carbon finance, climate change mitigation and sustainable
TRANSCRIPT
Key Messages
Climate, finance
and development
are closely
linked
Economic
stimulus programs
can address
climate action
Climate
negotiations can
transform global and
national financial
landscapes
2
Response to financial crisis can facilitate or amplify climate
action. Consider provision of incentives to developing
countries for green recovery ahead of the negotiated post
2012 climate finance package.
Climate finance is a catalyst to leverage private and public
resources, open economic opportunities, and enhance
development policy and finance. Policy, market and
technology innovations are key to maximizing the impact.
Copenhagen is as much about finance and development as
about climate. Finance, Economic and Development
Ministers must be involved in key issues: How much additional finance is needed?
How will the money be raised for different needs?
How will resources be transferred to diverse recipients?
How will processes and outcomes be monitored?
How Will the World Finance Climate Change Action
3333
Catalytic
climate
finance
Climate Finance is a Catalyst
Climate finance can cover
additional cost to…
Facilitate enabling policies, regulatory
frameworks, institutions and markets
in support of adaptation and mitigation
Catalyze transformational private and
public investments and development
programs
• low-carbon technologies(renewable energies, energy efficiency in
industry, water use, transport,
buildings...)
• terrestrial carbon (agriculture and
forestry)
• climate resilience (change practices
and factor-in climate vulnerability in
infrastructure planning, in agriculture...)
Support research, development and
deployment of new technologies
What is climate finance?
Sources Uses
44
TODAY’S DISCUSSION
Connecting Climate, Finance and Development
How Will the World Finance Climate Change Action
Making Climate Finance Work at Home
Take Away Messages
Mobilizing International Climate Finance
Meeting the Diverse Needs Through a Portfolio of Instruments
5
The world is committed to 2oC
warming above the pre-
industrial level. Adaptation
efforts must be intensified to
cope with unavoidable
changes.
IPCC estimates that exceeding
2oC will undermine
development prospects.
“Business-as-Usual” is forecast
to lead to 6-7oC of warming, at
an unprecedentedly rapid pace.
Temperature change during the
last ice-age was 8oC over
millenniums.
Delaying action reduces
development options for
mitigation and adaptation and
raises their costs.
The 10-15 year window of opportunity is
closing fast…
Climate: Urgent Action Versus Heightened Risks
)
Connecting Climate, Finance and Development
Year
666
Climate Finance: Additional Costs and Catalytic Impacts
… to
leverage
development
investments
Climate finance
covers additional
costs and serves
as a catalyst…
Total climate finance for developing countries
over 2010-20: US$ 180 bln to US$ 250 bln p.a.*
or 0.5 % of OECD GDP
Private Sector
Investments
National
Development
Budgets
International
Development
Assistance
Additional investment needs over 2010-20
(US$ bln p.a.)
Mitigation
Developing
countries
Adaptation
550 ppm 450 ppm
Global ~460~270
~150 ~220
~30
US$ 250bln p.a.
US$ 4,620bln p.a. (2008)
Connecting Climate, Finance and Development
Developing
countries
* UNFCCC, IEA, McKinsey
~30
777
Comparative Costs, US$ bln. per annum, 2008
Current Dedicated Resources Cover less than 5% of the Needs
Connecting Climate, Finance and Development
US$ bln
250
120
560
310
258
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TODAY’S DISCUSSION
Connecting Climate Change, Finance and Development
How Will the World Finance Climate Change Action
Making Climate Finance Work at Home
Take Away Messages
Mobilizing International Climate Finance
Meeting Diverse Needs Through a Portfolio of Instruments
9
Developing Countries are Already Taking Action...
