ANNEX
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 57 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 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 sequestra- tion in land use, some renewable energy forms). • Transitional Activities: These are part of GHG-emissive systems but contribute to the transition towards a climate-neutral economy (e.g., energy efficiency im- provements in manufacturing using fossil fuels). • Enabling Activities: These facilitate other activi- ties that make substantial contributions to climate mitigation (e.g., manufacturing very low-emission technologies). 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.
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 con- tent in the geothermal fluid that cannot be reinjected.
• Biofuel projects that deplete carbon pools more than they reduce GHG emissions, due to high emissions dur- ing production, processing and transportation.
Methodological Differences and Tracking
The methodologies for tracking adaptation and mitigation finance differ fundamentally:
• Adaptation: Adaptation activities are context-specific and tailored to certain climate vulnerabilities, making it impossible to produce a standalone “list of adaptation activities.” • Mitigation: Mitigation activities can be tracked based on predefined lists of typical activities that support low-carbon development, as the impact of a 1-ton re- duction in CO 2 emissions is consistent regardless of location.
57 https://www.worldbank.org/content/dam/Worldbank/document/Climate/common-principles-for-climate-mitigation-finance-tracking.pdf
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