Download Module 1 - Background and Overview

Global Climate Change Alliance:
Intra-ACP Programme
Training Module
Climate Change Finance
Module 1 – Financing Climate Change
Ms Isabelle Mamaty
Senior Expert
Climate Support Facility
An initiative of the ACP Group of States funded by the European Union
Module Structure
 Climate change and sustainable development
linkages
 Mainstreaming climate change into national
development planning and budgeting
 Financing climate change
 External sources of climate change
2
Climate change and sustainable
development linkages?
3
Climate change and
sustainable development
Both adaptation and
mitigation support more
sustainable
development
Climate change
Biophysical effects
Environment
Sustainable
development
Socio-economic
impacts
Social
dimension
In turn, the pursuit of
sustainable development
enhances society’s response
capacity
4
Economy
Climate change and MDGs
Eradicate extreme
poverty & hunger
(Goal 1)
e.g. Adverse
effects on food
security
Improve
maternal
health
(Goal 5)
e.g. Higher
incidence of
anaemia resulting
from malaria
Reduce child
mortality
e.g. Increased
incidence of
waterborne
diseases
(Goal 4)
Potential
impacts on
MDGs
e.g. Dependence
on livelihoods put
at risk by CC
Ensure
environmental
sustainability (Goal 7)
Combat major
diseases (Goal 6)
e.g. Heat-related
mortality & illnesses
Source: OECD (2009a)
Promote gender
equality & empower
women (Goal 3)
5
e.g. Increased stress
on ecosystems and
biodiversity
Adaptation and mitigation
measures
 Adaptation and mitigation measures should be
considered as opportunities to development cobenefits towards a green growth
 Mitigation should be compatible with adaptation
policies and instruments, rely on environmentally
sustainable practices while adaptation should take
account of emissions.
… then this helps moving to climate-resilient
development and low- emissions development
… only if climate change is mainstreamed into
policymaking and planning
6
Mainstreaming climate change into national
development planning and budgeting
7
Mainstreaming climate change into
national development planning
 There is a strong case for mainstreaming climate change
into all development planning
 There are entry points for mainstreaming climate change at
all stages of the policy cycle
 Mainstreaming climate change at strategic
planning levels supports more integrated, effective,
efficient and sustainable responses
o But top-down and bottom-up approaches to adaptation are
complementary and mainstreaming is also justified at local level
 Evidence supports both the engagement of key actors and
the development of a communication and advocacy
strategy
8
Mainstreaming climate change into
national development budgeting
 Climate-related policies and measures can
impact the national budget in multiple ways
 There are entry points for mainstreaming climate change
at practically all stages of the budgetary process including at the stage of ex post evaluation (PERs)
 It is recommended to set up systems to keep track of
adaptation- and mitigation-related expenditures
 Multiple sources of funding exist to support adaptation
and mitigation – focus on eligibility and objectives
 Where conditions are met, budget support is a suitable
modality for supporting CC mainstreaming efforts
9
NAPAs and NAMAs
 Many developing countries have now
submitted their NAPAs (& NAMAs) to the UNFCCC
o NAPAs = national adaptation programmes of action
 Help LDCs build national capacities and identify priority
adaptation projects with developmental benefits
o NAMAS = nationally appropriate mitigation actions
 These voluntary mitigation measures are consistent with a
country’s development strategy, and are meant to put it on a
more sustainable development path
 These are a good starting point for addressing the
climate challenge without compromising
development objectives
10
Financing climate change
11
Global response to climate change
under UNFCC (1)
 165 nations signed the 1992 United Nations
Framework Convention on Climate Change
(UN-FCCC) at Rio de Janeiro
 The Convention divides countries into two
main groups Annex I (developed) & nonAnnex I (developing)
12
Global response to climate change
under UNFCC (2)
 Annex I (Developed Countries) agreed to reduce their
GHGs by 5.2 % below 1990 levels in 1st commitment period
2008 – 2012
 Convention hinges on three principles:
o Common but differentiated responsibility
o Precautionary approach
o Sustainable Economic Growth and Development
 Commitment by developed countries to provide funding for
the “agreed full incremental costs” of climate change in
developing countries under Article 4.3: Convention, Kyoto
Protocol, successive COP agreements and decisions
13
UNFCC key decisions
on climate finance (1)
 1991 - Creation of the Global Environment Facility (GEF)
hosted at the World Bank.
