International Climate Change Financing:
The Climate Investment Funds (CIF)
Richard K. Lattanzio
Analyst in Environmental Policy
May 5, 2011
Congressional Research Service
7-5700
www.crs.gov
R41302
CRS Report for Congress
P
repared for Members and Committees of Congress

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International Climate Change Financing: The Climate Investment Funds (CIF)

Summary
The United States contributes funding to various international financial institutions to assist
developing countries address global climate change and other environmental concerns. Congress
is responsible for several activities in this regard, including (1) authorizing periodic
appropriations for U.S. financial contributions to the institutions, and (2) overseeing U.S.
involvement in the programs. Issues of congressional interest include the overall development
assistance strategy of the United States, U.S. leadership in global environmental and economic
affairs, and U.S. commercial interests in trade and investment. This report provides an overview
of two of the larger and more recently instituted international financial institutions for the
environment—the Climate Investment Funds (CIF)—and analyzes their structure, funding, and
objectives in light of the many challenges within the contemporary landscape of global
environmental finance.
The CIF are investment programs administered by the World Bank Group that aim to help finance
developing countries’ transitions toward low-carbon and climate-resilient development. Formally
approved by the World Bank’s Board of Directors on July 1, 2008, the CIF are composed of two
trust funds—the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF)—each
with a specific scope, objective, and governance structure. The CTF provides financing for
demonstrating, deploying, and diffusing low-carbon technologies that have the potential for long-
term avoidance of greenhouse gas emissions. The SCF—a suite of three separate funds, including
the Pilot Program for Climate Resilience (PPCR), the Forest Investment Program (FIP), and the
Scaling Up Renewable Energy Program in Low Income Countries (SREP)—supports the least
developed countries in their efforts to achieve low-carbon, climate-resilient development. Overall,
donor countries have pledged $6.9 billion to the funds since September 2008 in support of
programs in 45 developing countries. The U.S. pledge totals $2 billion. In FY2010, Congress
approved $375 million for the CIF (P.L. 111-117, Consolidated Appropriations Act, 2010); in
FY2011, Congress approved $235 million for the CIF (P.L. 112-10, Continuing Appropriations).
For FY2012, the Administration has requested an additional $590 million for the program.
The CIF are just one set of financial mechanisms in a larger network of international programs
designed to address the global environment. Accordingly, their effectiveness depends on how the
trust funds address programmatic issues, build upon national investment plans, react to recent
developments in the financial landscape, and respond to emerging opportunities. Proponents of
the CIF point to several factors in support of the funds, including an innovative programmatic
design, a country-led investment process, and a balanced governance structure with enhanced
stakeholder engagement. Proponents of the multilateral development banks’ (MDBs’) role in
environmental assistance emphasize several advantages to financing climate programs through
the World Bank Group, including its commitment to private sector development, its capacity to
leverage large co-financing arrangements, and its possession of fiduciary standards and
institutional expertise. However, critics highlight several factors of concern with the CIF and their
Trustee, including a lack of transparency, coordination, and “polluter pay” responsibilities; a
potential for new conditionalities, additionalities, and increased debt burdens on developing
countries; and a prior economic development policy at the World Bank that is considered a
conflict of interest for environmental protection.

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International Climate Change Financing: The Climate Investment Funds (CIF)

Contents
Introduction ................................................................................................................................ 1
The Climate Investment Funds .................................................................................................... 3
Background .......................................................................................................................... 3
The Clean Technology Fund (CTF) ....................................................................................... 4
Overview ........................................................................................................................ 4
Governance.....................................................................................................................4
Funding .......................................................................................................................... 5
Program Areas ................................................................................................................ 6
The Strategic Climate Fund (SCF)......................................................................................... 8
Overview ........................................................................................................................ 8
Governance.....................................................................................................................8
Funding .......................................................................................................................... 9
Program Areas .............................................................................................................. 10
Current Issues ........................................................................................................................... 11
Innovations by the CIF........................................................................................................ 12
Issues in Support of the Multilateral Development Banks (MDBs) and Multilateral
Assistance........................................................................................................................ 12
Issues of Concern for Developing Countries and Civil Society ............................................ 14

Tables
Table 1. Recent U.S. Budget Authority for Multilateral Environmental Programs ........................ 2
Table 2. Total Pledges to the Clean Technology Fund .................................................................. 5
Table 3. Clean Technology Fund Investment Plans ...................................................................... 7
Table 4. Total Pledges to the Strategic Climate Fund.................................................................... 9

Contacts
Author Contact Information ...................................................................................................... 17

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International Climate Change Financing: The Climate Investment Funds (CIF)

Introduction
Many governments acknowledge that environmental degradation and climate change pose
international and trans-boundary risks to human populations, economies, and ecosystems that
could result in a worsening of poverty, social tensions, and political stability. To confront these
global challenges, countries have negotiated various international agreements to protect the
environment, reduce pollution, conserve natural resources, and promote sustainable growth.
While some observers call upon developed countries to take the lead in addressing these issues,
efforts are unlikely to be sufficient without similar measures being implemented in developing
countries. Developing countries, however, focused on poverty reduction and economic growth, do
not have the financial resources, technological know-how, and institutional capacity to deploy
such measures. Therefore, increased international support in these areas has remained the
principal method for governments to assist developing country action on global environmental
problems.1
The United States and other industrialized countries have committed to financial assistance for
environmental initiatives through several multilateral agreements (e.g., the Montreal Protocol
(1987), the United Nations Framework Convention on Climate Change (1992), United Nations
Convention to Combat Desertification (1994), and the Copenhagen Accord (2009)). International
financial assistance takes many forms, from fiscal transfers to market transactions, and includes
foreign direct investment (FDI), bilateral overseas development assistance (ODA), and
contributions to multilateral development banks (MDB)2 and other international financial
institutions (IFI), as well as the offering of export credits, loan guarantees, insurance products,
etc.
Table 1 outlines recent U.S. financial support for global environmental initiatives.3 Congress is
responsible for several activities in this regard, including (1) authorizing periodic appropriations
for U.S. financial contributions to the institutions, and (2) overseeing U.S. involvement in the
programs. Issues of congressional interest include the overall development assistance strategy of
the United States, U.S. leadership in global environmental and economic affairs, and U.S.
commercial interests in trade and investment.4 As Congress considers potential authorizations
and/or appropriations for initiatives administered through the Department of State, the
Department of the Treasury, and other agencies with international programs, it may have

