Transcript Risks of Climate Change

Clean Energy, Energy Efficiency
and Sustainable Development
G8 Climate Change Action Plan
The Global and Brazilian Context
Sao Paulo, 26 October 2005
Historical Emissions of CO2
LULUCF Annex 1
Fossil C Annex 1
LULUCF Non Annex 1
Fossil C Non Annex 1
5000
Mt C / year
4000
3000
!
2000
1000
0
-1000
1850
1900
1950
2000
World Energy-Related CO2 Emissions
20 000
Mt of CO2
16 000
12 000
8 000
4 000
0
1970
OECD
1980
1990
2000
Transition economies
2010
2020
2030
Developing countries
70% of the increase in global CO2 emissions comes from
developing countries
There are many paths leading to the stabilization of
atmospheric concentrations of carbon dioxide.
All require significant global emissions reductions
Stabilization Level
(ppm)
450
550
650
750
1000
Date for Global
Emissions to Peak
2005-2015
2020-2030
2030-2045
2040-2060
2065-2090
Date for Global Emissions
to be Below Current Levels
2000-2040
2030-2100
2055-2145
2080-2180
2135-2270
Other greenhouse gases, which are increasing, need to be taken into account when
deciding the appropriate stabilization level of CO2 (other gases already equiv to
about 100ppm of CO2)
From Rio to Gleneagles:
International Responses to
Climate Change
G8 Request to the World Bank on
Adaptation
“35. We will:
(a) invite the World Bank to develop and implement 'best practice'
guidelines for screening their investments in climate sensitive
sectors to determine how their performance could be affected by
climate risks, as well as how those risks can best be managed, in
consultation with host governments and local communities; and
(b) invite other major multilateral and bilateral development
organisations to adopt the World Bank guidelines, or develop and
implement similar guidance.”
An initial screening tool has been developed in ESSD and is being applied
through a piece of sector work on the challenges for adaptation to climate
change in India.
Expanding investment in forestry and agriculture to increase resilience
to climate risk and to expand weather related disaster risk insurance to
the poorest is the adaptation “twin” to the “mitigation” arm of the
investment framework (on efficient fossil fuel use, RE etc)
Investment Framework Initiative
“We will invite the World Bank and other multilateral development
banks (MDBs) to increase dialogue with borrowers on energy issues
and put forward specific proposals at their annual meetings to:
(a) make the best use of existing resources and financing instruments and
develop a framework for energy investment to accelerate the adoption of
technologies which enable cleaner, more efficient energy production and
use;
(b) explore opportunities within their existing and new lending portfolios to
increase the volume of investments made on renewable energy and
energy efficiency technologies consistent with the MDBs’ core mission of
poverty reduction;
(c) work with interested borrower countries with significant energy requirements
to identify less greenhouse gas intensive growth options which meet
their priorities; and ensure that such options are integrated into
Country Assistance Strategies (China, India, Mexico, Brazil, South Africa)
(d) develop local commercial capacity to develop and finance cost-effective
projects that promote energy efficiency and low-carbon energy sources.”
G8 Requested Role of the World Bank
Dialogue Initiative
Objective: To build a consensus among all of the OECD countries
and major developing countries on the policies, instruments and strategy
for long term climate management (mitigation and adaptation)
Investment Framework Initiative
Objective: to greatly accelerate investment in energy efficiency and
clean energy, notably efficient coal-fired power plants in China and
India, coal-to-gas shifts, and in leading edge long term technologies
for coal gasification and coal power plant emissions sequestration
Increased Bank Lending Initiative
Objective: to increase Bank lending for low carbon climate
friendly economic development (energy/infrastructure,
NRM/agriculture/forestry, climate risk management, and
expanded carbon finance and GEF programmatic assistance
G8 Climate Change Initiative
Milestone Events
• Objective: to raise the profile of climate change globally and to
expand the participation of key countries.
