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INTERNATIONAL CLIMATE FINANCE: PAST, PRESENT, FUTURE
University of Texas, Austin October 20, 2011
The views expressed here are those of the presenter and do not necessarily reflect those of the World Bank.
Gevorg Sargsyan, Program Coordinator, Climate Investment Funds, World Bank
Overview
What are the impacts of climate change? What are the solutions? How much will this cost? What is the current status of climate financing? What is the future of climate financing?
What Are The Impacts of Climate Change?
What Are The Impacts of Climate Change?
1st IPCC Assessment (1990): unequivocal detection of human impact not likely for a decade
2nd (1995): balance of evidence suggests discernible human influence
3rd (2001): most of the warming in the last 50 years is likely (>66%) due to human activities
4th (2007): most of the warming very likely (> 90%) due to human activity
What Are The Impacts of Climate Change: Rising Ocean Level and Melting Ice Sheets
244 glaciers – 87% have retreated over last 50 years
Greenland’s Melting Ice Sheet
Increase ~0.8oC in global temperature over the last century
Sea level rise: 3.1 ± 0.07 mm/year
Source: IPCC and World Development Report: Climate Change, 2010
What Are The Impacts of Climate Change: Current Greenhouse Gas Emissions
Source: IPCC, 2007
Forestry 17% Waste and
Wastewater 3%
Agriculture 14%
Industry 19%
Residential and Commercial
Buildings 8%
Transport 13%
Energy Supply 26%
Total greenhouse (GHG) emissions have increased from 28.7 to 49 GtCO2-eq between 1990 and 2004 (IPCC, 2007)
The largest growth in global GHG emissions has come from the energy supply sector (145% increase between 1970 and 2004)
Source: World Development Report: Climate Change, 2010
Under existing commitments to reduce emissions, the world temperature is estimated to increase by >3o by 2100
What Are The Impacts of Climate Change : Impact on Developing Countries
Development goals are threatened by climate change, with the heaviest impacts on poor countries and poor people …
…whereas, individuals’ emissions in high-income countries overwhelm
those in developing countries
Source: World Development Report: Climate Change, 2010
Source: World Bank
What Are The Impacts of Climate Change : Consequences of a 5o Rise In Temperature
Increased droughts and desertification
Loss of glaciers in the Andes and the Himalayas
$200 billion in assets in developing countries threatened by rising sea levels
Rising Sea-level
threatening 600 million
people
Increased flooding
Ocean acidification leading to disruption of marine ecosystems
Possibility of >50 percent of species’ extinction
Dieback of Amazon rainforest
What Are The Impacts of Climate Change : Growing Demand
1.6 billion people lack access to modern energy Global population will increase by >2 billion by
2050 presenting dual challenge of achieving growth and low-carbon climate resilient future
Source: IEA, 2010
What Are The Solutions?
What Are The Solutions?
Mitigation: To reduce the long-term risks and hazards of climate change through energy efficiency, renewable energy, transport, agriculture, reforestation, etc.
Adaptation: Adjustment to the adverse effects of climate change to reduce its impacts and increase future climate resilience
What Are The Solutions: Fundamental Principles Act now: 10 year delay will likely make 2oC
unachievable, postponing mitigation in developing countries by 20 years can double cost, China is expected to double building stock in next five years, coal plants for next 25 years will have CO2 higher than in last 100 years
Act together: cost of achieving original target is 60% higher if US does not participate though it is responsible for 20% emissions
Act differently: transformation in all sectors is required
What Are The Solutions: GHG Mitigation Options
Source: World Development Report: Climate Change, 2010
What Are The Solutions: Behavioral Change
Source: World Development Report: Climate Change, 2010
How Much Will This Cost?
How Much Will This Cost?
Considerable uncertainties about: cost of future technologies ability of ecosystems and societies to adapt Tipping point beyond which catastrophic impact occur
Distributional issues across time How to value loss of life, livelihood, biodiversity Cost of action must be compared with cost of inaction Emerging agreement that at 2oC- 2.5oC benefits
exceed cost
How Much Will This Cost: Technology Options
How Much Will This Cost: Developing Countries
Source: Stern Review, 2008 and World Development Report: Climate Change, 2010
Estimated annual climate funding needed in developing countries to limit GHG emissions and stabilize temperatures at 2oC
0.5%- 1.5% of global GDP is required
annually to stabilize emissions to account for faster than expected
climate change
What Is The Current Status of Climate Financing?
What Is The Current Status of Climate Financing?
