Download World Bank Bangkok Briefing - World Economy and Development

Briefing on Climate Investment
Funds
Bangkok
April 1, 2008
Warren Evans
Director, Environment
Sustainable Development Network
The World Bank Group
Outline
• Progress since Gleneagles (CEIF)
• Towards Strategic Framework on Climate
Change and Development (SFCCD)
• Proposed Climate Investment Funds (CIF)
• Scaling up Carbon Finance
2
Meeting Financing Needs –
Progress since Gleneagles
Update on the Clean Energy
Investment Framework (CEIF)
Reporting on CEIF
Progress Report to October 2007 Annual Meeting
provided details on progress on Action Plan for:
• Energy for growth, with a particular emphasis on access
to energy in Sub-Saharan Africa;
• Transition to a low-carbon development trajectory; and
• Adaptation to the impacts of climate change.
Report also outlined an approach to scaling up actions on climate
change and provides a review of options to further reduce the
financial barriers to support low-carbon and adaptive growth in
developing countries.
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Sustainable Development @ The World Bank
WBG Key Progress Since Gleneagles
• Access and Low Carbon Energy (1)
– Cumulative energy commitments of over US$11
billion for FY06–FY08 to date are 57% higher than the
energy lending in FY03–05.
– Energy financing to IDA countries also increased
significantly, from annual average of US$0.9 billion
between FY03 and FY05 to an annual average of
US$1.8 billion between FY06 and FY07. But energy
access remains a policy and financing challenge in all
regions, especially in SSA.
– Share of support for low-carbon energy projects up
from 28% in FY03–05 to 40% since Gleneagles.
– GEF and Carbon Finance contributed US$546 million,
or 13 percent.
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Sustainable Development @ The World Bank
WBG Key Progress Since Gleneagles
• Access and Low Carbon Energy (2)
– RE and EE for the period FY05 to H1FY09 was
US$2.3 billion, exceeding Bonn commitment 1.5
years ahead of schedule
– CEIF low-carbon work extended to other sectors,
such as transport and urban sectors, showing good
potential.
– Two new Carbon Facilities—CPF and FCPF
approved in September 2007
– Pilot program to begin measuring GHG emissions of
the WBG lending portfolio is underway.
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Sustainable Development @ The World Bank
Adaptation – IDA and Climate Change
results and related work
• CEIF argued for the need for a shift in approach to
adaptation from a largely stand alone, project by project
approach to one where the management of climate risk,
current and future, was regarded as an essential part of
development planning.
• IDA and Climate Change report (2007) shows that the
poorest countries are most vulnerable to climate change
impacts and that such countries need to consider
immediate interventions that will increase their resilience
to climate change.
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Sustainable Development @ The World Bank
Adaptation
Drought
Flood
Storm
Coastal 1m a
Coastal 5m a
Agriculture
All low-lying Island All low-lying Island
Sudan
States
States
Netherlands
Ethiopia
China
Bangladesh
Vietnam
Senegal
Japan
Zimbabwe
India
Madagascar
Egypt
Zimbabwe
India
Cambodia
Viet Nam
Tunisia
Bangladesh
Mali
b
Mozambique Mozambique
Moldova
Indonesia
Philippines
Zambia
b
Niger
Laos
Mongolia
Mauritania
Egypt
Morocco
Mauritania
Pakistan
Haiti
China
Brazil
Niger
Eritrea
Sri Lanka
Samoa
Mexico
Venezuela
India
Sudan
Thailand
Tonga
Myanmar
Senegal
Malawi
Chad
Viet Nam
China
Bangladesh
Fiji
Algeria
Kenya
Benin
Honduras
Senegal
Vietnam
Ethiopia
Denmark
Iran
Rwanda
Fiji
Libya
Pakistan
Note: Bold and grey shaded = high income countries. Light green = IBRD. Non-shaded = IDA-only and blend
countries. The typology is based on both absolute effects (e.g., total number of people affected) and relative effects
(e.g., number affected as a share of GDP). See Annex C for more detail on the indices used.
a. Meters above the seal level.
b. Winter storms.
