INTERNATIONAL CLIMATE FINANCE: ESTIMATION IN THE CASE OF THE REPUBLIC OF NORTH MACEDONIA

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INTERNATIONAL CLIMATE FINANCE: ESTIMATION IN THE CASE OF
THE REPUBLIC OF NORTH MACEDONIA
Aleksandar NAUMOSKI
Ss. Cyril and Methodius University in Skopje, Faculty of Economics, Blvd. Goce
Delcev 9V 1000 Skopje, Republic of North Macedonia
Correspondence: aleksandar.naumoski@eccf.ukim.edu.mk
ABSTRACT
International climate finance is funds provided to support developing
countries to respond to the challenges and opportunities of climate change aiming
to reduce greenhouse gas emissions and/or adapt to the impacts of climate change.
In this paper, we estimate the received international climate financial support in the
Republic of North Macedonia. Data for the analysis are collected using survey
approach on a project-based level for the 2018-2020 period. We applied the OECD
DAC Rio climate markers methodology for weighing climate relevance of project
budget and used two-year averages to smooth out annual fluctuations in data. Our
findings show that, in the analysed period, a total of 61 projects have been
implemented or are in some stage of implementation, which are related to climate
activities for which international financial support of USD 34.4 million is obtained.
The pandemic of COVID-19 has a negative impact on both, the number of projects
which fell from 38 in 2018/2019 to 23 in 2019/2020, and to the international
climate financial support received, which declined from USD 23.2 million to USD
11.2 million.
KEYWORDS: international climate finance, UNFCCC, Enhanced Nationally
Determined Contributions (ENDCs), North Macedonia
JEL CLASSIFICATION: H72, Q51, Q54
INTRODUCTION
Providing funding for climate activities on a consistent basis is essential. In this
regard, international support for financing climate activities is crucial for
developing countries. Undertaking climate action is equally necessary in developing
countries as well as in developed industrialized countries. Reducing Greenhouse Gas

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emissions (GHGs) in any country benefits the whole world because GHGs do not
recognize country borders. Thus, reducing emissions in developing countries is also
to the benefit of developed countries. The lack of own resources of developing
countries discourages and limits them in undertaking climate activities at an
appropriate level or in general. The United Nations Framework Convention on
Climate Change (UNFCCC or Convention hereafter) clearly recognizes the
weaknesses of developing countries as well as the enormous benefits of the inflow
of foreign resources, primarily financial, in addition to technical, technological, and
capacity building, from developed countries to developing countries to support the
execution of their nationally determined contributions (NDCs). The Convention
established a strong financial mechanism, presented in Figure 1 below, to stimulate
and direct finances from developed to developing countries to support their
activities to mitigate and adapt to climate change, in addition to bilateral support.
As a non-Annex I country to the Convention, the Republic of North Macedonia is a
recipient of international support and is therefore required to report the amount of
support received in the subsequent two-year period. In the last three-year period,
the bilateral support from the European Union denotes the highest contribution to
financing climate activities. In particular, the Instrument for Pre-Accession
Assistance (IPA) has enabled many municipalities, NGOs, and ministries to
implement projects, especially in the field of energy efficiency, and thus contribute
to the global fight to reduce greenhouse gas emissions and mitigate the adverse
effects of climate change. In fact, much of the support that has been received has
been used to finance projects predominantly to mitigate the effects of climate
change. One of the Convention funds, the Global Environment Facility (GEF), is the
second largest provider of climate financial support in North Macedonia. Large
amounts of funds have also been received from the Food and Agriculture
Organization of the United Nations (FAO), generally aimed at supporting activities
to mitigate the adverse effects of climate change. Nevertheless, it must be
emphasized that the amount of support received in the developing countries is far
from sufficient to meet the needs of undertaking more serious mitigation and
adaptation climate activities required towards green transition, which is a
commitment to greater engagement in the future.

