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Congressional Research Service
Inforrning the legislative debate since 1914


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October 25, 2017


Paris Agreement: U.S. Climate Finance Commitments


International Environmental Assistance
Many  governments hold that environmental degradation
and climate change pose international and trans-boundary
risks to human populations, economies, and ecosystems. To
confront these challenges, governments have negotiated
various international agreements to protect the
environment, reduce pollution, conserve natural resources,
and promote sustainable growth. While some observers call
upon industrialized countries to take the lead in addressing
these issues, many recognize that efforts are unlikely to be
sufficient without similar measures being taken in lower-
income countries.

However, lower-income  countries, which face poverty and
economic growth issues, may not have the financial
resources, technological know-how, and/or institutional
capacity to deploy environmentally protective measures on
their own. Therefore, international financial assistance, or
foreign aid, has been a principal method for higher-income
governments to support actions on global environmental
problems in lower-income countries. Often, this assistance
can serve as a cost-effective strategy for donor countries to
provide greater market access for their environmental goods
and services abroad and increased environmental benefits at
home.

The United States and other industrialized countries have
committed to providing financial assistance for global
environmental initiatives through a variety of multilateral
agreements, including, among others, the Montreal Protocol
(1987), the United Nations Framework Convention on
Climate Change (UNFCCC,   1992), and the U.N.
Convention to Combat Desertification (1994). International
financial assistance takes many forms, from fiscal transfers
to market transactions. It may include grants, loans, loan
guarantees, export credits, insurance products, and private
sector investment. It may be structured as official bilateral
development assistance or as contributions to multilateral
development banks and other international financial
institutions.

Ultimately, U.S. government assistance to developing
countries for environmental initiatives is determined by
Congress. Congressional committees of jurisdiction include
the House Committees on Foreign Affairs, Financial
Services, and Appropriations and the Senate Committees on
Foreign Relations and Appropriations.

Finance Under the UNFCCC
The UNFCCC is   the principal international treaty to
acknowledge  and address human-driven climate change.
The United States ratified the treaty in 1992 (U.S. Treaty
Number:  102-38).


Among  the obligations outlined in Article 4 of the
Convention, higher-income Parties (i.e., those listed in
Annex  II of the Convention, which were members of the
Organization for Economic Cooperation and Development
in 1992) sought to provide unspecified amounts of new
and additional financial resources to meet the agreed full
costs incurred by developing country Parties in complying
with their obligations under the Convention. Further, the
implementation of these commitments shall take into
account the need for adequacy and predictability in the flow
of funds and the importance of appropriate burden sharing
among  the developed country Parties.

Over the past several decades, the United States has
delivered financial and technical assistance for climate
change activities in the developing world through a variety
of bilateral and multilateral programs. U.S.-sponsored
bilateral assistance has come through programs at the U.S.
Agency  for International Development, the U.S. State
Department, the Millennium Challenge Corporation, the
Export-Import Bank, and the Overseas Private Investment
Corporation, among others.

U.S.-sponsored multilateral assistance has come through
contributions by the U.S. Departments of State and the
Treasury to environmental funds at various international
financial institutions and organizations such as the Global
Environment Facility (GEF), the Green Climate Fund
(GCF), the U.N. Development Program, the U.N.
Environment Program, the UNFCCC's   Special Climate
Change  Fund and Least Developed Country Fund, and the
World Bank's Climate Investment Funds and Forest Carbon
Partnership Facility, among others. Each channel has its
own  mission and particular capacities.

Global Environment Facility
To facilitate the provision of climate finance under the
UNFCCC,   the Convention establishes a financial
mechanism  to provide funds to developing country Parties.
Article 11 of the Convention states that the operation of the
financial mechanism can be entrusted to one or more
existing international entities.

The GEF  was established in 1991 as an independent
international financial institution to provide grants, promote
cooperation, and foster actions in developing countries to
protect the global environment. The GEF subsequently
became  an official operating entity of the financial
mechanism  of several international environmental
agreements, including the UNFCCC. The relationship
between the UNFCCC   and the GEF is outlined in a
memorandum   of understanding contained in UNFCCC
Conference of Parties (COP) decisions 12/CP.2 and
12/CP.3.


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