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Towards aStrategic Framework on Climate

Change and Development (SFCCD) for the World Bank Group

Consultation www.worldbank.org/climateconsult

28 April 2008

The World Bank Group

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I. Objective of ConsultationsII. Climate Change is a Development IssueIII. World Bank Group ExperienceIV. How We Will Develop a Comprehensive

FrameworkV. About the Strategic FrameworkVI. Concrete Step Forward – Proposed

Climate Investment FundsVII. Consultations

Outline

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I. Objective of Consultations

• Listen to different views

• Better integrate perspectives of diverse stakeholders

• Facilitate consensus on the World Bank Group’s role

• Identify areas of collaboration

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II. Climate Change is a Development Issue

• “Warming of the climate is unequivocal… many natural systems are being affected” (IPCC)

• Human-made GHG emissions are most likely among the key causes

• Unabated growth in emissions will likely cause severe and irreversible impacts

• The likelihood of catastrophic events is increasing• The exact time, location and scale of impacts are

uncertain

Effective response must combine: Mitigation - to avoid the unmanageable Adaptation - to manage the unavoidable

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Climate Change is a Development Issue

• Developing countries are already being affected

• The poorest countries and communities stand to suffer the earliest and the most

• Development gains and achievement of the Millennium Development Goals are at risk

• Lower carbon and climate resilient growth offers opportunities for sustainable development with multiple benefits

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Developing Countries Are Most At Risk 6 Climate Threats

Drought Flood Storm Coastal 1m Coastal 5m Agriculture

Malawi Bangladesh PhilippinesAll low-lying Island

StatesAll low-lying Island

States Sudan

Ethiopia China Bangladesh Vietnam Netherlands Senegal

Zimbabwe India Madagascar Egypt Japan Zimbabwe

India Cambodia Vietnam Tunisia Bangladesh Mali

Mozambique Mozambique Moldova Indonesia Philippines Zambia

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 Vietnam China Bangladesh Fiji Algeria

Kenya Benin Honduras Senegal Vietnam Ethiopia

Iran Rwanda Fiji Libya Denmark Pakistan

Middle Income

Low Income Source: World Bank

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Poverty Reduction Success Is Linked To Climate Change

distribution of climate threats, by category

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Adaptation Challenges Over Time Will Depend on Mitigation Progress

Likely change already

“baked in”

Likely change with successful

mitigation action

Likely change without significant action on

mitigation

Risk of catastrophic events increases with temperature

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Sources of GHG are cross-sectoral and most significant from energy and land use change

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Regional ImpactsAfrica

• Food security and risk associated with agricultural production

• Lack of access to safe water and increased water stress

• Low adaptive capacity and high vulnerability to climate variability and natural disasters such as droughts and floods

• Negative health impacts, especially increased risk of malaria

• Sea-level rise and its impact on low-lying coastal areas

*Source: Concept Paper Annex 1

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Regional Impacts East Asia and Pacific

• Decreased freshwater availability• Endemic morbidity and mortality due to diarrhoeal

disease associated with floods and droughts• Degradation of marine and coastal ecosystems by sea-

level rise and temperature increases• Sea-level rise potential results in displacement of millions

of people• Damage to aquaculture industry by sea water intrusion• Increased threats to the ecological stability of wetlands,

mangroves and coral reefs

*Source: Concept Paper Annex 1

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Regional Impacts Europe and Central Asia

• Increased climate-related hazards including prolonged droughts, more frequent storms and floods, and fire risk

• Coastal Floods and erosion due to sea-level rise

• Increased health risks due to more frequent heatwaves, flooding and greater exposure to vector- and food-borne diseases

• High water stress

• Decline of forest productivity*Source: Concept Paper Annex 1

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Regional Impacts Latin America and the Caribbean

• Decreased water availability in many water scarce regions and impact on high mountain ecosystems

• Reduction in agricultural productivity• Distortion of the functioning of ecosystems,

including coral reefs, wetlands and mangrove, and forests

• Large-scale displacement of populations due to increased extreme events and sea-level rise

• Health impacts e.g., heat stress mortality and greater exposure to vector-borne diseases

*Source: Concept Paper Annex 1

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Regional Impacts Middle East and North Africa

• Increased occurrence of droughts and water scarcity

• Greater fluctuation of agricultural yields, especially in rain-fed areas

• Worsening of public health due to heat waves, decreasing water and air quality, and ground ozone formation