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Climate finance in the Paris Agreement
Article 9 of the Paris Agreement stipulates that developed country Parties shall
provide financial resources to assist developing country Parties with respect to both
mitigation and adaptation in continuation of their existing obligations under the
Convention. Other Parties are encouraged to provide or continue to provide such
support voluntarily (United Nations, 2015). Furthermore, as part of a global effort,
developed country Parties should continue to take the lead in mobilizing climate
finance from a wide variety of sources, instruments and channels, noting the
significant role of public funds, through a variety of actions, including supporting
country-driven strategies, and considering the needs and priorities of developing
country Parties. Such mobilization of climate finance should represent a progression
beyond previous efforts. In addition, Article 9 states that the provision of scaled-up
financial resources should aim to achieve a balance between adaptation and
mitigation, taking into consideration country-driven strategies, and the priorities
and needs of developing country Parties, especially those that are particularly
vulnerable to the adverse effects of climate change and have significant capacity
constraints, such as the least developed countries and small island developing
States, bearing in mind the need for public and grant-based resources for
adaptation.
Regarding ex-ante communication of information, developed country Parties
shall biennially communicate indicative quantitative and qualitative information
related to paragraphs 1 and 3 of Article 9, as applicable, including, as available,
projected levels of public financial resources to be provided to developing country
Parties (United Nations, 2015). Other Parties providing resources are encouraged
to communicate biennially such information on a voluntary basis. The global
stocktake referred to in Article 14 of the Agreement shall consider the relevant
information provided by developed country Parties and/or Agreement bodies on
efforts related to climate finance. Regarding the issue of transparency of support,
developed country Parties shall provide transparent and consistent information on
support for developing country Parties provided and mobilized through public
interventions biennially. Other Parties are encouraged to do so.
The Financial Mechanism of the Convention, including its operating entities,
and the Standing Committee on Finance, shall serve as the financial mechanism of

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this Agreement. In addition, Article 9 stipulates that the institutions serving the
Agreement, including the operating entities, shall aim to ensure efficient access to
financial resources by means of simplified approval procedures and enhanced
readiness support for developing country Parties, in particular for the least
developed countries and small island developing States, in the context of their
national climate strategies and plans.
Underdeveloped and developing countries face several economic, political,
and existential problems. Undertaking climate activities in these countries facing a
shortage of climate finance is supported by developed industrialized countries. In
line with the “common but differentiated responsibilities and respective
capabilities” principle (Article 4, UNFCCC), developing countries have articulated
their financial and capacity-building needs in their NDCs and made their
contributions conditional on receipt of international support. At the 15th
Conference of Parties (COP15) of the UNFCCC in Copenhagen in 2009, developed
countries committed to a collective goal of mobilizing USD 100 billion per year by
2020 to assist and address the needs for climate action in developing countries, in
context of meaningful mitigation actions and transparency in implementation. The
goal was formalized at COP16 in Cancun (UNFCCC, 2010) and was reiterated for
2020 and extended to 2025 at COP21 in Paris (UNFCCC, 2015).
At COP 21, it was also decided that developed countries intend to continue
their existing collective mobilization goal through 2025 in context of meaningful
mitigation actions and transparency on implementation, and that prior to 2025 the
Conference of the Parties serving as the meeting of the Parties (CMA) to the Paris
Agreement shall set a new collective quantified goal from a floor of USD 100 billion
per year, considering the needs and priorities of developing countries.
Furthermore, the COP resolved to enhance the provision of urgent and
adequate finance, technology, and capacity-building support by developed country
Parties in order to enhance the level of ambition of pre-2020 action by Parties, and
in this regard strongly urges developed country Parties to scale up their level of
financial support, with a concrete roadmap to achieve the goal of jointly providing
USD 100 billion annually by 2020 for mitigation and adaptation while significantly
increasing adaptation finance from current levels and to further provide
appropriate technology and capacity-building support. Parties also decided to

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conduct a facilitative dialogue in conjunction with the twenty-second session of the
Conference of the Parties to assess the progress in implementing decision 1/CP.19,
paragraphs 3 and 4, and identify relevant opportunities to enhance the provision of
financial resources, including for technology development and transfer and
capacity-building support, with a view to identifying ways to enhance the ambition
of mitigation efforts by all Parties, including identifying relevant opportunities to
enhance the provision and mobilization of support and enabling environments
(UNFCCC, 2014).
Figure 1. Global climate finance architecture
Source: Watson et al. (2022)
The fight against climate change is high on the agenda of the Government of
the Republic of North Macedonia, which is strictly committed to the green transition
and the achievement of carbon neutrality. The preparation of the new law on climate
action is in the final stage, which will thoroughly pave the way, but also the
commitment and obligations of all stakeholders from the public and private sector
for the implementation of climate actions. In 2021, the Government submitted its