… drawing on a menu of instruments to match the diversity of needs
Brazil: Reducing
deforestation in the
Amazon by 70% by 2020;
expanding biofuel
programs, energy
efficiency
Caribbean Islands: Adaptation to
increasing hurricanes and storms,
catastrophic risk bond
Indonesia: Adaptation (coastal flooding),
forest conservation programs, scaling-up
renewable energy, low carbon development
fund
India: Adaptation
(drought, floods, cyclones,
glacier melting), energy
efficiency, hydro and new
renewable energy, solar
energy R&D, knowledge
China: Energy efficiency,
20% reduction in energy
intensity from 2005 to
2010; 15% renewable
energy target by 2020;
Clean technology R&D;
sustainable transport
Morocco: Integrated approach to
tackling climate change in water,
agriculture, and urban sectors,
Mediterranean Solar Plan Initiative
Ethiopia: Integrating
adaptation in sustainable
land management, social
protection, development of
hydropower, and building
capacity programs
Meeting Diverse Needs Through a Portfolio of Instruments
10
Adaptation is Priority for Developing Countries
Strengthening Climate Resilience in Country-led Development Processes
Action Financing Examples
Core Development Domestic Budgets
plus ODA
Investments in education & health, income- generation
programs; etc.
Climate Resilient
Development
Increased ODA plus
Additional Climate
Finance
Accelerated agricultural diversification; climate resilient
road construction & irrigation systems, climate
forecasting; capacity building, etc.
Adaptation New & Additional
Climate Finance
Seawalls; dikes; additional shelters & water-storage
Meeting Diverse Needs Through a Portfolio of Instruments
Adaptation requires additional finance to ensure development outcomes
Win-win opportunities can help enable most effective and efficient adaptation
Synergies in climate finance and development finance must be fully utilized
Public investment / subsidy, e.g. for new technology deployment
Policies and regulations; incentives for barrier removal; technical assistance
Carbon market
Support for R&D11
Abatement potential
COSTS
of
abatement
GAINS
from
abatement
Stylized Marginal Abatement Cost Curve
Lighting switch
Solar
Reforestation Wind
Industry: EE in cement
Power generation from landfill gas
Waste management
Coal CCS
Nuclear
Grassland management
A Range of Tools is Needed to Realize Different Mitigation Potentials
Meeting Diverse Needs Through a Portfolio of Instruments
Tools:
12
Managing Terrestrial Carbon can Help Climate and Development
Meeting Diverse Needs Through a Portfolio of Instruments
Land use change, forestry
and agriculture account for
almost 50% of emissions in
developing countries
Offer cost effective mitigation
with significant co-benefits:
improved livelihoods; reduced
soil erosion; biodiversity…
Financing the First Phase
Developed countries:
aggressive and integrated
cap & trade markets
Developing countries:
major role for carbon offsets
and international funds for
adaptation and mitigation
All countries: reflecting
climate externalities in
policies, taxes and incentives
13
Policies and Market-based Incentives
Will Over Time Catalyze Most of the Investment Flows
Financing the Second Phase
A global cap & trade market As incomes and living
standards rise, developing countries “migrate” from offset markets to cap & trade
Policies, taxes and incentives reflect climate externalities
International funds mostly for adaptation and capacity building
Collaborative R&D efforts, international support for adaptationand clean technology access to poorest countries
Meeting Diverse Needs Through a Portfolio of Instruments
14
Evolution of Climate Finance Needs and Mechanisms
for Developing Countries
Market-based
Instruments
Multilateral,
mostly
developed
country
funding
Domestic
developing
country
fundingPost-2012 ~2050… to leverage
development
investments
Catalytic
climate
finance…
Meeting Diverse Needs Through a Portfolio of Instruments
Post-2012
CDM
Carbon offsets & other
performance-based
schemes
Cap-and-trade
~2050
Fin
an
cin
g n
ee
ds
This is a stylized, illustrative picture, not intended to show the exact sizes of various mechanisms
International
climate funds
1515
TODAY’S DISCUSSION
Connecting Climate, Finance and Development
How Will the World Finance Climate Change Action
Making Climate Finance Work at Home
Take Away Messages
Mobilizing International Climate Finance
Meeting Diverse Needs Through a Portfolio of Instruments
16
Mobilizing International Climate Finance
Markets for carbon offsets can only achieve full potential provided:
Adequate developed countries targets and provisions for offsets: up to US$ 30 bln under currently proposed developed countries targets for 2020 while stricter targets can facilitate up to US$150 bln.