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Malawi
Bangladesh
Philippines
Sustainable Development @ The World Bank
Adaptation- Progress since Gleneagles
• New analytical tools and guidance for assessing and
managing climate risk are necessary.
• Resources made available through the GEF have been
critical in promoting assessments, capacity building and
initial project by project action, but fall a long way short
of the resources required to support comprehensive
adaptation.
• Netherlands, UK, WB partnership on a Global
Economics of Adaptation study to “understand how to
identify and prioritize adaptation measures and to
estimate the financial costs of ensuring national
development plans are climate resilient”.
• JBIC, ADB, WB partnership on Adaptation in major
Coastal Cities.
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Sustainable Development @ The World Bank
Key Lesson since GleneaglesThinking of climate change differently
• Beyond environment—complex and overaching problem
• Affects all aspects of societies—economy, technology, trade, equity, ethics,
security, relations within and among countries
• Financial aspects inceasingly important, both in regard of national budgets
and international transfers- and financing needs are enormous and not
being met.
• Progress on implementing widespread adaptation has been hindered by
the lack of sound estimates of the scope of the task and the financial
implications.
• Requires to run on two legs:
– mitigation—to avoid the unmanageable,
– adaptation—to manage the unavoidable
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Sustainable Development @ The World Bank
Towards a WBG Strategic Framework on
Climate Change and Development
(SFCCD)
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Sustainable Development @ The World Bank
Towards a WBG Strategic Framework on
Climate Change and Development (SFCCD)
• WBG will maintain the momentum for
implementing the CEIF action plan and
expand its strategic thinking on climate
change, in a more comprehensive, crosssectoral manner and in alignment with the
growing needs of developing countries.
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Sustainable Development @ The World Bank
SFCCD Milestones
– Requested by Annual Meetings 2007 as an evolution
of the Clean Energy investment Framework (CEIF)
– Concepts and Issues development, early
consultations– through March 2008
– Full-scale Consultations – April-June
– Draft Final Paper –July
– Web-based consultations, select meetings per
demand – August-September
– Final paper – Annual Meetings in October 2008
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Sustainable Development @ The World Bank
SFCCD is about development in the
context of climate change
• Priority of growth, poverty
reduction and MDGs
• Importance of meeting
energy needs of
developing countries
• Development imperative
of helping to adapt to
climate risks
• Resource mobilization in
addition to the current
ODA levels
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Relation to UNFCCC Negotiations
– Neutral to any party position
– Helping countries understand the impacts of
alternative policies within the UNFCCC
– Piloting innovative instruments and
approaches that help inform the development
of a future regime (e.g. Carbon Finance,
IDA15 as a platform for mainstreaming
adaptation)
– Advocacy and capacity building
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Sustainable Development @ The World Bank
SFCCD Objective
To integrate climate change and development
challenges, without compromising – and rather
enhancing – growth and poverty reduction
efforts through:
– Country, regional, and global operations
– A multi-sectoral, multi-dimensional approach
– The use of a strong and balanced results
framework
– Working with other development partners
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Sustainable Development @ The World Bank
Working With Multiple Partners
• UN agencies, UNFCCC Secretariat, GEF
– A common UN-system approach to CC
– Building blocks: mitigation, adaptation, technology, finance
• Other MDBs
– Clean Energy Investment Framework
• Bi-lateral donors
• Initiatives by countries, sub-national (city) governments,
private sector, NGOs
• Scaling up WBG engagement based on its specific
comparative advantages
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Sustainable Development @ The World Bank
SFCCD Pillars