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Enhanced Nationally Determined Contributions (ENDCs), providing a clear
roadmap to reduce greenhouse gas emissions by 51% by 2030. Their effective
implementation is provided through 63 mitigation policies and measures (PAMs)
(MASA, 2020). The estimated amount of funds needed for their execution is EUR
25.03 billion, where the funding structure is planned to be by Government only
(4%), other source of financing only (no government) (43%), and mixed financing
(government + other - private sector, donors, consumer) (54%) (McClellan, 2021).
The Republic of North Macedonia is a country that faces many development
challenges and a great lack of its own resources. From the planned financial
structure, it is clear that the implementation of ENDCs will mostly depend on the
inflow of international climate finance.
INTERNATIONAL CLIMATE FINANCE GLOBALLY AND THE IMPACT OF COVID-
19 PANDEMIC
Climate Policy Initiative’s Global Landscape of Climate Finance provides the
most comprehensive overview of global climate-related primary investments. In
their annual reports, they provide two-year data, but use biannual averages to
smooth out the annual fluctuations in data. Global climate finance in 2019/2020
reached a record USD 632 bn, which is an increase of 75% compared to 2011/2012,
but only 10% compared to 2017/2018. In previous years, the average growth was
25% per year, while this slowdown in growth is due to impact of the global
pandemic of COVID-19's virus on climate finance (Naumoski and Angelova, 2022).
To meet the climate objectives to limit the global temperature rise to well below 2°
C and pursuing efforts to limit it to 1.5° C by 2030, annual climate finance must
increase by 588% to USD 4.35 trillion, and 1,078% to USD 7.45 trillion (mean
scenario) by 2050. Domestic climate finance flows reached USD 479 bn, and
international climate finance amounts to USD 153 bn with an increase of USD 13
billion from 2017/2018, primarily driven by increased public investments from
multilateral and national DFIs (CPI, 2021).
The COVID-19 pandemic has drastically altered the context for international
climate finance. It has resulted in the most damaging humanitarian and economic
crisis since the Second World War and its impacts have been particularly severe on
emerging markets and developing economies (EMDEs). They have suffered large

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losses of revenue with knock-on effects on their fiscal and debt positions (IEGCF,
2020). Global COVID-19 pandemic negatively affected the growth of the global
climate finance in 2020 and lowered the level of public climate finance in many
developing countries. They were impacted negatively since the implementation of
their national NDC mostly rely on international support. International climate
finance has decreased during the pandemic since many developed countries cut
these flows. For example, in July 2020 the United Kingdom announced a total cut of
£2.9 billion in its planned ODA budget for 2020 (FCO, 2020). This caused the
proportion of ODA to projects with a significant focus on climate adaptation or
mitigation to fall from 25% in 2019 to 17% in 2020, while ODA to projects with
climate as a principal objective fell from 18% to 14% (DI, 2021). Most of the funding
of domestic climate finance in developing countries took the form of loans, and they
have reallocated or decreased their domestic climate flows because of the high costs
of responding to the pandemic (Alayza and Caldwell, 2021). As a result, climate-
related projects have been delayed.
Figure 2. Domestic and international climate finance flows by region of
destination (USD bn, 2019/2020 annual average)
Source: adapted from CPI, 2021
In 2020, International Development Finance Club (IDFC) institutions
committed USD 185 billion in green finance (of which USD 178.5 billion relate to
climate finance), representing a 6% decrease from 2019, primarily due to the
unprecedented challenge posed by the COVID-19 pandemic and the need to
Eastern Europe & Central Asia
$32 bn
$17 bn
$15 bn
East Asia and Pacific
$ 292 bn
$270 bn
$22 bn
Other Oceania
$9 bn
$6 bn
$3 bn
South Asia
$30 bn
$11 bn
$19 bn
Western Europe
$105 bn
$74 bn
$31 bn
Middle East & North Africa
$16 bn
$7 bn
$9 bn
Sub-Saharan Africa
$19 bn
$2 bn
$18 bn
Latin America & the Caribbean
$35 bn
$16 bn
$19 bn
USA & Canada
$83 bn
Domestic $76 bn
International $6 bn
Transregional
$10 bn
$10 bn

