EnvironmentSmith School of Enterprise and the Environment29accounted for 80 per cent. In South America, Brazil accounted for 88 per cent [46]. To date, Africa hosts fewer than 2 per cent of all registered CDM projects.There are several reasons for this. First, African and other least developed countries make up a very small percentage of the world's GHG emissions. Therefore investors have focused on the 'low-hanging fruit' of high emission nations. In addition, the majority of emissions savings opportunities in the least developed countries come from smaller projects, as demonstrated by figure 6. The costs of establishing a CDM project are high due to the strict requirements and administration processes. For smaller projects these requirements and costs make up a much larger fraction of the project costs in comparison with larger projects. There are two strategies that have been developed to overcome these issues in the form of the Bundling Approach and the more recent Programmatic Approach introduced in 2007. The latter was introduced in order to overcome issues with Bundling Approach which required very high levels of planning due to its inflexibility. The strict requirements when implementing a CDM project represent another reason the majority of projects have been implemented in emerging nations; there is relatively more safety involved in investing in an emerging nation with the proven experience and technical skills to carry out the project. The current international approach to climate mitigation and adaptation financing is insufficient as it lacks a functioning and permanent system for resource transfer to developing countries. It largely depends upon arbitrary contributions of grant resources from governments' treasuries. In addition, the private financial flows as mentioned above do not meet the climate needs of developing countries. Long-term and stable flows of climate financing that are sufficient to meet the requirements of developing countries are unlikely to materialize in view of the dire fiscal prospect of most developed nations.The Cancun Agreements sets out funding for developing nations approaching US$30 billion for 2010-12 and moving to US$100 billion by 2020. This latter figure is in the range of that estimated to be 5Chapter 5Chapter 5: Next StepsFigure 6 -The long-tailed emissions reductios curve for CDM projects. The majority of the emissions reductions opportunities in the least developed countries lie within the tail. Adapted from UNEP 2008 [52].

30Smith School of Enterprise and the EnvironmentSmith over the end use of the money once it has been put forward. The developed world seeks assurance that the money would actually go towards mitigation and adaptation actions [54]. However, attempts to control or monitor what the recipient government spends climate money on may be perceived to impinge significantly on their democratic decision making processes, as with many conditional aid systems.Given the uncertainties regarding the developed world's production of mitigation and adaptation funding it is useful to consider alternative sources of finance. A new international approach must be introduced to make sure that the accepted level of climate stability is effectively achieved on time and with the least cost. It must also provide a new, stable and credible financing system for developing countries which is decoupled from economic ups and downs of donor community. CO2 markets, in a reformed form, are a feasible model for delivering the financial flows to the developing world on the scale required. Perversely, the current cap and trade systems act as an incentive to developing countries to emit CO2 to qualify. It should be noted that the least developed countries will not always have such low GHG emissions; if the economies of the poorest developing nations continue to develop along the high-carbon route then they will contribute more and more in the future. According to the IEA [46], global energy demand is predicted to grow by 55 per cent by 2030. Just over 90 per cent of the increase in the energy demand from 2007 to 2030 is projected to come from non-OECD countries [52]. In the run up to 2030 the new energy supply infrastructure will require investment of up to US$26 trillion, with around half of this required in developing countries. If the investments made are not directed towards growth in climate-friendly technologies, emissions will increase by 50 per cent by 2050 [10]. It would likely be far easier and cheaper for the developing world economies to be incentivised to grow along a low-carbon pathway, rather than attempting to convert at a later stage after investing in high-carbon infrastructure.A number of proposals for alternative mechanisms to the current international approach to developing country financing have been put forward over the past few years based upon a variation on the current required in order for developing countries to deal adequately with the threat of climate change [29].There are three key issues with this funding strategy. First, it is unclear where this money will come from and whether it will actually be delivered. Second, how the money is to be distributed is contentious. Third, ensuring the money is spent effectively will be both difficult and likely to intrude on the ruling governments of the recipient nations, and hence subvert democratic decision making. The developed world does not have a good track record when it comes to delivering on money promised [53]. For example, developed countries already appear likely to fail to meet the Millennium Development Goal targets of providing Official Development Assistance (ODA) of 0.7 per cent GDP by 2015. The current economic downturn will make it even more difficult for developed countries to raise the public funds required. There are further concerns surrounding the US$100 billion for mitigation and adaptation for developing countries. One major worry is that the funds will in fact not be 'new and additional' but may be diverted or relabelled 'development aid'. One issue that underlies this concern is that there is not currently a clear baseline of current climate aid. The voluntary nature of ODA makes it easy for donors to vary the amount and nature (e.g. goods and services in kind) depending upon political and economic situations. These programs for health, poverty alleviation and promoting the rights of women and children also act to make communities more resilient to climate change [53]. In terms of the distribution issues, there are scientific challenges to clearly defining what risks and losses are additional due to climate change. Differences in how vulnerability is defined would lead to very different distributions of the funds. For example, if it is defined biophysically then low-lying land such as islands and deltas, drought zones and areas fed by glaciers would be most deserving, but should vulnerability be defined using social factors then the funds would be distributed to the poorest or most densely populated regions. It has been suggested that an international centre should be set up with the purpose of identifying these additional losses [30]. The developed world on the other hand has concerns Chapter 5Chapter