1 For a more detailed discussion on various sources and mechanisms of financial assistance for climate change
activities, see CRS Report R41808, International Climate Change Financing: Needs, Sources, and Delivery Methods,
by Richard K. Lattanzio and Jane A. Leggett.
2 The group of multilateral development banks referred to in this report includes the International Bank for
Reconstruction and Development (IBRD or World Bank), African Development Bank (AfDB), Asian Development
Bank (ADB), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank Group
(IDB), and the International Finance Corporation (IFC, the private sector wing of the IBRD).
3 Some commentators believe the new and increased funding for environmental issues is the result of several factors,
including (1) an increased political understanding by some policymakers of climate change, (2) the transformed role of
multilateral development banks in global energy and environmental issues, (3) an expressed desire to achieve more
immediate environmental and economic impacts through bilateral and private sector resources, and (4) a perceived lack
of efficiency in current financial mechanisms. See Gareth Porter, Neil Bird, Nanki Kaur, and Leo Peskett, “New
Finance for Climate Change and the Environment,” WWF and the Heinrich Böll Foundation, 2008.
4 For more substantive analysis of foreign aid and congressional roles, see CRS Report R40213, Foreign Aid: An
Introduction to U.S. Programs and Policy, by Curt Tarnoff and Marian Leonardo Lawson; and CRS Report R41170,
Multilateral Development Banks: Overview and Issues for Congress, by Rebecca M. Nelson.
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questions concerning the direction, efficiency, and effectiveness of current bilateral and
multilateral programs. This report provides an overview of two of the larger and more recently
instituted multilateral mechanisms—the Climate Investment Funds (CIF)—and analyzes their
structure, funding, and objectives in light of the many challenges within the contemporary
landscape of global environmental finance.
Table 1. Recent U.S. Budget Authority for Multilateral Environmental Programs
In Nominal US$ Millions
2010
2011
2011
2012
Agency/Program
Enacted
Request
Enacted
Request
Department of State




Least Developed Country Fund
30 30
TBDa 20
Special Climate Change Fund
20 20
TBD 20
World Bank Forest Carbon
Partnership
10 15
TBD 21
Department of the Treasury




Tropical Forests Conservation Act
20 20
TBD 15
Global Environment Facility
87 175 90 144
Clean Technology Fund
300 400 185 400
Strategic Climate Fund: Pilot Program
for Climate Resilience
55 90
/
50b 40
Strategic Climate Fund: Forest
Investment Program
20 95 /
50 130
Strategic Climate Fund: Scaling-Up
Renewable Energy
0 50 /
50 20
Source: Office of Management and Budget, Federal Climate Change Expenditures Report to Congress, 2010; Office
of Management and Budget, The Budget of the United States Government, 2011 and 2012 (State, Foreign Operations
and Related Programs Budget), and H.R. 1473, The Department of Defense and Full-Year Continuing
Appropriations Act, 2011 (P.L. 112-10).
a. TBD, “to be determined”: Appropriated funds for these specific programs/activities are drawn from larger
line item categories in agency budget authorities, occasionally with “shall”-language implementing spending
ceilings. Based on provisions in H.R. 1473 (P.L. 112-10), allocations in FY2011 for these programs are left at
the discretion of the agency and have yet to be determined/reported.
b. H.R. 1473 (P.L. 112-10) FY2011 budget authority for the Strategic Climate Fund is $50 million for all
programming. Al ocation of funds among the three sub-programs is at the discretion of Treasury and has yet
to be determined/reported.
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The Climate Investment Funds
Background
Projected climate change is considered a potential threat to economic development, with
anticipated effects on the environment, human health, food security, and economic activity.
Further, climate change disproportionately affects the urban and rural poor of developing
countries, thus making it a central concern to those interested in poverty reduction, and
sustainable development.5 Under this context, and at the request of the G8/G20, the multilateral
development banks (MDBs) have recently sought to expand their support to low-carbon and
climate-resilient investments in several ways, including (1) creating new and additional
environmental funding resources, (2) repackaging their “core” financial products with specialized
climate provisions, and (3) leveraging their suite of financial instruments for greater private sector
environmental investment.6
In keeping with these aims, in February 2008, Japan, the United Kingdom, and the United States
announced their intention to create a set of funds at the World Bank to help developing countries
“bridge the gap between dirty and clean energy” and “boost the World Bank’s ability to help
developing countries tackle climate change.”7 The World Bank held the first design meeting for
the proposed Climate Investment Funds (CIF) in March 2008 in Paris, France. Two subsequent
meetings were held in Washington, DC, and Potsdam, Germany, and on May 23, 2008,
representatives from 40 developing and industrialized countries reached agreement on the funds’
design and duration (the CIF are programmed to sunset upon the commencement of a new
climate fund in the UNFCCC). Formally approved by the World Bank’s Board of Directors on
July 1, 2008, the CIF have become an attempt to bridge the gap in climate financing between
present obligations and a post-2012 global climate change agreement.8
The CIF are composed of two separate trust funds—the Clean Technology Fund (CTF) and the
Strategic Climate Fund (SCF)—each with a specific scope, objective, and governance structure.
Overall, donor countries have pledged $6.9 billion to the funds since September 2008 in support
of programs in 45 developing countries.9 The U.S. pledge totals $2 billion. In FY2010, Congress
approved $375 million for the CIF (P.L. 111-117, Consolidated Appropriations Act, 2010); in
FY2011, Congress approved $235 million for the CIF (P.L. 112-10, Continuing Appropriations).
For FY2012, the Administration has requested an additional $590 million for the program.
All U.S. funding is subject to annual congressional approval. Authorizing legislation is managed
by the House Financial Services Committee and Senate Foreign Relations Committee. The House