1. Make effective climate action – both adaptation and
mitigation - part of core development efforts
2. Address the resource gap through existing and
innovative instruments for concessional finance
3. Facilitate the development of innovative market
mechanisms
4. Create enabling environment for and leveraging private
sector finance
5. Accelerate the deployment of existing and development
of new climate-friendly technologies
6. Step-up policy research, knowledge management and
capacity building
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Sustainable Development @ The World Bank
Dual approach to integrating climate
action into development by :
• Focusing on multiple • Mobilizing
benefits and business concessional finance
opportunities
to cover additional
cost
19
WB lending: in sectors with largest
potential for adaptation and /or mitigation
GHG Emissions by Sector, IBRD-IDA Countries
Transportation
6%
Waste
3%
Total IBRD-IDA Lending by Sector, FY07
Financial & PSD
8%
Electricity &
Heat
20%
Energy & Mining
5%
Other
40%
Land-Use
Change &
Forestry
32%
Transport
19%
Industry
13%
Urban
Development
6%
Other
11%
Agriculture
15%
Agriculture &
Rural
Development
12%
Water
10%
Numerous opportunities to make a difference; similar situation in IFC
and MIGA: GHG Emissions and IBRD/IDA Portfolio, FY07
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Sustainable Development @ The World Bank
… similar situation with IFC & MIGA
portfolios
IFC IFC
investment
by Sector ($ mln), FY07
Investm ent by Sector ($ m illion), FY07
Other
13%
Infrastructure
17%
MIGA MIGA
Guarantees
bySector
Sector
($ mln),
Guarantees by
($ m illion),
FY07 FY07
Financial
24%
Accommodation &
tourism services
2%
Infrastructure
44%
Oil, gas, mining &
chemicals
10%
Finance &
insurance
40%
Agriculture &
forestry
2%
Manufacturinig &
industry
16%
Oil, gas & mining
12%
Manufacturing
10%
Agribusiness
2%
Tourism,
construction &
services
8%
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Mobilizing Finance to Cover Additional
Costs
Progress to date:
– Strong replenishment of
IDA15
– Adaptation Fund under
special arrangement with
GEF Secretariat
– CIEF: Increased volume
and share of low carbon
energy lending, in
partnership with GEF
– IFC leveraged private
finance by 1 to 5
– Robust increase in
Carbon Finance
– Forest Carbon
Partnership Facility
New initiatives:
• WBG+RDBs - Climate
Investment Funds (CIF)
• Carbon Partnership Facility
• MIGA –carbon credit delivery
guarantee
• IFC- Structured financing
packages blending CF with
loans and guarantees
• WB Treasury - bonds at
reduced rates to advance to
projects with climate benefits
• Climate Risk Insurance
products customized to
different needs
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Sustainable Development @ The World Bank
Addressing the Resource Gap:
proposed
Climate Investment Funds
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Sustainable Development @ The World Bank
Addressing the Resource Gap:
proposed Climate Investment Funds
• Scale of action- need to translate lessons from CEIF and
longer-term GEF pilot and prototype projects and
capacity building, into broader programs which will help
transform economies so that the objective of alleviating
poverty and fostering growth can be met through new
ways of approaching low-carbon growth and enhancing
resilience.
• In consultation with interested parties, the WBG and
Regional Development Banks (RDBs) are joining efforts
to establish a portfolio of strategic CIF.
• CIF to complement, build upon and enhance the
activities of other existing instruments, like the GEF, IDA,
International Bank for Reconstruction and Development
(IBRD) and the IFC.
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Sustainable Development @ The World Bank
Climate Investment Funds: Principles
• Financing needs for climate change are enormous –
widespread recognition that all multilateral institutions must
work with their clients to address this agenda in support of
the Bali Action Plan.
• Climate Change is a development issue, and therefore
MDBs have an essential role to play. The central role of the
GEF and UN agencies in the financial architecture to
address climate change is fully recognized.
• The CIF aims to fill a critical gap: scaling up investments
while transforming development paths of the countries.
This will contribute to promoting an international
environment supportive of a global agreement to address
climate change.