 1992 - Rio Earth Summit- Decision to restructure GEF
 1994 - GEF becomes a permanent, separate institution
and the financial mechanism of the following conventions:
UNFCC, Convention on Biodiversity, Montreal Protocol on
Ozone, Stockholm Convention on persistent Organic
Pollutants and UN Convention to Combat Desertification.
 1995 - COP 1 Berlin – discussion on Kyoto Protocol
14
UNFCC key decisions
on climate finance (2)
1997-COP 3 - Kyoto – Adoption of Kyoto Protocol
(binding commitment on emissions reduction)
2001-COP 7- Marrakesh Accords- Rules of implementation for
the Kyoto Protocol, new funding and planning instruments for
adaptation and establishment of technology transfer framework
2005- Kyoto Protocol into force
2006- Adoption of Nairobi action plan on adaptation to assist all
Parties (in particular LDCs and SIDs in improving and assessing
impacts of CC and information on practical adaptations
actions
15
UNFCC key decisions
on climate finance (3)
 2007- COP13- Bali Road Map: launching of the Adaptation
Fund
 2009- COP 15- Copenhagen: Copenhagen Accord– Short
term-finance = 30 billion USD for 2010-2012 (Fast start) +
Mobilisation of 100 USD billion a year by 2020 to address
developing countries needs.
 2010- COP 16- Cancun – Cancun Agreements:
Establishment of a Green Climate Fund to scale –up long
term Finance for developing countries.
 2011-COP 17 Durban: agreement to move into a second
commitment period for the Kyoto protocol in 2013
16
Global environment facility
(GEF) (1)
 GEF is since 1994 the financial mechanism of the following
conventions:
o
o
o
o
UN Framework Convention on Climate Change(UNFCC),
Convention on Biodiversity,
Stockholm Convention on persistent Organic Pollutants
UN Convention to Combat Desertification.
 Supports activities on management of chemical products
under the Montreal Protocol on Ozone
o Manages two funds under the UNFCCC
o Special fund for climate change (SCCF)
o Least developed countries fund (LDCF)
 Secretariat of the Adaptation Fund
17
How does GEF work ?
 GEF provides grants to programmes embedded in national planning
in eligible countries :
 they meet eligibility criteria established by the relevant COP; and
 are eligible to borrow from the World Bank (IBRD and/or IDA);
 and/or they are eligible recipients of UNDP technical assistance through
country programming related to climate change, international waters, land
degradation, the ozone layer, biodiversity, and persistent organic pollutants).
 Resources for the GEF Trust Fund are replenished every four years:
current replenishment period is the GEF fifth replenishment - GEF-5 for
period 2010-2014
 Country allocation is provided under the new System for Transparent
Allocation of Resources (STAR) that replaces the former Resource
allocation Framework (RAF) system under GEF-4 period
18
System for Transparent
Allocation of Resources (STAR)
 STAR covers biodiversity, climate change and land degradation
 Allocation is given to individual country taking account of their
vulnerability
 Minimum Allocation floor (threshold):
o $ 2 billion for climate change
o $1.5 billion for biodiversity
o $0.5 billion for land degradation
 Maximum allocation (cap):11% of total funds for climate change and
10% for biodiversity and land degradation
 However STAR provides flexibility for countries :
o below the threshold to use the total of their allocations across all and any STAR
focal areas during the GEF-5 cycle
o with a total allocation of up to $7 million to allocate these $7 million in any or all of
these focal areas without having to respect the proportions
o To be able to use more than 50% of their indicative allocations during the first two
years (elimination of the GEF-4 fifty percent rule)
19
Kyoto Protocol
 Annex I (Developed Countries) agreed to reduce their GHGs
by 5.2 % below 1990 levels in 1st commitment period
2008 – 2012
 Kyoto Protocol is a legally binding agreement for emissions
reductions by industrialised countries through three marketbased mechanisms:
o Emissions trading “carbon market”
o Clean development mechanism (CDM)
o Joint implementation (JI)
 184 Parties of the Convention have ratified its Protocol to
date.
20
Emission Trading under Kyoto
Protocol (1)
Emission trading (Art. 17 of Kyoto Protocol):
Parties under Kyoto Protocol (Annex B Parties) have
committed targets for limiting or reducing CO2 expressed as
levels of allowed emissions or « assigned » amounts over
2008-2012 period. The allowed emissions are expressed as
« assigned amount units » (AAUs) which can be traded by
parties that have not used them to parties that are over their
targets.