5 As summarized by the International Institute for Sustainable Development, at http://www.iisd.ca/download/pdf/sd/
ymbvol172num2e.pdf.
6 See the World Bank website for additional information at http://siteresources.worldbank.org/NEWS/Resources/
Climate_Change_Results_Brief_4-12-10.pdf.
7 Henry Paulson, Alistair Darling, and Fukushiro Nukaga, “Financial bridge from dirty to clean,” Financial Times,
February 7, 2008.
8 For a full description of purpose and programs, see CIF’s website at http://www.climateinvestmentfunds.org/cif/.
9 Exchange rates as of September 30, 2010, the last recorded Trustee Report for the CIF, at
http://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/
CTF%204%20Trustee%20Report%20nov2010.pdf.
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and Senate Appropriations Subcommittees on State, Foreign Operations, and Related Programs
have jurisdiction over appropriations.
The Clean Technology Fund (CTF)
Overview
Faced with energy and environmental challenges, among others, many developing countries see
value in clean technology to meet their energy security, poverty alleviation, and sustainable
development goals while also reducing their growth in emissions. However, the costs to
developing countries of switching to cleaner technologies without financial assistance may be
prohibitive. The CTF seeks to provide financing—principally to larger emerging economies and
to regional groups—for demonstrating, deploying, and diffusing low-carbon technologies with
the potential for long-term avoidance of greenhouse gas emissions. The fund promotes renewable
energy and energy efficient technologies in the power sector as well as energy efficiency
strategies in the transportation, building, industry, and agricultural sectors. Currently, the CTF is
designed to support 15-20 country and regional investment plans and/or co-financed projects. As
of December 2010, the CTF has endorsed 14 programs, including plans from Mexico, Egypt,
Turkey, South Africa, Ukraine, Morocco, Colombia, Kazakhstan, Indonesia, Philippines,
Thailand, Vietnam, Nigeria, and a five-country region in the Middle East and North Africa.
Projects include support for wind energy, urban public transportation systems, solar water heaters,
smart-grid development, and concentrating solar thermal power programs, among others (see
Table 3 for more detailed descriptions of the national investment plans).10
Governance
The CTF is implemented by the World Bank Group and governed by representatives from the
donor and recipient countries. The role of governance for the CTF is to approve investment plans,
programming, and the allocation of financial resources; and to provide guidance, performance
evaluation, and reporting. It is further tasked with ensuring that the strategic orientation of the
CTF is guided by the principles of the United Nations Framework Convention on Climate Change
(UNFCCC). The organizational structure of the CTF is equally balanced between donor and
developing countries. All decisions are made by consensus. Other international organizations, the
private sector, and civil society representatives are included as observers. All observer roles are
“active,” allowing them to take the floor to make interventions, propose agenda items, and
recommend experts. Observers do not vote during consensus decisions. The governance structure
includes:
• The CTF Trust Fund Committee, which oversees and decides on the operations
and activities of the CTF and includes (1) eight representatives from contributor
countries (currently Australia, France, Germany, Japan, Spain, Sweden, United
Kingdom, United States); (2) eight representatives from eligible recipient
countries (currently Brazil, China, Egypt, India, Morocco, Nigeria, South Africa,

10 Description of CTF overview and governance from CIF, Annual Report 2009, on the CIF website at
http://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/cif_annual_report_final_021810.pdf;
furthermore, for a more detailed background into the issues surrounding the implementation of the CTF, see CRS
Report RS22989, The World Bank’s Clean Technology Fund (CTF), by Martin A. Weiss.
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Turkey); (3) a representative from the project recipient country (during
deliberations on the investment plan, program, or project); (4) a representative of
the World Bank; and (5) a representative for the other MDBs.
• The MDBs Committee, which facilitates collaboration, coordination, and the
exchange of information, knowledge, and experience among MDBs partners.
• The Partnership Forum, which supports civil society engagement and includes
representatives of donor and eligible recipient countries, MDBs, UN and UN
agencies, Global Environment Facility (GEF), UNFCCC, Adaptation Fund,
bilateral development agencies, NGOs, indigenous peoples, private sector
entities, and technical experts.
• The Administrative Unit, which supports the work of the CIF, is housed in the
World Bank Group’s Washington, DC, offices.
• A Trustee (the World Bank), which holds in trust, as the legal owner and
administrator, the funds, assets, and receipts that constitute the Trust Fund,
pursuant to the terms entered into with the contributors.
Funding
In September 2008, 13 donor countries pledged over US$6.9 billion to finance the two CIF trust
funds. The total amount pledged by the eight contributing countries to the CTF was US$4.405
billion as of September 30, 2010 (see Table 2 for pledges and Table 1 for U.S. Budget
Authority). The funds are to be disbursed as grants, concessional loans, loan guarantees, and other
risk management instruments.
Table 2. Total Pledges to the Clean Technology Fund
(In millions US$, as pledged since September 2008, with exchange rates as of September 30, 2010)
Donor Contribution
Typea Amount
Pledged
Australia Grant
$97

France
Loan
$277

Germany Loan/Grant
$615

Japan
Grant
$1,112

Spain
Capital
$109

Sweden
Grant
$90

United Kingdom

Capital
$613
United Statesb
Grant
$1,492

Total

$4,405

Source: The CIF website at http://www.climateinvestmentfunds.org/.
a. Donor contribution types include grants, loans, and equity, and describe in broad terms the general
requirements stipulated by the donors on their contributed funds. The U.S. government has historical y
contributed grant financing for reasons that include ease, ODA accounting practices, and flexible capital
reflow provisions.
b. The total U.S. pledge to the CIF remains at $2 billion. Contributions across funds are extrapolated from
current al ocations.
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Program Areas
The CTF is based on country and regional investment plans that aim to support climate-friendly
technologies. Investment plans are undertaken jointly by the recipients, the MDBs, other
development partners, private industry, and civil society to build upon existing national strategies
and demonstrate how the CTF can be complementary to the country’s overall developmental
activities. The CTF supports investment plans that are cost-effective and implementation-ready,
can be scaled up quickly to impact development, and have the potential for significant greenhouse
gas emission reductions. To receive CTF funding, a country must be eligible for official
development assistance (ODA) and have an active MDB program.
The majority of CTF funding supports programs that help shape demand side markets for
technology diffusion. The fund’s criteria for lending allow for all renewable and energy efficiency
initiatives, as well as large-scale hydroelectric power plants, natural gas plants, some forms of
biofuels, power plant refits, and ultra-supercritical coal plants.11 Funds are commonly targeted to
support a variety of investment activities, including (1) direct purchase of technological goods
and services; (2) direct investment into government infrastructure for transport or transmission
modernization; (3) seed funds for financial intermediaries to incentivize clean technology
lending; and (4) investment support and risk mitigation strategies for private sector entry into the
market. In short, the CTF attempts to address the additional costs contained in lower-carbon
energy investment such that it becomes a viable option to conventional fossil-fuel power
generation. Table 3 outlines the endorsed Investment plans as of June 1, 2010.