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reallocate public resources to emergency response and economic recovery. While
the COVID-19 pandemic may have negatively impacted green finance flows in 2020,
in 2021 IDFC members have made strong pledges to climate action and green
finance (IDFC, 2021).
At the request of developed countries, the OECD has, since 2015, produced
analyses of progress towards this goal. The most recent historical OECD figures
indicate that climate finance provided and mobilized by developed countries
reached USD 79.6 billion in 2019, up by only 2% from 2018 (OECD, 2021). OECD has
developed two forward-looking scenarios for climate finance provided and
mobilized by developed countries to developing countries in 2021-2025 where
significant growth is forecasted between USD 83 billion – USD 117 billion annually
(OECD, 2021).
DATA AND METHODOLOGY FOR ESTIMATING INTERNATIONAL CLIMATE
FINANCE IN NORTH MACEDONIA
Definition and scope of climate finance
Finance for climate change related activities, or climate finance, is a diverse
concept. It is in some instances discussed separately, or often integrated with
related and overlapping concepts of green finance, sustainable finance, or low-
carbon finance. Climate finance refers to local, national, or transnational financing -
drawn from public, private, and alternative sources of financing - that seeks to
support mitigation and adaptation actions that will address climate change.
While there is no single definition of climate finance, the closest one can get is
provided by the United Nations Framework Convention on Climate
Change (UNFCCC) Standing Committee on Finance, which defines it as: “finance that
aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at
reducing vulnerability of, and maintaining and increasing the resilience of, human
and ecological systems to negative climate change impacts.” (Climate Change
Secretariat, 2014, p. 2). This definition represents finance for climate change in its
broadest form as it relates to the flow of funds to all activities, programmes or
projects that support climate change related projects, whether mitigation or
adaptation, anywhere in the world.

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Climate finance is needed for mitigation, because large-scale investments are
required to significantly reduce emissions. Climate finance is equally important for
adaptation, as significant financial resources are required to adapt to the adverse
effects and reduce the impacts of a changing climate.
Climate change mitigation activity: An activity should be considered as climate
change mitigation related if it contributes to the objective of stabilization of GHG
concentrations in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system, by promoting efforts to reduce
or limit GHG emissions or to enhance GHG sequestration (OECD, 2011)
Climate change adaptation activity: An activity should be considered as
adaptation related if it intends to reduce the vulnerability of human or natural
systems to the impacts of climate change and climate-related risks, by maintaining
or increasing adaptive capacity and resilience. This encompasses a range of
activities from information and knowledge generation, to capacity development,
planning and the implementation of climate change adaptation actions (OECD,
2011).
International climate finance is funds provided to support developing
countries to respond to the challenges and opportunities of climate change
aiming to reduce greenhouse gas emissions and/or adapt to the impacts of
climate change. These finances cover all foreign inflows provided by developing
countries bilaterally, through multilateral development financial institutions
(MDFIs), or through the multilateral climate funds of the UNFCCC financial
mechanism.
Data
Given that there is no single centralized system for automatic data collection
of received support (list of projects, purpose, the amount of support, source, i.e.,
provider), the biggest challenge is the approach to obtain relevant, reliable, and
comprehensive data, so that accurate assessment of the international financial
support received can be made. The approach adopted here to collect the data on
international financial support received was through a survey that was sent to all
potential support users (government institutions, line ministries, municipalities,
NGOs, etc.). As usual, some of the respondents did not respond. Consequently, much

