Norwegian Government to establish new climate fund

Source: press release, 7 July 2021

Norway’s Minister of Climate and Environment, Sveinung Rotevatn (photo: Ministry of Climate and Environment)
Norway’s Minister of Climate and Environment, Sveinung Rotevatn (photo: Ministry of Climate and Environment)

The Norwegian Government has decided to allocate NOK 10 billion over a period of 5 years for a new fund that will invest in renewable energy in developing countries with the aim of reducing greenhouse gas emissions.

“The climate investment fund is an essential part of Norway’s contribution to achieve the goals set out in the Paris Agreement and the SDGs,” says Prime Minister Erna Solberg.

There is an enormous and growing need for climate finance worldwide. One important outcome of the Paris Agreement was a pledge from developed countries to provide USD 100 billion in climate finance annually to developing countries by 2020. It is therefore vital global financial support for climate action is scaled up.

“The establishment of the new climate investment fund is a milestone in Norwegian development aid. It is part of the solution to some of the major challenges we are facing and that are having a particularly severe impact on the world’s poor. We know that even if all countries spend 1 % of their GNI on aid, it will still not be enough to solve global challenges such as climate change,” says Minister of International Development Dag-Inge Ulstein.

“The new fund is a win-win initiative that will support climate action and at the same time increase access to renewable energy in countries that are in need of sustainable energy solutions. The fund is the beginning of a new partnership between public and private capital that can yield returns on investments, reduce greenhouse gas emissions and increase climate finance,” Ulstein adds.

NOK 2 billion will be provided to the climate investment fund annually over a period of 5 years. The funding will come from the national budget and from Norfund, the Norwegian investment fund for developing countries. Norfund will be given responsibility for administering the fund.

“To succeed in reducing greenhouse gas emissions, particularly in Asia, we need to mobilise more commercial capital. I urge investors to work with the climate investment fund when it is up and running,” Solberg says.

Some 30% of global greenhouse gas emissions come from coal-fired power plants, and a net increase is expected in coal power generation in developing countries over the next few years.

“Providing more climate finance to developing countries is important for reaching the global climate targets and for ensuring that all countries can benefit from the transition to a low-emission society. This fund will provide Norway with a new tool that it can use to help bring about reductions in greenhouse gas emissions in developing countries,” says Minister of Climate and Environment Sveinung Rotevatn.

“The new fund is intended to mobilise investments in renewable energy far more quickly than would otherwise have been the case and thus contribute to the efforts to phase out coal. In the long term, this will also benefit those who are most vulnerable and those who have done least to create the climate-related challenges we are now facing,” Ulstein says.

The new climate fund:

  • The fund will increase investments in renewable energy, particularly in countries with high emissions from coal-fired power plants. The investments made will be in line with national climate and energy plans in the countries in which the fund operates. Over time, the fund could mobilise around NOK 100 billion in investments in renewable energy.
  • NOK 10 billion in funding will be provided over a 5-year period, starting in 2022. NOK 1 billion from Norfund and NOK 1 billion from the national budget will be allocated to the fund annually during this period.
  • Norfund is to be given an additional mandate to administer the fund. The preparatory work will begin now. A mandate, articles of association and an investment strategy for the fund will be drawn up in cooperation with the relevant ministries.