Progress with reforming CDM and introducing REDD, sector crediting and other performance-based mechanism
Expanding Carbon Markets
Scaled-up markets for carbon offsets can generate significant financial flows for developing countries
Could generate up to US$ 30 billion and close the adaptation financing gap for developing countries or be used for both adaptation and mitigation in developing countries
Auctioning emissions rights under cap & trade systems in developed countries can be a useful additional source
Potential of carbon markets
Leverage investment through multiplier effect; facilitate technology transfer; create global price signal for carbon; lower costs of compliance with targets
$150 bln
Offset
Market
$30 bln
Offset
Market
Mobilizing International Climate Finance
Carbon markets can reduce the financing gap significantly – yet need to be complemented by other instruments, particularly for a 450 ppm trajectory Adaptation, capacity building, new technology R&D and
transfer, and market barriers require a portfolio of tools
Other Financing Tools
Gap:
$ 70 bln
Gap:
$ 190 bln
US$250 bln p.a
450 ppm.
0.5-1% GDP contribution by developed countries – US$ 150-300 bln
(G-77 / China)
Contribution by all countries based on GDP, GHG and population
– US$ 10 bln initially, with potential scale-up (Mexico)
International tax on aviation and/or shipping – up to US$ 40 bln
(Various)
Levy on GHG emissions over 1.5 ton/capita – US$ 18 bln in net
transfer to developing countries, mainly for adaptation (Switzerland)
Tax on international financial transactions – US$ 15-20 bln. (Tobin tax)
Specific Financial Proposals Under Discussion Include:
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plus $30 bln.
from auctioning
60
180
US$180 bln p.a
550 ppm.
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TODAY’S DISCUSSION
Connecting Climate, Finance and Development
How Will the World Finance Climate Change Action
Making Climate Finance Work at Home
Take Away Messages
Mobilizing International Climate Finance
Meeting Diverse Needs Through a Portfolio of Instruments
Efficiency standards; codes, zoning; climate screening/
proofing of investments
Improve investment climate; deepen financial and capital markets; new markets (cap & trade, CDM)
1919
Enabling Domestic Policy Environment is Key
Making Climate Finance Work at Home
Rationalize energy, water and agricultural price, tax incentives, fiscal and expenditure policies
Incentives
Education, raising awareness and promoting change in consumer behavior and preferences
Public Outreach
Capacity of public, private and financial sector institutions to assess and act on climate risks and new business opportunities
Institutions
Public Outreach
Regulations
Markets
2020
TODAY’S DISCUSSION
Connecting Climate, Finance and Development
How Will the World Finance Climate Change Action
Making Climate Finance Work at Home
Take Away Messages
Mobilizing International Climate Finance
Meeting Diverse Needs Through a Portfolio of Instruments
Decisions needed from climate negotiations
Emissions targets for developed countries
Criteria for recognizing and crediting mitigation action by developing countries
Finance
Governance
Targets and
actions
Take Away Messages
Arrangements for transfer and monitoring of funds, verification of results, evaluation of effectiveness
CDM reform
Expanded coverage and scale of offset markets Sector crediting, REDD, agriculture
Stable and predictable additional resourcesFinancing for adaptation must be provided as priority
Technology transfer and collaborative R&D
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Negotiation outcomes will transform development cooperation and finance
Take Away Messages
22
Finance
Economic &
Development
Ministers
need to be
involved
Will significantly affect how market economies operate
Will require new policies, revenues and investments
Will create new global market mechanisms
To develop a portfolio of tools catalyzing sufficient
investment into adaptation, mitigation, technology
To establish effective and efficient international finance
transfer mechanisms
To maximize synergies with development finance and
leverage on private sector investment
Climate
Agreement…
Delay
increases
costs
Accelerating support to developing countries will help
make green investments at a critical and opportune time of
economic recovery
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What the World Bank Group can Offer
Economy-wide support to governments for sustainable development and policy reforms (e.g. energy pricing)
Major lender to renewable energy and energy efficiency
Climate risk management in water, agriculture and disaster risk reduction programs…
Extensive partnerships: UN agencies, other MDBs, private sector, NGOs, research community
Capacity and
experience in
development
finance
Take Away Messages
Expertise in
leveraging
climate finance
Leveraging GEF resources
Spearheading the carbon market and developing robustCarbon Finance business
Climate Investment Funds (CIF)
Financial innovations on the capital markets