Enabling co-ordinated climate action through the Climate Envelope

Challenge

In 2008, the Danish government established the Climate Envelope to assist developing countries in meeting the challenge of climate change. The Climate Envelope responds to the challenge of channelling dedicated climate funding in support of both mitigation and adaptation activities as an integrated part of Danish development assistance while ensuring co‑ordination across the government.

Approach

The Climate Envelope is a budget line in the Danish official development assistance (ODA) budget, reflected in the Finance Act. The Climate Envelope plays a central role in Danish climate funding.

Only basic priorities for the Climate Envelope were adopted in 2008-9. However, an evaluation of Denmark’s climate funding to developing countries undertaken in 2015 led to more detailed Guiding Principles – including a theory of change and a monitoring framework – being adopted in 2016.

In 2012, the Climate Envelope was split into two frames. The Poverty Frame encompasses climate change finance for low-income countries and is initiated by the Ministry of Foreign Affairs (MFA). The Global Frame for emerging economies is initiated by the Ministry of Climate, Energy and Utilities (MCEU). The MCEU focuses on mitigation activities, whereas the MFA mainly covers adaptation activities. Each ministry proposes and prepares activities for their frame of the Climate Envelope.

The MFA and MCEU co-ordinate activities and meet regularly to discuss progress in implementing current interventions and the programming of future activities. Informal interactions between the two ministries are almost daily in relation to specific activities. Even though the MFA is financially responsible for all ODA, both the MFA and MCEU need to agree on the composition of the whole Climate Envelope for it to be approved.

Results

• The Climate Envelope has protected climate funding even when climate action was not an explicit policy priority. For example, following a change of government and priorities in 2015, climate change was no longer included as a strategic focus area in Denmark’s “The World 2030” strategy. However, the Climate Envelope continued to be funded, albeit at a reduced level.

• A systematic mobilisation of Danish domestic expertise due to the direct involvement of the MCEU in using the Climate Envelope has allowed mitigation activities targeting emerging countries to have a more robust approach compared to other initiatives. For example, funding from the Climate Envelope has enabled the Danish Energy Agency to build trusted relationships with energy authorities in several emerging economies, providing technical advice and building local capacity.

• As a funding mechanism, the Climate Envelope allows the government to take deliberate decisions on its composition. For example, in 2016 and 2017, it was used to balance out Danish support for mitigation and adaptation by increasing funding for adaptation.