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of the data was collected from research on the websites of beneficiaries of the
international financial support, and, especially, from the websites of funders
(donors and lenders). The support received was aimed on project financing, so
support for climate activities was assessed at project-based level. All amounts are
expressed in USA dollars.
In our survey, entities were required to provide more detailed general
information on projects (name of the project, purpose of the project, the description
of the project, implementing organization, donor or creditor, project start and end
date), financial data related to the project (amount of the total budget, separate
amounts spent in 2018, 2019 and 2020, total international funder contribution), the
climate purpose of the project (mitigation, adaptation, capacity building, technical
support, technology support, general). Not all respondents provided complete data
on the amount of funds spent by years, so the assessment was conducted as a
combination of committed/received funds, according to the data provided. Greater
problem in the assessment was that there are projects that have started before 2018
and have not yet been completed, but also projects that have started in 2018 or 2019
and would continue after 2020.
All pieces of information provided in this estimation are related to active and
ongoing projects, mostly by the amounts received and spent in this three-year
period. When there is no such data, the committed amount was taken. North
Macedonia is a beneficiary of significant amounts of funds from the EU Instrument
for Pre-Accession Assistance, especially in the field of cross-border cooperation. For
these EU IPA funded projects, which relate to funding two or more countries, we
managed to extract and allocate only the amount committed/spent in North
Macedonia for each project. We excluded from the analysis all those projects where
only the committed amount was reported, but without any implementation in this
two-year period. Likewise, projects where there is only a contract with the funder
(donor or lender), with a commitment to the amount, but for which funds have not
yet been received in the analysed period, have been excluded from the analysis.
OECD DAC Rio markers methodology for weighing climate relevance
The second step towards accurate estimation of the international climate
financial inflows into North Macedonia was to determine what part of the spent

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project budget expenditures is related to climate change. This means that the entire
project budget cannot be anticipated ex-ante as climate-related. Some projects are
fully climatical, but in other projects part of the budgets may be spent on non-
climatic purposes or only part of the project budget may be related to climate
activities. Closer specification of climate relevance and weighting of amounts by
climate relevance was performed by applying the OECD DAC Rio Markers
Methodology (OECD, 2011).
The OECD Development Assistance Committee (DAC) collects statistics on aid
and other
resource flows to developing countries from bilateral and multilateral
donor agencies
every year. The data are publicly available in the Creditor Reporting
System (CRS) database. Since 1998, the DAC has monitored aid targeting the
objectives of the Rio Conventions through the CRS using the so-called “Rio markers”.
The Rio marker on climate change
mitigation was established by the DAC in close
collaboration with the Secretariat of the
United Nations Framework Convention
on Climate Change (UNFCCC). It tracks aid flows
that support the implementation
of the Convention. In December 2009, the DAC approved a new marker to also track
aid in support of climate change adaptation. This complements the climate change
mitigation marker, and thus
allows the presentation of a more complete picture
of climate-change-related aid.
These climate markers indicate donors’ policy objectives in relation to each aid
activity. A principal objective (mitigation or adaptation) score is given when
promoting the objectives of the UNFCCC is stated in the activity documentation to
be one of the principal reasons for undertaking the activity. In other words, the
activity would not have been funded but for that objective. Activities marked
“significant” have other prime objectives, but have been formulated or adjusted to
help meet climate concerns.
The markers allow an approximate quantification of aid flows that target
climate
objectives. In marker data presentations, the figures for principal and
significant objectives should be shown separately, and the sum referred to as the
“estimate” or “upper bound” of climate-change-related aid.
Data collection on the climate markers is based on a scoring system with three
values:
▪ principal objective (marker 2),

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▪ significant objective (marker 1),
▪ not targeted to the policy objective (marker 0).
An activity can be marked as “principal” when the objective (climate change
mitigation, climate change adaptation, biodiversity, combating desertification) is
explicitly stated as fundamental in the design of, or the motivation for, the activity.
Promoting the objective will thus be stated in the activity documentation to be one
of the principal reasons for undertaking the activity. In other words, the activity
would not have been funded (or designed that way) but for that objective.
An activity can be marked as “significant” when the objective (climate change
mitigation, climate change adaptation, biodiversity, combating desertification) is
explicitly stated but is not the fundamental driver or motivation for undertaking and
designing the activity. The activity has other prime objectives but has been
formulated or adjusted to help meet the relevant environmental concerns.
The score “not targeted” (“0”) means that the activity was examined but found
not to target the objective in any significant way. For activities that have not been
assessed with the Rio markers in mind, the “0” value should not be used, but rather
the marker field should be left empty. Thus, there is no confusion between activities
that do not target the objective (score = “0”), and activities for which the answer is
not known (score = “null”). This important distinction has implications for statistical
presentations of Rio marker data.
Figure 3. The scoring system of OECD DAC Rio Climate Markers
Source: OECD (2011), p.7