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Sustainable Development @ The World Bank
Building on New Initiatives
• UK Environmental Transformation Fund
• US Clean Technology Fund
• Japan Cool Earth 50
ADB, AfDB, EBRD, IDB and the WBG joined forces to
establish a portfolio of Climate Investment Funds
– Strategic Climate Fund
– Clean Technology Fund
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Sustainable Development @ The World Bank
Where We Are
Current status:
– Strong interest from several donors
– Support from MDBs
– Demand from countries
– Agreement with GEF and preliminary discussions with UN
agencies and UNFCCC
Ongoing Actions:
– Consultations with recipient countries
– Expand donor base
– Broader and deeper consultations with others (UNFCCC, GEF,
UN partners, private sector)
– Advance design of funds and financial instruments
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Sustainable Development @ The World Bank
Proposed Funds
Clean Technology Fund
Strategic Climate Fund
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Sustainable Development @ The World Bank
The Gap in Mitigation Financing
• Absolute financing gap is ~ $100 billion per year
• In long-term, could be filled by combination of:
– growing market for carbon trading (could reach
$100 billion after 2012), and
– policy instruments such as carbon taxes
• In the interim, concessional financing is critical
to catalyze increased flow of commercial capital
in this area
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Sustainable Development @ The World Bank
Proposed Clean Technology Fund
• Accelerates transformation to low carbon economies
• Finances cost-effective mitigation of greenhouse gas
emissions
– Focus on investments that reduce GHGs at scale or
have demonstration impact that will lead to scale
– Speed and nimbleness essential, given urgency
– Scales-up and replicates lessons of GEF
• Focuses on engaging private sector
• Complements existing financing
• Utilizes the right blend/suite of instruments (concessional
loans, grants, guarantees)
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Sustainable Development @ The World Bank
Proposed Funds
Clean Technology Fund
Strategic Climate Fund
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Sustainable Development @ The World Bank
Proposed Strategic Climate Fund
• Composed of Partnerships for targeted
initiatives
–
–
–
–
Pilot Program for Climate Resilience
Ecosystem Services
Pre-commercial Technologies
Forest Investment
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Sustainable Development @ The World Bank
Pilot Program for Climate Resilience
• IDA is strong platform to promote climate-resilient
development. The successful IDA-15 replenishment was
partly testament to that (+42%)
• MDBs have already begun incorporating adaptation concerns
into their programs
• GEF Voluntary Funds:
• Special Climate Change Fund
ca. $300 million
• Least Developed Countries Fund
• GEF Trust Fund Strategic Priority on Adaptation
• Adaptation Fund (GEF-administered) could reach:
• ~ $100-500 million through 2012, can increase to
$2 billion per year after 2012.
• Bilateral donors providing additional resources
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Sustainable Development @ The World Bank
Gaps in Adaptation Financing
• Financing gap: UNFCCC estimates that in 2030,
$28–67 billion/year required to help developing
countries adapt
• Knowledge gaps are impediments to integrating
climate risks into development
• Until large-scale funds are operational, interim
financing is necessary to proceed with adaptation
mainstreaming in development and to build
knowledge base
34
Sustainable Development @ The World Bank
Proposed Climate Resilience Pilot Program
• Pilot and demonstrate ways to mainstream
climate risk management and climate resilience
into core development planning and budgeting
• Pilots will be country-led and build on National
Adaptation Programs of Action (NAPAs)
• Report lessons learned to the Board of the
Adaptation Fund, and share them widely with
IDA and similar programs in MDBs and UN
• Explore how to support country efforts through
international finance, consistent with Paris
Declaration on Aid Effectiveness
35
Sustainable Development @ The World Bank
Proposed Climate Resilience Pilot Program
• Board of Adaptation Fund will be invited to participate in
design and governance
• Primary decision making at country level
• Oversight Committee: developing countries + all
recipient countries, donors, the developing country CoChair of the Adaptation Fund Board, MDBs, UNDP,
UNEP, GEF, civil society
• 5-10 pilot countries to receive scaled-up support
• Pilot countries will be IDA eligible or SIDS
• 3-5 year time frame
– Technical assistance ($1-2 million)
– Additional financial resources to fund investments (up to $100
million per country)
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Sustainable Development @ The World Bank
Summary: Key Common Features of
Climate Investment Funds
• Support investments based on country-led strategies, and
• Be flexible and efficient to respond to country demand and
provide innovative solutions to mobilize private sector
• Maximize co-benefits, particularly in relation to poverty
reduction and sustainable management of natural resources
and ecosystem services
• Encourage fast-tracking of early action (both mitigation and
adaptation) and market-based solutions to climate change
• Utilize skills and capabilities of international financial
institutions to raise and deliver concessional climate
financing at a significant scale
37
Sustainable Development @ The World Bank
CIF Issues and Opportunities
• In further developing the proposal for climate investment
funds, the MDBs are engaged in extensive consultations
with key stakeholders, particularly potential recipient
countries and other interested parties and advance the
design of funds and financial instruments.
