meeting the challenge is not a choice between growth and climate change… a climate smart world is...
TRANSCRIPT
• Meeting the challenge is not a choice between growth and climate change…
• a climate smart world is within reach if we act now, act together and act differently…
• … and build on new finance, technology and capacity at scale.
Climate change as a development challengeJari Vayrynen, Sr. Environmental
Specialist, World Bank
Objectives: Enable WBG to effectively support sustainable
development and poverty reduction, as climate risks and climate-related economic opportunities arise
Facilitate global action and interactions among all countries
Key principles: Working in partnerships guided by UNFCCC process Country-led, country-driven, “no regrets” actions Approach tailored to specific needs of diverse clients
WB Strategic Framework for Climate Chance and Development
MDB & UNPartnerships
Knowledge &Capacity
Climate Investment Funds
Bottom Up Momentum
Resource Mobilization
Regional / Country Strategies
Financing Climate Change Mitigation
• Scale of financing needs for mitigation estimated by UNFCCC at $200 billion annually
• Concessional resources are very limited for low carbon investments in developing countries and transition economies
• Mobilizing private sector finance is crucial– Market mechanisms can play a central role
Finance scaled-up demonstration, deployment, and transfer of low carbon technologies
Country Investment Plans: Support country development strategies Leverage financial products of
International Financial Institutions Stimulate private sector engagement
Clean Technology
Fund (CTF)
± $5 billion
Strategic Climate
Fund (SCF)
±$1 billion
Targeted programs with dedicated funding to pilot new approaches with potential for scaling up
Pilot Program for Climate Resilience: Mainstream climate resilience into core development planning
Forest Investment Program: Reduce emissions from deforestation and forest degradation
Scaling Up Renewable Energy in Low Income Countries
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World Bank Carbon Market initiatives
World Kyoto Funds under implementation reaching over $2 billion in funding and about 130 ER purchase agreements signed
Progress with new facilities:
Exploring possibilities for further engagement Carbon in Agriculture sector Carbon Capture and Storage (CCS)
Carbon Asset Development Fund (CADF) operational at €7 million
Carbon Fund currently €100 million (minimum target €200 million)Carbon Partnership Facility (CPF)
Forest Carbon Partnership Facility (FCPF)
Operational since June 2008 - current donor pledges at $107 million
37 Developing Country Participants
How do carbon markets work?
What is traded?
What is the underlying principle?
Units = tons of carbon dioxide (or equivalent) allocated as part of an emission cap or “reduced” by a project or program activity. These units are labeled based on the market segment in which they are traded : AAUs, CERs, ERUs, EUAs, VERs, etc.
Cost-effectiveness: a ton of CO2 emitted anywhere in the world has exactly the same impact on climate change and should therefore be reduced/ mitigated where the cost of doing so is lowest.
Why should this be of interest?
• Significant new investments and financial flows • Application of new technologies and financial instruments to
reduce emissions at lower costs; and• Transition to a lower carbon economy better tuned to cope
with future resource and environmental constraints.
What are the
benefits?
• Lowers compliance costs for meeting emission reduction obligations; ;
• Catalyzes financial and technology flows to developing countries to facilitate low-carbon growth;
• Creates a global and long-term price signal to lower carbon intensity.
Beyond domestic actions to reduce emissions, a country can use trading to purchase reductions in another country to achieve compliance with its Kyoto obligations.
Examples of trading options include:• Buying emissions ALLOWANCES (called AAUs) from other
countries with commitments which are below their Kyoto cap (International Emissions Trading)
• Purchasing carbon OFFSETS from projects which reduce emissions• In developing countries (Clean Development Mechanism – CDM)• In economies in transition (Joint Implementation – JI)
Kyoto Protocol-based carbon markets
Domestic actions
Baseline emissions
1990
“Business as-usual” projected emissions by 2008
1990 Baseline
Kyoto target
Allowances from IET
Project-based Offsets (CDM/JI)
2008-12
Kyoto allowed emissions
Projected emissions increase
between 1990 and 2008-2012
Sources of reduction
CDM: Offsets obtained from a non-Annex I countryJI: Offsets obtained from another Annex-I country;
IET: Kyoto allowances obtained from another Annex-I country
A significant amount of the reduction must be achieved through domestic measures
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Industrialized country with an emissions cap
Baselin
e em
issions
Baseline Scenario
EmissionReduction Units (ERUs)
Project em
issions
Project Scenario
How does Joint Implementation (JI) work?
Emissions target
Purchase of allowances
Project benefits from increased
cash flow
$$
ERU
Purchase of ERs
Domestic action
Carbon Market Values in 2008
(in M US$)
Allowance MarketsProject-Based Transactions
CDM
6,500
EU Emission Trading Scheme
91,910
SecondaryCDM
26,300
JI300
Assigned Amount Units 210
World Bank Carbon Finance Projects in Bulgaria
• Joint Implementation projects:– Sofia District Heating– Pernik District Heating– Svilosa Biomass
• Green Investment Scheme (GIS)–options study– GIS is a system where revenues from AAU trades are
reinvested in environmental projects– To our knowledge Bulgarian Government has not yet
concluded any GIS transactions11
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• Climate change is fundamentally a development issue, not only an environmental issue
• Huge financing needs– Carbon markets will continue to be play a major role in catalyzing
low carbon investments in developing countries and transition economies
• The World Bank, through a range of financial instruments and capacity building activities, is deeply engaged in this effort
Conclusions
Thank You.
Jari Vayrynen
Please visit us online at
www.carbonfinance.org