This document discusses results-based finance (RBF) and how it can support short-term climate impact. RBF ties finance to the achievement of predefined results rather than to inputs or processes. It has been used in development finance and is inherent in climate mechanisms like the CDM, REDD+, and NAMAs. RBF comes in various forms from upfront payments to payments for emissions reductions or ecosystem services. Lessons from the CDM show that ex-post finance requires pre-financing, enabling measures are key, and recurring payments can help ensure long-term success of interventions. RBF may help link carbon markets and climate finance by supporting short-term emissions reductions while piloting new approaches.

1. Trends of result based finance:
How it can support in achieving
short term climate impact
Regional Workshop on Carbon Finance for Latin America and the
Caribbean
7th September 2015, Santiago de Chile
Carsten Warnecke

2. RBF in a nutshell
RBF is defined as financing modality not a new
mechanism
Term emerged from development finance to
improve aid effectiveness compared to
conventional financing
Finance is dispersed upon achievement of
predefined result
Inherent in existing climate finance mechanisms,
CDM, REDD and discussed in the context of
NAMAs and the GCF
07.09.2015 www.newclimate.org 2

3. Range of RBF variety
RBF variety in climate policy
07.09.2015 www.newclimate.org 3
Upfront payment
Payment on
results –
quantitative/
qualitative
Payment on
results - tCO2e
based
Grant/
concessional
finance
(e.g. ODA)
Payment for
mitigation (e.g.
CER purchase &
retirement)
Advanced market
commitments
(e.g. FIT)
Payment for eco
systems services
(e.g. REDD)
Methodological stringency
High certainty of outputs
Strong verification need
Long term (indirect) impacts
Development benefits
Address multiple barriers
Payment for
mitigation (e.g.
NAMA)
Carbon Market
Mechanisms
(e.g. CDM)
Tradable units/
offsets (tCO2e)

4. RBF – lessons from the CDM
Ex-post finance requires financial resources to pre-finance interventions
Enabling measures are key
Risks transferred to implementing agencies are substantial
Stringent but reliable definition and verification of results is not feasible
in all sectors and for all mitigation opportunities
Objectives that are not linked to payments might not be met
Recurring results-based payments and recurring verification lead to
endurance of interventions and long-term success
07.09.2015 www.newclimate.org 4

5. 79%
3%
1%
1% 15%
CDM
component
operational
status
In regular operation
Regular operation temporarily stopped
Regular operation permanently stopped
Regular operation not started, no GHG
mitigation
No CDM-conformant operation, alternative
GHG mitigation equipment operating
I do not know
CDM Project status
Up to 79% of registered CDM projects are
implemented and in regular operation
Excl. China and India just up to 53% of projects are operational
07.09.2015 www.newclimate.org 5
What is the operational
status of the CDM
component of the GHG
mitigation activity?
Source: „Analysing the status quo of CDM projects” (May 2015):
http://newclimate.org/2015/05/16/analysing-the-status-quo-of-cdm-projects/

6. Project continuation
CER revenues are sufficient for
fewer than 3% of fully
implemented projects
High rate of irreversible
investments
Expectations for alternative
support
07.09.2015 www.newclimate.org 6
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
CER revenues still sufficient
CDM still required to overcome non-financial barriers
A stop of the GHG mitigation equipment does not result in cost savings
The investment (decision) is irreversible.
Continuation is required due to binding legal contracts.
Continuation is required by national laws or regulations.
Project activity / emission source will be covered under an ETS
Expectations exist to receive alt. support or convert to alt. project scheme
Other reason.
Responses: 543 Error margin: 10%
Despite the recent drop in CER prices, what
are the reasons to continue with the CDM
GHG mitigation activity?
Source: „Analysing the status quo of CDM projects” (May 2015):
http://newclimate.org/2015/05/16/analysing-the-status-quo-of-cdm-projects/

7. Price requirements
For 53% CER prices below €5 are sufficient to continue VI activities
Low price requirements might include acceptance of sunk costs
07.09.2015 www.newclimate.org 7
What CER price level is required by the
project to continue verification &
issuance activities?
Source: „Analysing the status quo of CDM projects” (May 2015):
http://newclimate.org/2015/05/16/analysing-the-status-quo-of-cdm-projects/

8. RBF – a linking element?
Benefits for carbon markets:
Short term support through CER purchase and cancelation
Opportunity to test new and innovative mechanism approaches in a
safe environment
Piloting of tailored approaches for sectors
Benefits for climate finance:
Quantification of short-term interventions with proven approaches
Increased recognition of mitigation impacts achieved through climate
finance
Increased effectiveness and persistence of interventions through MRV
framework and recurring processes
07.09.2015 www.newclimate.org 8

9. RBF benefits in climate policy
RBF creates strong incentives to deliver on intended
programme objectives
RBF approaches can address further objectives
beyond greenhouse gas mitigation
RBF approaches attract funders driven by mitigation
certainty
RBF can foster enduring interventions
RBF frameworks are flexible to be locally
appropriate
07.09.2015 www.newclimate.org 9

10. Further reading
“Connecting the dots - Results-
based financing in climate policy”
Overview of results-based finance options
and opportunities for linking market and
non-market approaches
07.09.2015 www.newclimate.org 10
Download report at newclimate.org
Supported by