11 No coal-fired power plants have been proposed or approved at this time. Hydroelectric power generation is currently
included in the Ukraine proposal.
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Table 3. Clean Technology Fund Investment Plans
(In millions US$)
Direct CTF Funding
Datea Country
/ Co-Financingb
Investment Plan
January 2009
Egypt
$300 / $1,600
Wind power; Urban transport (natural gas buses and a
subway); Transmission upgrades.
January 2009
Mexico
$500 / $6,000
Energy efficiency (appliance & lighting); Urban transport
(rapid bus); Wind power.
January 2009
Turkey
$250 / $1,900
Renewable energy and energy efficiency; Smartgrid
technology.
October 2009
Morocco
$150 / $1,500-$1,800
Energy sector privatization; Energy conservation; Urban
transport.
October 2009
South Africa
$500 / $1,900
Concentrated solar power; Wind power; Solar water
heaters; Energy efficiency.
October 2009
M.E.N.A.c
$750 / $4,900
Concentrated solar power; Transmission and distribution
infrastructure.
December 2009
Thailand
$300 / $4,000
Renewable energy and energy efficiency; Urban transport
(bus system).
December 2009
Philippines
$250 / $2,500
Solar power; Transmission infrastructure; Demand side
management; Sustainable transport strategy.
December 2009
Vietnam
$250 / $3,200
Renewable energy and industrial energy efficiency; Urban
transport (rail system); Initial capitalization of funds;
Transmission infrastructure.
March 2010
Colombia
$150 / $3,000
Sustainable transport program; Public/private sector
energy efficiency program.
March 2010
Indonesia
$400 / $2,700
Large-scale geothermal power; Biomass and other
renewable energy.
March 2010
Kazakhstan
$200 / $535
Hydro and wind power; Public sector transport fuel
switch; District heating; Energy efficiency.
March 2010
Ukraine
$350 / $2,300
Wind, hydro, biomass; Residential and government
energy efficiency; District heating; Smartgrid technology.
November 2010
Nigeria
$250 / $1,300
Transport sector structure; Clean and renewable energy
development; Energy efficiency; Financial sector reform.
Source: CTF committee meeting documents and national Investment plans, available at the CTF website.
a. Date of official CTF endorsement of the investment plan.
b. Endorsed funding by the CTF / leveraged co-financing from additional sources; in millions US$. It is
estimated that 30% of the co-financing comes from the private sector; the remainder comes from other
multilateral financial institutions, the recipient governments, state-owned enterprises, and carbon finance.
c. The Middle East North Africa region, including Algeria, Egypt, Jordan, Morocco, and Tunisia.
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The Strategic Climate Fund (SCF)
Overview
Some governments and civil society organizations are concerned that climate change may
exacerbate poverty situations and reverse economic gains in the developing world through the
possibility of temperature increases, rising sea levels, droughts, changes in rainfall patterns,
heightened disease patterns, and the lack of drinkable water. They believe that resources may be
necessary to help low-income countries manage a response. Responses to climate change are
likely to entail both mitigation efforts (i.e., slowing, then reducing greenhouse gas emissions) and
adaptation efforts (i.e., managing the effects of short- and long-term climate outcomes). The SCF
aims to help developing countries prepare for climate change by promoting low-carbon, climate-
resilient development. Three targeted programs provide grants and concessional loans to pilot
new approaches aimed at specific challenges:12
• The Pilot Program for Climate Resilience (PPCR) supports ways to integrate
climate risk and resilience into the development strategies of low-income
countries. Funds can be used to provide technical assistance to help with capacity
building, policy reform, and sector investment.
• The Forest Investment Program (FIP) provides financing to countries to help
them prepare for and participate in programs that aim to reduce deforestation.
Funds can be used for managing forests and for educating indigenous and local
communities about forest policies.
• The Scaling Up Renewable Energy Program in Low Income Countries (SREP)
helps low-income countries adopt renewable energy solutions to aid in the
development of their power generation sector. Funds can be used to provide
policy support, technical assistance, financial management, and sector
investment.
Governance
The SCF is implemented by the World Bank Group and governed by representatives from the
donor and recipient countries. The governance and decision-making structure is similar to the
CTF, but specifically includes:
• The SCF Trust Fund Committee, which oversees and decides on the operations
and activities of SCF and includes (1) eight representatives from contributor
countries (currently Australia/UK (rotating), Canada, Denmark/Switzerland
(rotating), Germany, Japan, Netherlands, Norway, United States); (2) eight
representatives from eligible recipient countries (currently Bolivia, Guyana,
Indonesia, Kyrgyz Republic, Maldives, Senegal, Tunisia, Yemen); (3) a
representative of the World Bank; and (4) a representative for the other MDBs.
• An SCF sub-committee for each of the targeted programs, which includes up to
six representatives from contributor countries to the SCF Program, a matching