21
Emission Trading under
Kyoto Protocol (2)
Other traded units under Kyoto are:
 A removal unit (RMU) on the basis of land use, land-use change and
forestry (LULUCF) activities such as reforestation
 An emission reduction unit (ERU) generated by a joint
implementation project (article 6 of the Kyoto Protocol) : a country of
Annex B party to Kyoto Protocol is allowed to earn emission
reduction (ERUs) from an emission –reduction or emission removal
project in another Annex B Party.
 A certified emission reduction (CER) generated from a clean
development mechanism project activity (article 12 of Kyoto
Protocol). A annex B country Parties to Kyoto Protocol is allowed to
earn saleable CER from an emission-project in developing countries.
 Transfers and acquisitions of these units are compiled in the registry
systems under the Kyoto Protocol
22
Financing Adaptation
 Copenhagen Accord 2009: priority of funding for adaptation to
LDCs, SIDs and Africa
 COP 2010 adoption of Cancun Adaptation Framework:
commitment for support to developing countries for adaptation
action under the National Adaptation Programs of Action
(NAPAs)
 Cost of adaptation: public versus private finance
 Majority of International climate funding instruments are ODA
transfers
 Finance through dedicated adaptation funds: 21% of total
climate finance approved in 2011
 Uneven distribution: poorest countries received less
23
Financing Mitigation
 Copenhagen COP 2009: commitment to mobilise $100
billion per year in climate finance by 2020
 Green Climate fund (GFC): Cancun COP 2010
 2/3 of total climate change since 2008, primarily in
renewable energy technologies activities (Asia Pacific
region)
 GEF projects seek to support rural electrification using
renewable energy technologies to reach the poor (exp.
Scaling Renewable Energy Program of the CIFs
 Need for transformation in policy and regulatory
frameworks to address mitigation
24
Estimating the Costs of
climate change
 The estimates of climate change financing
needs of developing countries are as
follow:
o mitigation : $500 billion to 1100 billion/year
(UNFCC, 2009; World Bank report 2010;
UNDESA (WESS, 2010)
o Adaptation : 100$ billion to $ 450 billion/year
(UNFCC 2007; World Bank 2010; Parry et al.
(2009)
25
External sources of climate change finance
26
Sources of Climate
Change Finance
 Public funding (multilateral/bilateral funds)
 National climate funds
 Private-public partnership initiatives (e.g.
GEEREF)
 Market-based instruments (« market
carbon »): Compliance market (CDM/ EU
emissions trading scheme)/voluntary market
27
Public funding (multilateral/bilateral funds)
28
Complex architecture of
the funds
29
Main sources of external
financing (1)
Source of funding
Activities supported
Development cooperation programmes
Adaptation and mitigation with a focus on
development
Least Developed Countries Fund
Preparation and implementation of NAPAs
Special Climate Change Fund
Adaptation (priority objective), technology transfers,
mitigation in high-potential sectors
GEF Trust Fund’s climate change focal area Mitigation projects, adaptation demonstration
projects and ‘enabling activities’
Adaptation Fund
Projects and programmes that reduce the
vulnerability of communities and sectors to CC
Green Climate Fund
(operations not yet started)
Channel for future multilateral funding for
adaptation and mitigation
Clean Technology Fund
Demonstration, deployment and transfer of lowemission technologies
Strategic Climate Fund (SCF) - Pilot
Program for Climate Resilience
Climate risk and resilience mainstreaming in
development
planning
30
Main sources of external
financing (2)
Source of funding
Activities supported
SCF- Forest Investment Program
REDD- related activities, sustainable forest
management
SCF - Program for Scaling Up Renewable
Energy in Low-Income Countries
Deployment of renewable energy sources
REDD+ (various streams of funding incl.
