Components of a post-2012 climate deal

Finance and the global climate agreement

Rob BradleyJonathan Pershing

World Resources Institute

• Where does finance come from?• Where is it needed?

– Adaptation– Technology – Forests– Developing country mitigation– Trade and sectoral approaches

• What next?

UNFCCCFunds

Other multilateral

e.g. World Bank CTF

Other government

al

e.g. ODA increase, bilateral

R&D

Non- government

al

e.g. NGOs, universities

Private sector

investment flows

Source: IPS

UNFCCC Low Estimate

2006 Level

If developed countries met 0.7% GNP target)

UNFCCC High Estimate

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Fundingrequired

TechnologyFunds‡

CDM in 2006 CDM potentialin 2030

GlobalInvestment inSustainable

Energy*

Total ODA FDI intodevelopingeconomies

Mill

ion

US$

Potential Future Funding - highestimate

Potential Future Funding

Actual Funding Available

‡ ‡ Indicative total * Total deals in 2006, including venture capital, private equity, corporate R&D, public R&D, asset and project finance and mergers and acquisitions (Source: New Energy Finance)Source: WRI, with data from New Energy Finance, UNCTAD Statistics, UNFCCC, and The World Bank

Adaptation

• Perhaps strongest prospects for public finance

• Tricky area for private finance• Adaptation Fund will likely

not handle all relevant finance

• …but can have an important steering role

Deploying adaptation finance

Adaptation

WRI Expert:

Heather McGray

Key Publication

Weathering the Storm: Options for Framing Adaptation and Development

Financing Adaptation: Opportunities for Innovation and Experimentation

Cumulative Energy InvestmentSource: IEA, WEO, 2006

Technology finance

Scale of current/necessary deployment

Source: Stern Review

Technology financeWRI Expert:

Britt Childs Staley, Hilary McMahon, Jenna Goodward, Dennis Tirpak, Deborah Seligsohn, Tan Xiaomei, Weng Weili

Coming up

Juice from Concentrate: investing in solar thermal electricity

Case studies of technology deployment in China

New

Five components of a new financial deal on technology under the Convention

From positions to agreement: technology and finance under the UNFCCC

Forests

Lots of options in the Bali Action Plan

• Carbon markets may not be the panacea some hope

• Policies and measures need to be implemented and supported in a variety of ways

• Developed country actions will count too – get more added value to more sustainable forest practices

Policy Options•Accuracy, Availability and Transparency

•Curb over-capacity

•Ensure legal supply

•Monitoring

•Planning and incentives

•Law enforcement

•Social forestry

•Fire prevention

•Certification

YEAR

Total Total

1985 23.5 14.6

1989 40.4 24.4

1990 37.9 25.3

1997 47.4 29.5

1998 45.3 19

1999 44.9 20.6

2000 47.8 13.8

2001 49.1 10.1

2002 50.5 8.1

LOG CONSUMPTION (including timber and pulp)

OFFICIAL LOG PRODUCTION (including

timber and pulp)

Comparison of Log Production and Consumption

Source: World Bank 2006

Accurate timely maps

Forest Management Units

Forests

WRI Experts:

Florence Daviet, Fred Stolle, Susan Minnemeyer, Lars Laestdius, Crystal Davis, Smita Nakhooda

Key Publication

REDD Flags

Beyond Carbon Financing

Sustainable supply chain procurement guide

Upcoming: Governance Forest Indicators

Trade and sectoral approaches

• Concerns over competition

and trade• Unilateral measures being

taken by developed countries won’t necessarily succeed

• But they may disrupt the multilateral process

• Sectoral approaches that address competitiveness concerns have been ruled out in UNFCCC

WRI Experts:

Robert Heilmeyer, Jake Werksman, Taryn Franzen

Key Publication

Leveling the Carbon Playing Field: International Competition and US Climate Policy Design

Developing country mitigation

Measurable, reportable and verifiable actions and support

• Bali offers a more common and more differentiated approach

• Greater variety means greater complexity

• Actions more rooted in national policies and plans are more likely to be implemented

• Financial support is likely to vary among countries and actions

WRI Expert:

Hilary McMahon, Taryn Fransen, Smita Nakhooda

Coming soon

Measuring the way to a new climate agreement

New paper with Tsinghua University on MRV in China

Financing a climate response is possible, but there is no easy solution

• Policy design can help enhance political support for finance

• Carbon markets are important, but not magical

• Finance is likely to flow through a variety of mechanisms

But how will real life intervene?

Implications

A new wrinkle: market behavior

Shanghai Index FTSE 100 Index S&P 500 Index

Nikkei 225 Index BOVESPA Index

Source: http://www.bloomberg.com, 9 October 2008

National Stimulus Packages

Source: USEPA: April 2007, US GHG Inventory

Country Amount Package Description

Australia $6.7 billion Pensioners, low and middle income earners; home purchase assistance

Britain £20 billion cut sales tax, help for small businesses, low earners and households

China $586 billion welfare housing, infrastructure, social & environmental services, economic restructuring, natural disaster relief, etc

Germany $29 billion tax holiday for new cars, subsidies for enhancing energy efficiency of buildings, new infrastructure investments

Italy $101 billion Environment R&D, public/private partnerships in infrastructure investment, tax measures for companies, funds to households

Japan $277 billion direct cash to households, loans for small businesses, reduction of highway tolls, subsidies to farmers

Mexico $22.8 billion

Infrastructure projects, new oil refinery, support small- and medium-sized businesses

S.Korea $10.8 billion

tax cuts, infrastructure & other projects, support to SMEs & low-income households,

US $100.3 billion -

unemployment, auto industry support, housing, small businesses, energy independence, infrastructure, disaster assistance