12 Description of SCF overview and governance from CIF, Annual Report 2009, on the CIF website at
http://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/cif_annual_report_final_021810.pdf.
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number of representatives from eligible recipient countries, and such other
representatives designated by the SCF Trust Fund.
• The MDBs Committee, which facilitates collaboration, coordination, and the
exchange of information, knowledge, and experience among the MDBs partners.
• The Partnership Forum, which supports civil society engagement and includes
representatives of donor and eligible recipient countries, MDBs, UN and UN
agencies, GEF, UNFCCC, Adaptation Fund, bilateral development agencies,
NGOs, indigenous peoples, private sector entities, and technical experts.
• The Administrative Unit, which supports the work of the CIF, is housed in the
World Bank Group’s Washington, DC, offices.
• A Trustee (the World Bank), which holds in trust, as the legal owner and
administrator, the funds, assets, and receipts that constitute the Trust Fund,
pursuant to the terms entered into with the contributors.
Funding
In September 2008, 13 donor countries pledged over US$6.9 billion to finance the two CIF trust
funds. The total amount pledged by 10 countries to the SCF was US$2.514 billion as of
September 30, 2010 (see Table 4 for pledges and Table 1 for U.S. Budget Authority). The funds
are to be disbursed as grants, concessional loans, loan guarantees, and other risk management
instruments.
Table 4. Total Pledges to the Strategic Climate Fund
(In millions US$, as pledged since September 2008, with exchange rates as of September 30, 2010)
Donor Contribution
Typea Amount
Pledged
Australia
Grant
$48

Canada
Grant
$84

Denmark
Grant
$35

Germany
Loan/Grant
$68

Japan
Grant
$222

Netherlands
Grant
$76

Norway
Grant
$179

Switzerland
Grant
$20

United Kingdom

Capital
$1,273
United Statesb
Grant
$508

Total

$2,514

Source: The CIF website at http://www.climateinvestmentfunds.org/.
a. Donor contribution types include grants, loans, and equity, and describe in broad terms the general
requirements stipulated by the donors on their contributed funds. The U.S. government has historical y
contributed grant financing for reasons that include ease, ODA accounting practices, and flexible capital
reflow provisions.
b. The total U.S. pledge to the CIF remains at $2 billion. Contributions across funds are extrapolated from
current al ocations.
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Program Areas
The programming of the SCF is less advanced than that of the CTF. Each of the three funds
remains in early implementation stages with its trust fund committee, having launched no earlier
than January 2009. As of the November 2010 meeting of the Joint CTF and SCF Trust Fund
Committees, the status of each fund was reported as follows:13
• The Pilot Program for Climate Resilience: The PPCR became operational in
January 2009; $972 million of the SCF pledge has been targeted to the PPCR.
Two regional groupings—the Pacific and the Caribbean—and nine countries,
including Bangladesh, Bolivia, Cambodia, Mozambique, Nepal, Niger,
Tajikistan, Yemen, and Zambia, were invited to participate. The program
provides funding to the countries in two phases: (1) a technical assistance phase,
which includes looking at how countries’ development plans can be made more
climate-resilient and deciding upon the types of investments countries could
make, and (2) an implementation phase, which includes the dispersal of grants of
up to $1.5 million with the option of additional loans to implement programs.
Zambia was the first country to begin preparations for phase one. Zambia’s
process was expected to raise discussion in the PPCR sub-committee regarding
deliverables to guide other countries. Cambodia, Tajikistan, Yemen,
Mozambique, and Bolivia followed in November 2009 in presenting proposals
for development. All PPCR pilot countries convened in November 2010 to
continue building a community of practice, exchange experiences, and document
good practices from the design process of PPCR.
• The Forest Investment Program: With a February 2010 pledge of $67 million
from Japan, the FIP was operational with a total of $558 million targeted to the
program. The next steps were to select five pilot countries and three back-up
countries; to finalize and approve operational guidelines, financing, and
investment criteria; and to design a grant mechanism to support the participation
of indigenous peoples and local communities. In March 2010, the FIP sub-
committee approved pilot programs in Indonesia, Ghana, Laos, Peru, and
Burkina Faso; with Brazil, Democratic Republic of Congo, and Mexico approved
subsequently in June 2010. All eight pilot country governments have confirmed
in writing their interest in being supported under the FIP. Work has been initiated
in each. The Multilateral Development Banks (MDBs) have reached out
informally to the government representatives in the pilot countries and are in the
process of planning jointly with the governments in partnership with country
stakeholder groups and other interested partner institutions. The first meeting of
pilot countries for the FIP took place in November 2010. The objective of the
meeting was to build a community of practice among the FIP pilot countries to
exchange experiences, to document good practices from the design process of
Investment Strategy, and to reach a shared understanding provided by the FIP.

13 See SCP Committee document, “SCF/TFC.6/3, Progress Report on targeted programs under the SCF,” at
http://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/
SCF%203%20Progress%20Report%20on%20targeted%20programs%20nov2010.pdf.
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• The Scaling Up Renewable Energy Program in Low Income Countries: The
SREP become operational in December 2009, surpassing its target of $250
million with a pledge of $50 million from the United States at the Copenhagen
Conference of Parties to the UNFCCC. With a February 2010 pledge of $40
million from Japan, and a June 2010 pledge of $11 million from Denmark, the
fund now has a total of $307 million. The SREP sub-committee held meetings in
early February 2010 to set criteria for selecting an advisory group as well as pilot
countries. In June, Ethiopia, Honduras, Kenya, Maldives, Mali, and Nepal were
selected. All six pilot country governments have confirmed in writing their
interest in being supported under the SREP. The committee aimed to approve
programming procedures, financing, and a measurement framework over the
course of 2010. The first scoping and joint missions are expected to be organized
for early 2011 once the programming and financing modalities have been
approved by the sub-committee. In many cases, the MDBs have already reached
out informally to the government representatives in the pilot countries to begin
preliminary discussions on SREP activities.
Current Issues
Each year, billions of dollars in environmental aid flow from developed country governments—
including the United States—to developing ones.14 While the efficiency and the effectiveness of
these programs are of concern to donor country governments, a full analysis of the purposes,
intents, results, and consequences behind these financial flows has yet to be conducted.15
International relations, comparative politics, and developmental economics can often collide with
global environmental agendas. Critics contend that the existing system has had limited impact in
addressing major environmental concerns—specifically climate change and tropical
deforestation—and has been unsuccessful in delivering global transformational change. A desire
to achieve more immediate impacts has led to a restructuring of the MDBs’ role in environmental
finance and the introduction of many new bilateral and multilateral funding initiatives. The CIF
grew out of these concerns.
The effectiveness of the CIF depends on how the trust funds address their programmatic issues,
build upon their national investment plans, react to recent developments in the financial
landscape, and respond to emerging opportunities. The following section investigates some of the
current challenges facing the CIF and summarizes some of the responses initiated by the funds.