UN-REDD, which promotes the
mainstreaming of REDD strategies in
national development)
Preparation, pilot implementation and deployment
of national strategies for reducing emissions from
deforestation/forest degradation
Prototype Carbon Fund
Pioneering approaches to mitigation that contribute
to sustainable development
BioCarbon Fund
Carbon sequestration projects in forests and agroecosystems
31
Main sources of external
financing (3)
Source of funding
Activities supported
Forest Carbon Partnership Facility
Preparation of national REDD strategies, pilot
financial transfers based on verified emission
reductions from REDD
Carbon Partnership Facility
Long-term, post-2012 mitigation projects
Global Energy Efficiency and Renewable
Energy Fund
Energy efficiency and renewable energy projects
Global Climate Change Alliance
Mainstreaming of CC in poverty reduction and
national development strategies
Adaptation, DRR, participation in REDD/CDM
MDG Achievement Fund, ‘environment
and climate change’ thematic area
Mainstreaming of environmental issues in national
and sub-national policies, planning and investment
frameworks
Clean Development Mechanism
Mitigation projects in developing countries
Voluntary carbon markets
Mitigation projects
32
Funding by theme
Split of overall funding by theme
Source: www.climatefundsupdate.org
33
Gaps in climate funds
flows (1)
Fund
Adaptation Fund
Pledged
Disbursed
254.95
25.61
4433.00
384.00
Congo Basin Forest Fund
165.00
15.71
Forest Carbon Partnership Facility
436.90
11.35
Forest Investment Program
599.00
14.00
GEF Trust Fund - Climate Change focal area
(GEF 4: 2006 - 2010)
1032.92
915.70
GEF Trust Fund - Climate Change focal area
(GEF 5: 2010 - 2014)
1141.00
1.00
Clean Technology Fund
Global Energy Efficiency and Renewable 34
Energy Fund
169.50
Gaps in climate funds
flows (2)
Fund
Pledged
Disbursed
International Climate Initiative
680.40
562.10
International Forest Carbon Initiative
216.27
47.60
Least Developed Countries Fund
379.86
107.71
89.50
83.30
Pilot Program for Climate Resilience
982.00
55.00
Scaling-Up Renewable Energy Program for Low
Income Countries
352.00
6.00
Special Climate Change Fund
UN-REDD Programme
206.39
150.84
86.10
117.90
32719.05
2666.90
MDG Achievement Fund – Environment and Climate
Change thematic window
Total:
35
Financing NAPAs
 NAPAs focus on immediate and urgent
needs of the LDCs to adapt to cliamet
change. Only 20% of NAPAs needs are
being met from dedicated climate funds
 46 countries have developed NAPAs
focusing on agricutlture food security and
water projects
36
Difficulties in capturing resources
for developing countries (1)
 Internal difficulties in developing countries
 Problem in designing projects
 Sequencing
 Coordination
 Lack of absorptive capacity
37
Difficulties in capturing resources
for developing countries (2)
 Difficulties related to the funds
 Proliferation of funds runs contrary to the Paris
Declaration principles for aid effectiveness
 Complication of reporting, monitoring and
verification of financial commitments
 Heavy administrative burden placed on recipient
countries
38
Funds evaluation – ground
level reality
39
National climate funds
40
National climate funds
 Several countries have now established a ‘national
climate fund’ (trust fund) to:
o channel and manage external funding related to CC
o leverage existing funds and initiatives (incl. those
financed with national resources)
o support the mainstreaming of climate-related programmes
and projects into national development strategies
 Expected benefits:
o Alignment of external funding with national priorities
o Building of national capacities and institutions
o Scaling up of the response to climate change
41
Private-public partnership initiatives
42
Private-public Linkages
Many climate change responses, especially in relation to
mitigation will involve the private sector (exp. Energy
efficiency), therefore government should:
 Involve private sector representatives to the climate change task-force
and/or other national committees/councils;
 Involve the private sector in setting amended national standards and
codes to respond to the challenge of climate change;
 Assist the private sector to take up climate change responses by
providing incentive schemes, and by initiating public-private partnerships
 Identify and seek the support of private enterprise in national climate
change initiatives and in particular, the Clean Development Mechanism.
43
Market-based instruments
44
Market carbon structure
Compliance Market
JI & CDM
Kyoto
compliance:
Annex1
countries
Australia, EU,
Canada, Japan,
New Zealand, USA
EU emissions
Trading
Scheme
Voluntary Market
Voluntary
NGOs
Retail
Pre-compliance
CSR
Market-based Instrument
Challenges(1)
 Challenges in host countries:




Lack of institutional capacity
Lack of financing and information
Perceptions of investment risk
Small size (e.g. small volume) of emissions
reductions
Market-based Instrument
Challenges (2)
 Uncertainty over a second commitment period
(after 2012) for the Kyoto Protocol raises
questions about the future of the CDM
 Private Public partnership : challenge in
designing instruments to address private sector
risk while ensuring public accountability for
delivering impact and results (incl.
developmental and social co-benefits)
47
Turning words into action
48
Discussion
 Questions and answers
 General discussion and sharing of experiences
concerning the use of the existing climate
change funds and market-instrument
mechanisms and difficulties encountered by your
organisation and/or country
49
• Thank you
• Contact: Dr. Pendo MARO, ACP Secretariat
[email protected] or +32 495 281 494
www.gcca.eu/intra-acp