According to the Copenhagen Accord and Cancun Agreement developed countries agreed to Provide Fast Start Finance (FSF) of $30 billion (2010-12) Mobilize $100 billion annually by 2020
90 countries have registered plans to reduce emissions or emission intensity (52 are developing and 27 are low income) but, even if implemented, will provide only 60% of required reductions
Current flows of mitigation finance averaging some $8 billion a year to 2012, is inadequate
Less than $1 billion a year now available for adaptation
What Is The Current Status of Climate Financing: Available Climate Finance
Existing concessional climate finance can be used to leverage
additional donor, Multi Development Bank (MDB) and private sector
finance
Global Environment Fund
(GEF)
3.4 billion
Climate Investment Funds (CIFs)
6.5 billion
Private Investments (e.g. Global
Climate Partnership Fund )
Carbon Finance and Green Bonds
~$19 billion
What Is The Current Status of Climate Financing: Carbon Finance Mechanisms under the Kyoto Protocol include
CDM –$27 billion in flows to developing countries in the past 9 years years, catalyzing low carbon investments of over $100 billion
Joint Implementation (JI) - 22 registered projects
European market for CDM credits from least developed countries are certain through EU legislation until 2020
Carbon Partnership Facility (CPF): European Union Emissions Trading Scheme and Post Kyoto-2012 Carbon Asset Development Fund (CADF) to prepare and
implement emission-reduction programs Carbon Fund (CF) to purchase carbon credits from the pool of
emission reduction programs
Source: World Development Report: Climate Change, 2010
What Is The Current Status of Climate Financing: Climate Investment Funds
Clean Technology Fund (CTF): Finances
demonstration, deployment, and transfer of low
carbon technologies Total commitment:
$4.5 billion Leveraged: $37
billion
Strategic Climate Fund (SCF):
Targeted programs to pilot new
approaches and scale-up:
Total commitment: $1.9 billion
Approved in July 2008 as an interim instrument, CIFs have balanced governance with equal representation from developed and developing countries
What Is The Current Status of Climate Financing: Transformational CTF and SREP Projects
Concentrated Solar Power (CSP) Middle East and North Africa South Africa India
Geothermal Indonesia Kenya Ethiopia
What Is The Current Status of Climate Financing: Transformational CTF and SREP Projects
Wind Egypt Morocco Mexico
Energy Access and Low Carbon Growth Mini grid – Maldives Micro-hydro – Nepal and
Honduras Solar PV electrification - Mali
Shoe vendor in Tanzania Before
After
What Is The Current Status of Climate Financing: Transformational CTF and SREP Projects
Energy Efficiency/Smart Grid Vietnam Mexico Turkey Ukraine
Public Transport and Modal Shift Philippines Colombia Thailand
What Is The Future of Climate Financing?
What Is The Future of Climate Financing?
• Equity in PPP for risky projects • Feasibility and pre-development
Government Finance
• Guarantees to de-risk projects • Long term debt capital leverage
ODA/MDB/ Bilateral Finance
• Mobilize equity and dept • Private sector expertise Private Sector
• Capacity building • Power to convene global expertise and
resources • Buy down investment cost of innovative
technologies
Dedicated Climate Finance
What Is The Future of Climate Financing: Sources of Finance
Carbon pricing or taxes ($25 per ton CO2) can raise around $250 billion annually
Feebates (taxes on high emission products and subsidies to efficient producers)
Wasteful fossil fuel subsidies Market based instruments for aviation/ maritime fuels Carbon-offset flows
What Is The Future of Climate Financing: Sources of Finance
but
Private investments leveraged by public policy reforms, institutional development and public outlays will be instrumental for meeting financing goals
What Is The Future of Climate Financing: Green Climate Fund
Green Climate Fund to channel portion of the$100 billion funding
The World Bank is interim Trustee for a period of 3 years
40 member transitional committee created to set-up the design and governance of the fund in 2010 25 members from developing countries and 15 from
developed nations Complex issues such as governance, capitalization,
direct access, role of private sector, allocation, adaptation vs mitigation, etc
What Is The Future of Climate Financing: Emerging trends
Climate impacts become part of a
wider resource stress Prop
ositi
on 1
Climate science is sufficient to drive climate policy Pr
opos
ition
1
Climate impacts become part of a wider resource stress
Prop
ositi
on 2
Industrialized nations will lead
Prop
ositi
on 2
Emerging markets are in the lead
Prop
ositi
on 3
Carbon markets will be the principal tool for
change Prop
ositi
on 3
Plans for low-carbon growth the principal tool
for change
Pre-Copenhagen Post-Copenhagen
Source: HSBC, 2011
Conclusion
Climate Change is real, its impact might be catastrophic and irreversible, with the highest impact on poor
Stabilizing temperature increase to less than 2oC while still remains technically and economically feasible is becoming increasingly difficult
Current financing for adaptation and mitigation ($9 billion) is only fraction of what is required
Significant existing voluntary commitments, but global temperature is expected to increase >3oC
Financing sources do exist, but political will may not
Thank You
"The problems of the world cannot possibly be solved by skeptics or cynics whose horizons are limited by the obvious realities. We need men who can dream of things that never were.“
John F. Kennedy
What Are The Impacts of Climate Change: Rising Ocean and Land Temperatures
Source: IPCC, 2007