14 The Organisation for Economic Co-operation and Development (OECD) maintains information on Member
countries’ Official Development Assistance. Current data (accessed April 15, 2011) reflect that all OECD DAC
Member countries contributed, on average, a total of $2,283 million per annum over the period 2005-2009 to multi-
sectoral environmental protection assistance (in 2010 US$), and that the United States contributed, on average, $285
million per annum over the same period to multi-sectoral environmental protection assistance (in 2010 US$). See
OECD StatExtracts database at http://stats.oecd.org/Index.aspx?DataSetCode=ODA_DONOR#.
15 This report does not aim to unpack the full range of discussions on environmental and developmental assistance. For
a discussion on international development assistance in general, see CRS Report R40213, Foreign Aid: An Introduction
to U.S. Programs and Policy, by Curt Tarnoff and Marian Leonardo Lawson. An overview and analysis of the history
of environmental financing can be found in a number of source materials including recent book length studies by Inge
Kaul and Pedro Conceição, The New Public Finance: Responding to Global Challenges, New York: Oxford University
Press, 2006; and Robert L. Hicks, Bradley C. Parks, J. Timmons Roberts, and Michael J. Tierney, Greening Aid?:
Understanding the Environmental Impact of Development Assistance, New York: Oxford University Press, 2008.
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Innovations by the CIF
Since their inception, the CIF have attempted to provide innovative approaches to global
environmental issues and have introduced several processes to address the limitations of previous
environmental finance.16 These innovations include, but are not limited to, the following:
• Programmatic Design: While the CIF still aim to scale up existing practices and
fund activities at the project level, they also were created to serve as laboratories
for new financing schemes and vehicles for developing sustainable strategies.
Funding strives to target the potential for large-scale transformation and to attain
global environmental benefits. Stakeholders seek to share knowledge gained and
inspire the use of best practice. As such, multinational or regional investment
plans that support global development goals, energy security, industrial growth,
diversification, and regional integration (e.g., the M.E.N.A. plan) best exemplify
the CIF’s programmatic approach.
• Country-led Process: Beyond a simple project-by-project approach, the purpose
of the CIF is to bolster the efforts of countries’ official adaptation plans and their
actions toward low-carbon, climate-resilient development. The country-led
approach aims to integrate funding into the country-owned development
strategies consistent with the Paris Declaration.17
• Innovative Governance and Stakeholder Engagement: In an effort to attain
transparency and accountability, the governing structure of the CIF is equally
balanced between donor and developing countries. All decisions are taken by
consensus, with no provision for voting. If a consensus is not possible, the
proposal is postponed or withdrawn. Representatives from other international
organizations, the private sector, and civil society are included as observers. All
observer roles are “active,” allowing them to take the floor to make interventions,
propose agenda items, and recommend experts.
Issues in Support of the Multilateral Development Banks (MDBs)
and Multilateral Assistance
The choice of financial mechanism and its administration is an important element to
environmental finance. The differences among multilateral or bilateral assistance, grant or lending
institutions, regional or global organizations, etc., all play a role in the structure of assistance. The
decision to employ the MDBs as trustees for the CIF has both advantages and disadvantages.
Historically, the MDBs have provided financial assistance to developing countries, typically in
the form of loans and grants, for investment projects and organizational capacity.18 Donor country
support for the MDBs—including U.S. support—has assisted efforts to promote institutions,

16 For further discussion regarding the limitations of past mechanisms for global environmental finance, see the section
on institutional challenges in CRS Report R41165, Global Environment Facility (GEF): An Overview, by Richard K.
Lattanzio.
17 The 2005 Paris Declaration, endorsed by over 100 countries, aims to increase harmonization, alignment, and
management of aid for results with a set of actions and indicators that can be monitored. See http://www.oecd.org/
dataoecd/11/41/34428351.pdf.
18 For a fuller discussion on the structure and the role of the MDB system, refer to CRS Report R41170, Multilateral
Development Banks: Overview and Issues for Congress, by Rebecca M. Nelson.
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strengthen financial systems, undertake large infrastructure and social welfare projects, and
develop property rights and rules of law. Through increased global integration, the aim of the
MDBs has been to bolster economic growth, poverty alleviation, and resource allocation
(including greater access to electricity) in developing countries while simultaneously building
new markets for developed countries’ exports and jobs. In 2008, at the urging of some donor
countries,19 a strategy to address climate change was added to the MDBs’ development agenda.
The “Strategic Framework on Development and Climate Change”20 analyzed the risks of climate
change to economic development and served as a basis for integrating mitigation and adaptation
planning into national development plans. Donor countries see several advantages to financing
climate programs through the institutional structure of the MDBs. These advantages include, but
are not limited to, the following:
• Commitment to Private Sector Development: Many donor countries—including
the United States—believe that climate-friendly economic growth can be led by
the private sector through such efforts as improving access to financial markets,
building the capacity of entrepreneurs, and providing training to civilian society.
One aim of the MDBs is to help foster private sector development by leveraging
donor funds into highly effective co-financing arrangements. Historically, the
U.S. Administration has supported these efforts. In a March 25, 2010, hearing
before the House Appropriations Subcommittee on State, Foreign Operations,
and Related Programs, the Treasury Department went on record as stating that
the United States invests in the MDBs because “they help generate new engines
of growth that benefit the U.S. economy and the global economy as a whole.”
• Economies of Scale, Coordination, and Co-Financing: Proponents of the MDBs
argue that multilateral assistance can solve problems of scale and efficiency by
providing specialized expertise while lowering administration and coordination
costs. Similarly, more competitive procurement rules, attractive cost-sharing
opportunities, and the ability to leverage co-financing from other public and
private organizations allow the MDBs to play a catalytic role in mobilizing
financial aid.21 At the March 25, 2010, hearing noted above, the Treasury
Department stated that the MDBs “provide strong, effective and highly leveraged
means to advance global prosperity.... For every dollar the United States
contributes to paid-in capital for the World Bank, six dollars of additional capital
is generated by other donors. And, for every dollar we invest in the World Bank,
$26 worth of aid is delivered.”22
• Responsiveness to Donors: The Treasury Department has similarly stated that the
United States invests in the MDBs because they “promot[e] core American
interests and values.” This arrangement is due primarily to the structure and
organization of the banks. MDBs governance is weighted on the basis of the
cumulative financial contributions and commitments by the donor countries, and
thus, while a single trust fund, like the CIF, may be designed to balance equally