• The final proposal will focus on:
– Supporting UNFCCC Bali Action Plan and consistency with Paris
Declaration
– Country ownership- low carbon growth strategies and NAPAs to
support national sustainable development
– Learning by doing- for example enhancing knowledge base for
Adaptation Fund operations through pilots
– Inclusive, effective and efficient governance
– Optimizing impact
38
Sustainable Development @ The World Bank
Scaling up Carbon Finance
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Sustainable Development @ The World Bank
Pioneering Carbon Finance
• World Bank’s experience
 A global pioneer and catalyst in the carbon market –
US$180 million Prototype Carbon Fund (PCF)
initiated in 1999, before the Kyoto Protocol became
effective
 BioCarbon Fund: “LULUCF” (Land use, Land use
Change and Forestry) pioneer since 2004, including
for “Reducing Emissions from Deforestation and
Degradation” (REDD) at the project level
 Now managing 10 carbon funds, and over US$2
billion
 16 countries and 66 private sector companies have
made contributions to funds
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Sustainable Development @ The World Bank
Scaling up Carbon Finance
New! Carbon Partnership Facility (CPF)
• Objectives
– Target long-term emissions
– Scale up
– Support strategic, transformational interventions in power sector
development, energy efficiency, gas flaring, transport, urban
development, etc.
• Features
–
–
–
–
Programs, away from individual projects
Partnership between buyers and sellers
Fostering both demand and supply in uncertain market
Target size: €5 billion over 5 years; first tranche: €350 million
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Sustainable Development @ The World Bank
Scaling up Carbon Finance
New! Forest Carbon Partnership Facility (FCPF)
• Objectives
– Pilot system of positive incentives for post-2012 that includes
REDD
– Remain neutral to UNFCCC negotiations
– Catalyze / leverage private sector investment to enable scaling
up: $300 million will not save world’s forests
• Features
– Balanced governance structure (developing countries,
industrialized countries and carbon fund participants have
balanced voting rights on Participants Committee)
– Voluntary participation
– Two mechanisms
• $100 million readiness fund for capacity building
• $200 million carbon fund for purchase of emission reductions
Sustainable Development @ The World Bank
42
Forest Carbon Partnership Facility (FCPF)
34 Requests
for
Participation/
Cooperation
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Argentina
Bolivia
Cameroon
Central African Republic
Colombia
Costa Rica
Dem. Republic of Congo
Ecuador
El Salvador
Gabon
Ghana
Guatemala
Guyana
Indonesia
Kenya
Laos
Liberia
Madagascar
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Malaysia
Mexico
Nicaragua
Pakistan
Panama
Papua New Guinea
Paraguay
Peru
Philippines
Republic of Congo
Senegal
Sierra Leone
Sudan
Thailand
Uganda
Vanuatu
Sustainable Development @ The World Bank
43
Thank You
44
Sustainable Development @ The World Bank