The government of Norway will allocate 10 billion Norwegian kroner ($1.15bn) to invest in renewable energy in developing economies as it looks to mitigate climate change.
The Scandinavian country is a major producer of oil in Europe, accounting for 1.8 per cent of global output, BP's Statistical Review of World Energy 2020 says.
The fund will be given 2bn Norwegian kroner on an annual basis for five years. The allocated capital will come from the country's national budget as well as Norfund, the Norwegian Investment Fund for developing countries. Norfund will administer the newly launched climate fund.
Norway was one of the first countries to start diversifying its economy away from oil, by investing the proceeds from the sale of crude into its $1.3 trillion sovereign wealth fund, which is the largest in the world.
"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 [sustainable development goals]”, Norwegian Prime Minister Erna Solberg said.
The Paris Agreement binds signatory countries to capping the rise in global temperatures at 1.5°C or 2°C above pre-industrial levels, putting them on a path towards reaching carbon neutrality by the middle of the century.
The establishment of the new fund will be part of the Nordic nation's development aid, said Dag-Inge Ulstein, the Minister of International Development.
"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 per cent of their GNI [gross national income] on aid, it will still not be enough to solve global challenges such as climate change,” he said.
The finance will help developing nations in Asia move away from coal-fired power plants, which currently contribute to 30 per cent of global greenhouse gas emissions.
"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," Ms Solberg said.