19 Including the United States. See the negotiations at the 2005 G8 Gleneagles Summit at http://www.g7.utoronto.ca/
summit/2005gleneagles/.
20 See http://siteresources.worldbank.org/EXTCC/Resources/407863-1219339233881/DCCSFTechnicalReport.pdf.
21 Sources of additional funds most often include other MDBs and multilateral financial institutions, the recipient
governments, state-owned enterprises, and carbon finance, as well as the private sector.
22 See testimony at http://appropriations.house.gov/images/stories/pdf/sfo/Secretary_Geithner.3.25.10.pdf.
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the roles of developed and developing countries, the MDBs are designed to give
greater weight to the major donors. The United States retains the most influence
on World Bank matters, with a 16.4% voting share and the ability to veto major
policy decisions. It is followed by Japan in second place, Germany in fourth, and
France and the United Kingdom tied for fifth. The only developing or emerging
country with as much voting interest is China, at third, with 4.4%.23 With a
governing structure that requires one representative from the World Bank, as
trustee, and one representative from the group of remaining MDBs, as well as
eight representatives from participating donor countries, the overall governance
structure of the CIF has remained responsive to donor interests.
• Possession of Fiduciary Standards: Both current and past Administrations have
argued that the World Bank has the proper internal safeguards to oversee large
amounts of financing. As reported by the Department of Treasury, “the World
Bank is an attractive trustee [for environmental funds] precisely because of its
strong fiduciary standards and its extensive capacity to uphold them.”24
• Possession of Institutional Expertise, Information, and Credibility Provisions:
Proponents of the MDBs claim that multilateral agencies offer larger and better
trained staffs with greater technical expertise. They state that large infrastructure
investment, particularly in innovative technologies and methods, requires
professionals who are experienced in identifying and facilitating access to
technology, sharing risks associated with commercialization, and improving
institutional capacity. Beyond institutional knowledge, multilaterals also collect,
interpret, and disseminate costly information on a global scale and provide
credibility controls for both recipient and donor governments.
Issues of Concern for Developing Countries and Civil Society
While advantages exist to financing climate programs through the institutional structure of the
MDBs, concerns also persist. A variety of recipient countries, nongovernmental organizations,
and civil society groups25 have highlighted a number of issues, including, but not limited to, the
following:
• Donor Centrism: While efforts have been made to include developing countries
in the governance of the CIF, some commentators still point to the fact that the
initiative was led by Japan, the United States, and the United Kingdom, and that

23 As reported by Reuters, at http://www.reuters.com/article/idUSTRE63O1RQ20100425, after the World Bank
Development Committee spring meetings on April 25, 2010. See World Bank press release at
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/
0,,contentMDK:22556192~pagePK:34370~piPK:34424~theSitePK:4607,00.html.
24 As reported in Climatewire, “Eskom fallout spurs new opposition to World Bank’s role in climate funding,” May 24,
2010.
25 There are many published critiques on the environmental agenda of the MDBs. Of specific relevance for CIF, see, for
example, Celine Tan, “No Additionality, New Conditionality: A Critique of the World Bank’s Proposed Climate
Investment Funds,” TWN, 2008, at http://www.twnside.org.sg/bangkok.briefings.htm; Smita Nakhooda, “Catalyzing
Low-carbon Development?” WRI, 2009, at http://pdf.wri.org/working_papers/
development_clean_technology_fund.pdf; and Heike Mainhardt-Gibbs, et al., “Fuelling Contradictions: The World
Bank’s Energy Lending and Climate Change,” Bretton Woods Project, CRBM & URGEWALD, 2010, at
http://www.brettonwoodsproject.org/art-566198.
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it existed outside international climate change regulatory frameworks and
without the initial participation of developing countries and other stakeholders.
Moreover, they claim that the design of the CIF remains premised on an aid
framework that is based on a donor-donee relationship that runs contrary to the
international climate change principles of developed country obligations and
“common but differentiated responsibilities.”26
• Lack of Transparency: While efforts have been made at transparency and
accountability, some sessions of the CIF committee meetings remain closed to
observers. Similarly, technology investment plans are not publicly disclosed due
to claims about sensitive sovereign information and national priorities. Observers
from GEF and UNFCCC are also excluded from investment plan discussions,
making it difficult to ensure complementarity.27
• Lack of Coordination: Observers point out that the CIF may create a parallel
structure for financing climate change adaptation and mitigation efforts outside
the ongoing multilateral framework for climate change negotiations. They are
concerned that without harmonization between the CIF and the other sources of
environmental finance (e.g., funds managed by the UN, the Global Environment
Facility, and bilateral sources), overlaps, redundancies, competing views, and
lack of synergy may affect climate priorities, funding processes, and qualifying
criteria.
• Potential to Prejudice U.N. Climate Provisions: Some commentators and several
governments have expressed concerns that the establishment of the CIF as trust
funds to the MDBs may prejudice the outcomes of the international negotiations
on climate finance within the framework of the United Nations. Many developing
countries have expressly stated that they do not consider funds contributed to the
CIF as meeting U.N. Annex I obligations. Furthermore, the design of the CIF
includes a “sunset clause” stating that the CIF “will take necessary steps to
conclude its operations once a new [UNFCCC] financial architecture is
effective.” The nature of these steps has yet to be determined.
• Potential for New Conditionalities: Under the CIF, individual loans or grants
under country programs follow the investment lending policies and procedures of
the MDBs, including their fiduciary standards and environmental and social
safeguards. Some observers believe this burdens developing countries with the
World Bank’s traditional criteria for financing, including tight fiscal discipline
and the implementation of economic and other structural and policy reforms.
They fear that the CIF may create onerous obligations on developing countries to
comply with emission reduction targets and other rules from which they have
been previously exempt.
• Lack of Polluter Responsibility: Some commentators claim that the provision of
loans—in addition to grants—as a financial instrument to eligible developing
countries contradicts the internationally agreed principle of “polluter pays” as
stated in the Rio Declaration. Some argue that the repayment of a loan,