• Sea-level rise and its impacts on agricultural, low-lying coastal areas and wetlands

*Source: Concept Paper Annex 1

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Regional Impacts South Asia

• Increased intensity and frequency of storm surges, cyclones, floods and droughts

• Negative impact on agricultural yields particularly in arid zones and flood-affected areas

• Decrease in river flows in the Himalayan countries, unreliable supplies of fresh water and the need for management of shared transboundary systems

• Sea-level rise and its impact on coastal livelihood through flood, damage to groundwater aquifers, loss of wetlands and ecosystems

• Lack of scientific information on the consequences of Himalayan snow melt and associated risks and climate change impact on biodiversity and ecosystems

*Source: Concept Paper Annex 1

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III. World Bank Group ExperienceSome Highlights

• 1993 – Began implementing / leveraging GEF funding for climate change

• 1999 – Pioneered Carbon Finance through $180 million Prototype Carbon Fund

• 1999 – ”Fuel for Thought” Environment Strategy for the Energy Sector

• 2001 – Adopted Environment Strategy with climate change pillar

• 2006-08 – Clean Energy Investment Framework (CEIF):

• (i) increased access to energy, especially in Sub-Saharan Africa; (ii) accelerated transition to a low carbon energy economy; and (iii) adaptation to climate variability and change.

• 2007 IDA and Climate Change Paper

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Recent progress in climate change• Share of support for low-carbon energy projects up from

28% in FY03–05 to 40% in Fy06-08, with an overall increase in energy lending from $6 billion to $11 billion– GEF and Carbon Finance (CF) contributed US$546 million, or 13

%, with significant leveraging

• RE and EE lending exceeded Bonn commitment 1.5 years ahead of schedule

• CF business grown to $2 billion, with two new facilities - CPF and FCPF- approved in September 2007

• Low carbon growth and adaptation studies • Pilot program to begin measuring GHG emissions of the

WBG lending portfolio is underway.• Strengthened partnership with MDBs

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Sources of GHG Emissions in Developing Countries

GHG Emissions by Sector, IBRD-IDA Countries

Electricity & Heat20%

Industry13%

Other11%

Agriculture15%

Land-Use Change & Forestry

32%

Transportation6%

Waste3%

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World Bank lending is in sectors with largest opportunities for both adaptation and mitigation

Total IBRD-IDA Lending by Sector, FY07

Financial & PSD8%

Energy & Mining5%

Transport19%

Urban Development

6%Water10%Agriculture &

Rural Development

12%

Other40%

Numerous opportunities to make a difference

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… similar situation in IFC & MIGA portfolios

Infrastructure 44%

Agribusiness 2%

Manufacturing 10%

Oil, gas & mining 12%

Financial 24%

Tourism, construction &

services 8%

IFC investment by Sector ($ mln), FY07 MIGA Guarantees by Sector ($ mln), FY07

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IV. How we will develop a comprehensive strategic framework to address climate change

Neutrality to UNFCCC Negotiations Flexibility to Accommodate New

DevelopmentsWorking with Multiple Partners Inclusive and Consultative Process

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Neutrality 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. IDA15 as a platform for mainstreaming adaptation, Carbon Finance, Climate Investment Funds)

– Advocacy and capacity building

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Flexibility to Accommodate New Developments

• The Strategic Framework will evolve as international negotiations and scientific knowledge and experience on the ground evolve

• It will pilot and test new approaches and benefit from learning and on-going consultations with various stakeholders

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Working With Multiple Partners

• UN agencies, UNFCCC Secretariat, Global Environment Facility– A common UN-system approach to Climate Change– Building blocks: mitigation, adaptation, technology, finance

• Multilateral Development Banks– Have worked closely on Clean Energy Investment Framework

• Bi-lateral donors• Initiatives by countries, sub-national (city) governments,

private sector, Non-Governmental Organizations Scaling up World Bank Group engagement based on its

specific comparative advantages

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Inclusive and Consultative Process

• Initial phase of global consultations through June 30

• Actively seeking comment from all regions and stakeholders including civil society, private sector and youth

• Consultations will continue through the implementation phase

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V. About the Strategic Framework on Climate Change and Development (SFCCD)

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To integrate climate change and developmentchallenges, without compromising – and ratherenhancing – growth and poverty reductionefforts through:

– WBG 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

Objective

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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

