This briefing aims to provide trade and climate policy-makers from Least Developed Countries (LDCs) with an understanding of how to coordinate two forms of concessional finance, public climate finance and Aid for Trade (AfT), to deliver against both their climate and trade goals.

Key Messages

The international climate and trade architecture both have mechanisms for disbursing concessional finance to lower-income countries. Climate finance is intended to support mitigation and adaptation actions. AfT is intended to build supply-side capacity and trade-related infrastructure.

In 2009, developed countries agreed to provide and mobilise $100 billion a year by 2020 for climate action in developing countries. They have fallen short in 2020 and 2021, with lower-income countries particularly struggling to access resources.

In parallel, Aid for Trade has disbursed more than $400 billion since 2006. However, empirical analysis of environmental impacts is weak and climate change is not integrated within conceptual frameworks.

Going forward, both forms of concessional finance need to support LDCs to expand their productive capacity in a low-carbon, climate-resilient way. Improved coordination is needed to better support LDCs achieve a green structural transformation, reducing poverty within the constraints imposed by climate change.

Report by the Overseas Development Institute