26 See UNFCCC, Art. 3.1, at http://unfccc.int/essential_background/convention/background/items/1355.php.
27 It should be noted that the United States, as well as the United Kingdom and France, have expressed a desire for
some advance disclosure of investment plans and for observer participation in these sessions.
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notwithstanding the degree of concessionality, burdens a developing country with
self-paying for a problem (climate change) that was caused by others (i.e.,
developed countries).
• Increased Debt Burden: While the loans under the CIF are provided on a
concessional28 basis, they are co-invested in other projects and programs and will
have to be repaid. Some commentators believe that the CIF’s loans may add to
their debt burden in the long run and affect their ability to generate resources for
growth.
• Potential for Additionality: The UNFCCC provides that developed country
signatories to the Convention “provide new and additional financial resources to
meet the agreed full costs incurred by developing country Parties” in their efforts
at mitigation and adaptation.29 Some observers fear that the design of the CIF
establishes a parallel process for climate financing that does not result in new and
additional resources. They are concerned that significant portions of the aid
budgets of donors may be diverted into the CIF and counted as part of their
annual ODA commitments.
• Commercial Influence: While advantages exist in prioritizing market-based
solutions to dealing with the problems of climate, some groups express concern
that the private sector may be unduly driven by commercial interests at the
expense of social or environmental safeguards.30 Concern also exists that a
dependence on market mechanisms as a source of climate financing may be
inadequate and inconsistent for meeting the financial needs of developing
countries charged with the responsibility of both implementing climate change
commitments and mediating the social, economic, and environmental
dislocations brought on by climate change.
• Energy Policy at the Banks: Many observers claim that the history of the World
Bank’s energy and infrastructure lending undermines its credibility as an
institution committed to combating the impacts of climate change. Civil society
groups have often highlighted the inconsistencies between the Bank’s rhetoric on
climate change and its operational policies and practices. They emphasize that
while the Bank has increased financing for renewable energy and energy
efficiency in recent years, its fossil fuel lending still accounts for 54% of the
energy sector share for fiscal years 2006 to 2008 (compared to 10% for
renewable energy, 15% for energy efficiency, and 21% for large hydropower).
Furthermore, the trend has reportedly increased, as FY2008 has seen the World
Bank and IFC scale up funding for fossil fuels by 102%, compared with only
11% for new renewable energy.31 The controversy is compounded by the Bank’s
inability to reach a consensus on the definition of “clean energy technology,”

28 “Concessional” or “soft” loans are loans extended on terms substantially more generous than market loans. The
concessionality is achieved either through interest rates below those available on the market or by extended grace
periods, or a combination of these.
29 See UNFCCC, Article 4:3, at http://unfccc.int/essential_background/convention/background/items/1362.php.
30 This concern has been levied against the Bank’s brokering of carbon purchases through its Prototype Carbon Fund.
See Bank Information Center, et al., “How the World Bank’s Energy Framework Sells the Climate and Poor People
Short,” 2006, at http://www.bicusa.org/en/Article.2954.aspx.
31 See Bank Information Center report at http://www.bicusa.org/en/Article.11033.aspx.
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retaining provisions for ultra-supercritical coal-fired power generation in its
environmental strategies.32 Recent guidance from the U.S. Administration
regarding the World Bank’s engagement with coal-fired power generation in
developing countries similarly leaves the definition open, stating that projects
“could include more carbon efficient fossil fuel generation” in their portfolio.33
While observers generally agree that funding from the CIF is unlikely to be used
in coal-fired power generation projects, most agree that continued investment by
the World Bank in fossil fuel energy and infrastructure may have several
unintended effects, including, inter alia, (1) counteracting any gains made with
the Bank’s renewable portfolio, (2) directing resources toward large-scale power
generation for industrial use rather than energy access and poverty reduction in
poor urban and rural communities, and (3) drawing the Bank’s professional and
technical staff away from a concentration on energy efficiency and renewable
energy activities to remain involved with fossil fuel generation.34

Author Contact Information

Richard K. Lattanzio

Analyst in Environmental Policy
rlattanzio@crs.loc.gov, 7-1754



32 Ultra-supercritical coal-fired power generation is defined as “new pulverised coal combustion systems ... [that]
operate at increasingly higher temperatures and pressures and therefore achieve higher efficiencies than conventional
PCC units and significant CO2 reductions. Supercritical steam cycle technology has been used for decades and is
becoming the system of choice for new commercial coal-fired plants in many countries.” See World Coal Institute
website at http://www.worldcoal.org/coal-the-environment/coal-use-the-environment/improving-efficiencies/.
33 See U.S. Treasury memorandum at http://www.ustreas.gov/offices/international-affairs/multilateral_banks/
statements/COAL%20GUIDELINES%202009%2012%2014%20FINAL%20%282%29.pdf.
34 For discussion of further debate on this issue, see CRS Report RS22989, The World Bank’s Clean Technology Fund
(CTF), by Martin A. Weiss; as well as the World Bank’s issue brief on “Energy,” available at
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/
0,,contentMDK:21513875~menuPK:34480~pagePK:64257043~piPK:437376~theSitePK:4607,00.html; and, as one
example, Heike Mainhardt-Gibbs, et al., “Fuelling Contradictions: The World Bank’s Energy Lending and Climate
Change,” the Bretton Woods Project, CRBM & URGEWALD, 2010, at http://www.brettonwoodsproject.org/art-
566198.
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