• Calendar of events leading up to Gleneagles
– March G8 meeting of Energy and Environment
– (London) and Environment and Development Ministers
(Derbyshire)
• Meetings with industry (energy and reinsurance) and IFIs in Sept
2005
• Climate change discussed at Annual Meetings of the IMF and World
Bank in Sept 2005 (Development Committee Communique)
• Investment Framework design process launched by Messrs.
Wolfowitz and Benn with G8 +5 Finance Ministers September 24th,
IMF/Bank Annual Meetings, Washington
• Nov 1 meeting in London of Energy and Environment ministers
launching dialogue on long term climate change management.
• Spring Meetings of IMF/WB – Investment Framework proposal
presented for implementation
Joint Statement of +5 at Gleneagles on
Climate Change
• Climate change will have a profound impact on developing
countries…
• Industrial countries should take the lead in reducing
emissions…
• Economic and social development and poverty eradication
are the fundamental priorities of developing countries…
• G-8 leaders should devise innovative mechanisms for the
transfer of technology and the provision of new and additional
resources to developing countries (under UNFCCC and KPCDM).
Investment Framework Initiative
Major Challenges
•
•
•
$8 trillion is required for energy sector investment in developing
countries over the next 25 years;
Decisions on energy, urban and transport infrastructure over next
25 years will lock in the carbon intensity of the global economy for
the rest of the century
Coal is Key – renewables are no silver bullet
–
–
–
–
•
Coal power is 25% of global CO2 emissions
China currently building coal power plants at rate of 1000MW-1400MW
per week. India and China will comprise >40% of installed power
capacity by 2030
Coal power rehabilitation, highest efficiency coal power are most
important near term initiatives
Coal power emissions capture and storage the most important medium
term technology
Large Hydro is an important and underdeveloped renewable
energy source that can no longer be ignored
Economically-feasible hydropower potential
100
Europe
% of potential
developed
80
North America
60
Asia (excl
China)
South America
40
China
20
Africa
0
0
0.5
1
1.5
2
Potential in million GWH/year
2.5
Investment - a large and growing gap
Financing Required for the Power Sector
In Emerging Markets 1990-2020
Cumulative
Sum ($Bn)
250.0
200.0
150.0
High Investment Demand
Scenario (3%)
Gap covered by public financing
self-financing, donor funding,
and rationing
$3,800 Bn
Low Investment
Demand Scenario (2%)
100.0
50.0
Private Investment
in the Power Sector
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
0.0
1990
Total Power Investment ($Bn)
$4,300 Bn
Source: World Bank, IEA, Deloitte Touche Tohmatsu Emerging Markets Group
Historic
Emerging Markets Group
Future
3
Investment – Needs and Shortfall
 Electricity infrastructure in developing countries
needs about $130 billion of new investment p.a.
until 2010 i.e. between 2 and 3% of GDP
 However investment lags resulting in shortages,
system failure and slow system expansion
 Under investment in the sector slows economic
growth
 Energy Security: Shortages, Poor System
Reliability & Slow System Expansion
Investment Framework Initiative
Major Challenges
•
Private capital is available on a sufficient scale to meet the
investment needs of the energy sector but:
–
–
–
•
OECD private investment in energy sector assets in the developing
countries declined from $40bn in 1997 to below $10bn in 2002
Political risk insurance underwriting for major project financing has
declined by 60-80% since 2000
50% of OECD power plant fleet likely to be replaced in next 15-20
years. Most attractive use of project finance
Private Banks and Coal Technology suppliers tell us that they need:
–
–
–
–
–
A larger pipeline of good quality investments
A transparent and predictable regulatory environment with good debt
service records
Means of transferring project risk in developing countries to the
broader market (securitization, bond issues)
Initial grant financing to support commercialization of leading edge high
efficiency coal technology (and other technology)
Better, faster political risk insurance
Investment Framework Initiative
Major Challenges
•
•
•
Limited attempts to create synergy between and within
public and private sources of finance for low carbon
infrastructure and adaptation.