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Markers identify activities contributing to meeting the objectives of the
corresponding Rio Convention(s). Activities are thus to be marked according to their
stated objectives and purpose and not primarily in relation to their relevance or
outcomes or possible positive side-effects, i.e., the methodology is purpose-based.
Weighting the climate relevance. If an activity is marked as principal for
mitigation or adaptation, 100% of the support is considered and reported as climate
finance. If an aid activity is marked as significant for mitigation or adaptation, then
only 40% of the support is considered and reported as climate finance. To avoid
double counting, any activity can only count as 100%, 40% or 0%. There is no
separate category to mark projects, which are at the same time relevant to both
mitigation and adaptation as “cross-cutting.” If an activity has dual objectives and is
marked for both mitigation and adaptation, in that case the estimated amount of
climate finance is divided in half between mitigation and adaptation.
Despite the general approach of the Rio Markers, in practice there is arbitrary
determination of weights. Thus, several methodological differences in the
approaches used by EU Member States to produce their climate finance figures
became obvious during the analysis of MMR data. Different coefficients are used for
Rio Markers (counting of 100%, 20%, 40% or 50%) (European Commission, 2016).
In our analysis, we implement the original approach of the methodology.
ANALYSIS OF INTERNATIONAL CLIMATE FINANCE FLOWS IN NORTH
MACEDONIA BETWEEN 2018-2020
The analysis of the collected data for the received international financial
support for financing the climate activities in North Macedonia was performed on
two-year averages to smooth out annual fluctuations in data. Our analysis covers the
period 2018 - 2020 for which data are collected on climate change projects that have
been fully implemented or implementation has begun. We have registered a total of
61 projects that have been implemented or are in some stage of implementation,
which are related to climate activities, and are funded by international sources for
the entire three-year analysed period. In 2018/2019, we registered a total of 38
climate-related projects that are funded with international support, while in
2019/2020 their number is 23 projects. This drastic reduction is due to the negative
impact of the global pandemic of Covid-19, the lock down of economic activity

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around the world and reduced support from international financiers because of the
relocation of funds to support their own economies.
Given that the number of projects has declined, the aggregate total budget for
all projects is almost identical in the two years, which can be seen in Table 1. The
total inflow of international climate finance for the three-year period is USD 34.4
million. However, it is obvious that the international financial support received for
financing climate projects in North Macedonia has declined by half. In 2018/2019,
it amounts to USD 23.2 million, while in 2019/2020 it was USD 11.2 million. On the
other hand, the domestic contribution for co-financing of these climate projects has
increased seven times.
Table 1. International financial support in North Macedonia for climate
actions between 2018 –2020, biannual averages (in USD)
2018/2019
2019/2020
Total
International climate finance
23,175,988
11,237,550
34,413,538
Total domestic contribution
1,969,425
13,805,516
15,774,940
TOTAL BUDGET
25,145,413
25,043,065
50,188,478
Source: author’s own presentation
Climate-specific (CS) are
those projects that are fully
climate-targeted, while
climate-relevant (CR) are those
that are not labelled as climate,
but with their implementation
have significant climate
benefits either for mitigation or
adaptation to climate change.
Source: author’s own presentation
Financial support related to climate-specific projects is higher in both periods.
Figure 4 shows that the financial support related to climate-specific projects is
decreased by 24% on an annual basis, while the financial support related to climate-
related projects is decreased by 91%.
The European Union and the Global Environment Facility (GEF) together
provide 73% of the total international climate support in North Macedonia for the
13,657,590
10,372,460
9,518.398
865,089
2018/2019 2019/2020
Figure 4. Climate relevance
Climate-specific (CS) Climate-relevant (CR)

