuses on activities that reduce, avoid, limit or sequester GHG emissions. According to the MDB/ IDFC Common Principles for Climate Mitigation Finance Tracking 34 methodology, an activity is classified as climate change mitigation if it substantially contributes to stabi- lizing GHG concentrations in the atmosphere, consistent with the Paris Agreement’s (PA) long-term temperature goal. Mitigation activities fall into three categories: • Negative or Very Low Emission Activities: These result in negative, zero or very low GHG emissions and are fully consistent with the PA (e.g., carbon sequestration in land use and some renewable energy forms). • Transitional Activities: These are part of GHG-emissive systems but contribute to the transition toward a climate-neutral economy (e.g., energy efficiency im- provements in manufacturing using fossil fuels).
The methodology explicitly excludes certain sectors:
• Hydropower plants with high methane emissions from reservoirs that surpass the GHG reductions from the plant’s renewable energy output.
• Geothermal power plants with high carbon dioxide content in the geothermal fluid that cannot be rein- jected.
• Biofuel projects that deplete carbon pools more than they reduce GHG emissions due to high emissions during production, processing and transportation.
Methodological Differences and Tracking
The methodologies for tracking adaptation and mitiga- tion finance differ fundamentally:
• Enabling Activities: These facilitate other activities that make substantial contributions to climate mitigation (e.g., manufacturing very low-emission technologies).
• Adaptation activities are context-specific and tailored to specific climate vulnerabilities, making it impossible to produce a standalone “list of adaptation activities.”
However, not all GHG-reducing activities qualify for MDB mitigation finance. This finance is calculated based on a specific list of activities compatible with low-emission pathways.
• Mitigation activities can be tracked based on prede- fined lists of typical activities that support low-carbon development as the impact of a one-ton reduction in CO2 emissions is consistent regardless of location.
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