Financing climate adpatation and mitigation in rural areas of developing countries

Agency for International Development (USAID), in cooperation with the U.S. Department of Agriculture, has commissioned this study to explore opportunities for expanding private sector financing for global climate change adaptation and mitigation projects in rural areas of developing countries. Given this scope, climate change mitigation (greenhouse gas emissions reduction) and adaptation (reducing risk posed by the physical impacts of climate change) projects considered for financing would be in the forestry or agriculture sectors; mitigation projects would also include small-scale renewable energy and energy efficiency efforts at the village level. In order to determine how USAID assistance may help overcome barriers to financing these types of projects, this report addresses the following questions: (1) what types of financing mechanisms can be used to fund projects with climate benefits?; (2) what are the barriers and opportunities associated with using these mechanisms?; (3) which types of climate projects are suitable candidates for which types of financing?; and (4) how can USAID help overcome financing barriers and promote greater investment in climate projects in rural areas of developing countries? Recognizing that it may also be possible to build upon or complement the work of other International Financial Institutions (IFIs), a summary of existing activities is included as Appendix I. Given the multitude of foreign assistance projects and the evolving nature of this work, the Appendix is by no means comprehensive. However, it may be useful as a reference tool in program planning. (Author abstract, modified)