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entire three-year period. Most of the international financial support inflows came
from the European Union in the amount of USD 14.4 million which is 42% of the
total support received. The second largest financier is the Global Environment
Facility (GEF), which provides USD 10.5 million that is 30.6% of the total support
received.
In 2018/2019, the largest funder is the European Union, which provided as
much as 58% of the total inflows of international climate finance. Most of these
funds are provided through IPA cross-border cooperation funds. But in 2019/2020
the funds received from the EU are drastically reduced. This is because of the Covid-
19 pandemic when developed countries have reduced support for developing
countries by relocating domestic funds to support their own economies. In Table 2,
there is a drastic reduction of bilateral funds received from Germany and
Switzerland.
Table 2. Funders of international financial support (in USD)
Source: author’s own presentation
Source: author’s own presentation
EU
58%
Germany
6%
Global
Environment
Facility (GEF)
13%
Green Climate
Fund (GCF)
1%
Switzerland
11%
UNDP
10%
World Bank
1%
Figure 5.1 International funders
2018/2019
FUNDER
2018/2019
2019/2020
TOTAL
European Union
13,566,181
818,159
14,384,340
Global Environment Facility (GEF)
2,933,387
7,592,545
10,525,932
Switzerland
2,614,360
32,327
2,646,687
UNDP
2,258,990
33,072
2,292,062
Food and Agriculture Organization
of the United Nations (FAO)
1,939,000
1,939,000
Germany
1,355,824
29,501
1,385,325
Green Climate Fund (GCF)
300,000
699,742
999,742
World Bank
147,245
147,245
Others
65,516
65,516
United Kingdom
27,688
27,688
TOTAL
23,175,988
11,237,550
34,413,538
Global
Environment
Facility (GEF)
68%
Green Climate
Fund (GCF)
6%
Food and
Agriculture
Organization
of the United
Nations (FAO)
17%
UNDP
1%
European Union
7% Germany
0.3%
Switzerland
0.3%
United
Kingdom
0.2% Others
1%
Figure 5.2 International funders
2019/2020

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Global Environment Facility (GEF) was the second largest support provider in
2018/2019 with 13%, while becoming the largest provider of international financial
support in the next year 2019/2020 with USD 7.6 million, which is 68% of the total
received financial support. In this year, the second largest provider is the Food and
Agriculture Organization of the United Nations (FAO) with the amount of USD 1.9
million or 17%. Most of the money received from FAO is aimed at adapting
agriculture to the negative impact of climate change.
Grants have become the dominant
type of international financial support,
which in 2018/2019 amounted to
98%, and in 2019/2020 to 85%. Here,
we point out that the state-owned JSC
Power Plants of North Macedonia has
contracted two large loans with the
German KfW Bank to finance two
major energy projects that will greatly
contribute to climate change
mitigation: i) Project: District Heating
of Bitola, Mogila and Novaci - first
stage, total budget EUR 46.3 mil. (EUR
39 million from KfW and EUR 7.3
million own funds); and ii) Extension
of the Wind Park – Bogdanci, stage II,
with a total budget of EUR 21 million
(EUR 18 million from KfW and EUR 3
million own funds). Despite the signed
loan agreement, the projects have not
yet started in the analysed period, and
therefore have not been included. If we
include this committed amount, it will
unrealistically overestimate the
amount of support received, although
22,920,096
9,538,091
255,892
1,699,458
2018/2019 2019/2020
Figure 6. Climate finance by
instrument of funding (in USD)
Grants Loans
8,124,257
798,787
7,328,659
1,659,000
5,018,944
720,397
2,704,128
8,059,366
2018/2019 2019/2020
Figure 7. Biannual average climate
finance by mitigation, adaptation and
dual objectives (in USD)
Mitigation Adaptation Dual objectives Other
Source: Author’s own presentation
Source: Author’s own presentation

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under the contract this amount will be relevant and if executed.
For the entire three-year period of 2018-2020, mitigation finance is equal to
adaptation finance and amounts to USD 8.9 million.
In 2019/2020, mitigation finances have fallen sharply from USD 8.1m to USD
0.79 million, adaptation finances have shrunk from USD 7.3 million to USD 1.66
million, as well as those with cross cutting nature with dual objective falling from
USD 5 million to USD 0.72 million.
There is a large increase in the received international financial support for
financing projects that fall in the category with other objectives, which increased
from USD 2.7 million to USD 8.1 million. This category includes projects whose main
goal is capacity building, technical support, technology support, and general
objective, but their implementation contributes to the fight against climate change.
The greatest part of international financial flow for the three-year analysed
period of 2018-2020 came from bilateral support amounting to USD 18.5 million,
while the multilateral support received amounts to USD 15.9 million. European
Union provides 77.7% of the bilateral support, which at the same time is 41.7% of
the total international financial support. The rest of the bilateral support is provided
by Switzerland (14.3%), Germany (7.5%), Others (0.5%).
Multilateral financial institutions that
are part of the financial mechanism of
the Convention play a particularly
important role in financing climate
projects in North Macedonia. The role
of the Global Environment Facility
(GEF) is especially important, which for
the three-year analysis period of 2018-
2020 provided USD 10.5 million or
66.2% of the total multilateral support
and 30.6% of the total international
financial support received. The Green
Climate Fund (GCF) in the entire period
provided 6.3%, while FAO provided
12.4%.
Source: Author’s own presentation
17,536,366
973,190
5,639,622
10,264,360
2018/2019 2019/2020
Figure 8. Climate finance by bilateral or
multilateral support received
Bilateral support Multilateral support
2,933,387
7,592,545
2,258,990
33,072
1,939,000
300,000
699,742
2018/2019 2019/2020
Figure 8.1 Multilateral support received
World Bank
Green Climate
Fund (GCF)
Food and Agriculture
Organization of the
United Nations (FAO)
UNDP
Global
Environment
Facility (GEF)