Climate change: Role of the WBG

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6 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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Pillar 1

• Country-driven– Customized country-level approach balancing adaptation needs

and low carbon growth opportunities• Multi-sector engagement based on demand• Tailor to the needs of both public sector (WB) and

private sector (IFC) clients• Focus on multiple benefits and development

opportunities of climate action• Understand and address social dimensions• Strengthen local institutions

1. Make effective climate action – both adaptation and mitigation - part of core development efforts

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Integrating climate action in development

• Country-driven approach– Customized to adaptation needs and low carbon

growth opportunities in a country-specific context• Multi-sector engagement based on demand• Tailor to the needs of both public sector

(WB) and private sector (IFC) clients• Focus on multiple benefits and development

opportunities of climate action• Attention to social dimensions and local

institutions• Dialogue on economic and fiscal policies

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Climate Financing

- main sources

Carbon Market

(CDM/JI)

$ 5 billion

Climate Investment

Funds by all MDBs

$5 – 10 billion

for 3 years

Other

MDBs financing

$3 billion

World Bank

Trust Funds from

Bilateral Donors

$ 10 Million

World Bank Group

(IBRD/IDA/IFC/MIGA)

$1.9 billion

GEF

$ 250 Million

Adaptation

Funds

$ 100 Million

Projected Annual Funding for FY09

GFDRR

~ $ 15 Million

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Pillar 22. Address the resource gap through existing and

innovative instruments for concessional finance

New initiatives:• WBG+RDBs - Climate Investment Funds (CIFs)• Innovation in Carbon Finance:

– Carbon Partnership Facility, Forest 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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Pillar 3

3. Facilitate the development of innovative market mechanisms

• Carbon Market

• Green Bonds

• Climate Risk Insurance markets

• Energy efficiency, “green” goods and services

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Pillar 4

• MIGA guarantees; IFC leveraging• Partnering with private sector on sustainable energy

products• Advising private sector on climate mitigation and

adaptation• Regulatory frameworks conducive to climate friendly

investments• Mobilizing donor funding for innovative investments –

working with GEF and other donors

4. Create enabling environment for and leverage private sector finance

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Pillar 55. Accelerate the deployment of existing and development

of new climate-friendly technologies

• Continue to accelerate technology deployment:– IFC clean production

programs – Proposed CIF envisages

clean technology window• Explore possible role in

technology R&D:– Assessment of models

from other sectors• Working with GEF and other

partners

Business as usual

Business as usual

Medium Tech Acceleration

Medium Tech Acceleration

High Tech Acceleration High Tech

Acceleration-40%

-20%

0%

20%

40%

60%

80%

100%

120%

2030 2050

% C

O2

Em

iss

ion

ch

an

ge

fro

m 2

00

5

CO2 Emissions from Energy

under Different Scenarios

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Pillar 66. Step-up policy research, knowledge management and

capacity building

• Growing regional and country programs – low-carbon growth studies in six countries; adaptation studies

• World Development Report 2010 on climate change• Global study on economics of adaptation• Social impacts of climate change• Economic and fiscal policy analyses• Diagnostic tools to support operations

– User-friendly software to screen for climate risks– Methodologies for carbon foot-printing of development projects

(starting with energy, transport, and forestry sectors FY08-09)– Guidance for economic analysis: discount rates, carbon pricing

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Consultations

Developing countries, UN agencies (UNFCCC, UNEP, UNDP, etc.), donors, CSOs, private sector, youth

Multisector In all regions, document translated into 7

languages www.worldbank.org/climateconsult

videoconferencing; teleconferences; face-to-face

Internal consultations underway

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1. [Global] What should the World Bank Group’s role on climate change be within the international development community?

2. [Climate & Development] The Concept and Issues Paper states that both mitigation and adaptation must be integrated into development efforts: where do you see the key areas of focus for the World Bank Group?

3. [Clean Technologies] What role can the World Bank Group play to accelerate the development and deployment at scale of climate friendly technologies for energy, transport, agriculture and other sectors in developing countries?

4. [Capacity Building] Building capacity within countries, regions and institutions will be crucial to address climate change issues. How can the World Bank Group contribute?

5. [Additional Financing] What should be the role of the World Bank Group in mobilizing additional concessional financing and private sector investments to respond to climate change?

Your Feedback: www.worldbank.org/climateconsult

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We are listening

www.worldbank.org/climateconsult