– GEF and Carbon Finance,
– Export Credit and IFIs
– IFIs product line largely uncoordinated and underleveraged.
There is no financing mechanism to meet the
incremental costs of adaptation to climate change.
GEF/UNFCCC Adaptation Funds are small
Carbon finance is the most important new and
additional source of development finance, potentially
exceeding one billion per year over the next 2-3 years,
$50-120 billion/year long term
– but growth constrained by deep uncertainty over continuity in
carbon trade beyond Kyoto.
Global CO2 Emissions
Electricity Generation
18
16
14
PROSPECTS
FOR
AND
STORAGE
[Gton CO2]
CO2 CAPTURE
12
0$
10$
25$
25$ NoCCS
50$
50$ NoCCS
10
8
6
4
2
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Energy Technology Scenarios
Energy is back on the Bank agenda
Lending has recovered but WBG can do more
in middle-income countries
Energy - Economic & Sector Work
3500
3000
4500
4000
60
IBRD Commit Amt
IDA Commit Amt
50
Costs
2500
Number of AAAs
40
Costs (US$ '000)
3500
3000
2500
2000
2000
30
1500
20
1500
1000
1000
10
500
500
0
0
FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00
FY01 FY02 FY03 FY04 FY05
FY00
FY01
FY02
FY03
0
Number of AAA Products
IBRD/IDA Lending Approvals for
Energy projects (supervised by all SBs)
Role and Opportunities for Brazil
Brasil: Geracao de Energia Eletrica
1400
1200
Importacaos Liquidas
1000
Eolica
800
Biomassa
TWh
Carvao Mineral
600
Nuclear
400
Gas Natural
Petroleo
200
Hidraulica
0
2000
2004
2010
Year
Source: Pietro Erber e Luiz Eyer
2020
2030
Carbon Finance: Opportunities for Brazil
Petrobras Fertilizer project (US$ 700 M.) :
Fuel switch and rural development
EletroBras ProInfa Program (US$ 150 M.)
3,300 MW in renewable energy
Banco do Brasil, Caixa Econômica Federal
Combine Carbon finance with underlying finance for
renewable energy and waste management projects
Other large projects (above US$ 20 M. per year each):
Fertilizer projects (reduction of N2O)
Deactivating hydro dam in the Amazon
Electrification of the Amazon
Aluminum industry
Ethanol “learning curve” for Brazil
Source: Goldemberg, J., et alii, 2004
(Oct 2002) US$ / GJ
100
1980
10
1986
1990
1993
1996
2002
1999
1
0
50000
100000
150000
200000
Ethanol Cumulative Production (thousand m 3 )
Ethanol prices in Brazil
Rotterdam regular gasoline price
trend (Rotterdam gasoline prices)
trend (Ethanol prices)
250000
Possible Issues for Brazil
• Climate variability on GDP growth
• Energy supply investment needs (BAU) vs
financial implications of lower-carbon energy
supply (larger dams, repowering, more
renewables)
• Potential finance needs for low-carbon
development path in Brazil
– Energy efficiency, renewables, urban waste
management, industrial gases, agriculture, forestry
• Trade implications
• Analytical needs?
Trade Possibilities for Brazil
•
•
•
•
Ethanol and ethanol technology
Flex-fuel vehicles
Hybrid buses
Opportunities and constraints for exports
of climate-friendly products and
technologies
• Opportunities and constraints for import of
climate-friendly products and technologies
Questions for Brazil
• What are Brazil’s priorities and concerns
regarding the G8 climate change initiative?
• How can the Investment Framework best
support Brazil’s needs?
• What financing tools and instruments are most
needed to stimulate increased investment?
• What public-private partnerships make sense for
Brazil
• What kind of macroeconomic and sectoral
analysis is needed by the Bank and other IFIs?