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Finally, we analysed the structure of the distribution of the international
financial support according to the sectors. The sector definition used in this analysis
is according to the OECD DAC Rio Markers methodology (OECD, 2011).
Figure 9 shows the distribution of international climate finance by sectors for
the entire three-year analysis period of 2018-2020. Most of the received
international financial support belongs to projects from the General Environmental
Protection sector, which is 46.3%. In the sector of Energy generation, distribution
and efficiency it amounts to 24.4%, Government and civil society 18.3%, Agriculture
4.9%, Water and sanitation 4.5%, Fishing 0.8%, Transport 0.4%, and
Communications 0.4%.
CONCLUSION
Effective and efficient implementation of climate activities relies on providing
climate finance on a consistent basis. This is a particular problem for developing
countries facing other economic and social development priorities and a severe
Energy
generation,
distribution
and efficiency
33%
Government
and civil
society
7%
General
envorenmental
protection
52%
Transport
1%
Water and
sanitation
7% Communications
0.6%
Figure 9.1 International climate finance by
sector 2018/2019
Energy generation,
distribution and efficiency
7%
Government
and civil
society
42%
General
envorenmental
protection
34%
Agriculture
15%
Fishing
2%
Figure 9.2 International climate finance by
sector 2019/2020
15,922,771
8,399,400
6,311,533
1,679,000
1,554,654
260,000
147,245
138,935
2018-2020
Figure 9. International financial
support according to sectors, period
2018-2020, in USD
Communications
Transport
Fishing
Water and
sanitation
Agriculture
Government and
civil society
Energy
generation,
distribution and
efficiency
General
envorenmental
protection
Source: Author’s own presentation

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shortage of climate finance. To meet the Paris Agreement’s long-term goals, it is
crucial that developed countries support developing countries in achieving their
Nationally Determined Contributions (NDCs) and mobilizing the required climate
finance.
COVID-19 pandemic had negative impact on climate finance in developing
countries. Developing countries have struggled to implement their NDCs while
facing a global pandemic that affected every country’s health and economy in
unprecedented ways. COVID-19 drastically slowed down economic activity, closed
borders, and required countries to redirect budgets, increasing their debt in some
cases, to address the financial needs created by the pandemic (UNDP, 2021). Climate
finance was insufficient before the pandemic. The goal of mobilizing USD 100 billion
annually by 2020 to address the needs of developing countries would not be met
(IEGCF, 2020). The most recent report showed that total climate finance, which was
provided and mobilized, reached USD 79.6 billion in 2019 (OECD, 2021a). During
the pandemic, some countries announced ODA climate-related cuts that further
reduced climate-finance flows.
The climate-finance needs of developing countries, based only on an
assessment of the current NDCs’ quantitative data communicated to the UNFCCC
Secretariat, are estimated at USD 4.6 trillion for developing countries (Alayza and
Caldwell, 2021). The Republic of North Macedonia is a small developing country
with clear commitment to combating climate change. With its Enhanced Nationally
Determined Contributions (ENDC) to reduce GHGs emissions by 51% by 2030, 63
mitigation policies and measures (PAMs) have been planned, which require green
investments of EUR 25.03 billion. With an annual GDP of USD 12.1 bn, domestic
financial and other capacities are far from needed to meet climate goals. Most of the
required capital is planned to be provided from international sources, especially
through the UNFCCC financial mechanism.
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