Transcript Climate change and ODA: Towards integration Presentation

Climate change and ODA:
Towards integration
Presentation for the APPG on
Debt, Aid and Trade
June 17th 2009
Prof. Peter Newell
School of International Development
UEA
ESRC Climate Change Leadership Fellow
www.clean-development.com
Introduction
 Focus on the issue of UK ODA to support clean
energy development consistent with goal of
tackling climate change.
 “For public investment, the challenge is to shift
more funds into less carbon-intensive, more
climate-proof measures without sacrificing
development priorities” (UNFCCC 2008).
 In 2007 the UK reported £4,921 million as ODA,
making the UK the third largest OECD-DAC
donor.
Why climate aid?
 Important way of improving levels of access to
energy for the poor and meeting UK
government targets on climate change.
 Multiplier effects of aid: rather than what it will
do in and of itself (e.g GEF Trust Fund & LDCF
have demonstrated the ability to catalyse larger
investments from elsewhere through cofinancing) (UNFCCC 2008): levering private
flows.
 Aid & additional finance as ‘deal breaker’ in the
climate negotiations- ‘You pay we play’
Proposals for Mitigation Aid
The G77+ China proposal
Developed countries provide funding of
0.5% GDP - mainly for mitigation
Mexican Climate Change Fund proposal
Countries obliged to contribute to the fund
on the basis of emissions, population and
income- mainly for mitigation. Middle
income countries would contribute.
Profile of climate aid
 The UNFCCC estimated that additional investment and financial flows of
US $ 200-210 billion a year will be necessary for mitigation by 2030
(UNFCCC 2007).
 IPCC (2007) suggests a (wide!) range of between 0.2 and 3.5% of
global GDP for annual mitigation costs. Looking at costs in excess of
the entire global aid budget today (Spratt 2009).
 Real need for public financing for innovation in mitigation
technologies at R&D and demonstration stages.
 Currently very little public finance is available for these stages. GEF is
typically aimed at the diffusion stage and the CDM is stimulating
adoption of technologies.
 Energy Technologies Institute could play a role in enabling clean
energies (projects on tidal, offshore wind etc).
Adaptation
Range of estimates:
 US$4-37 billion annually (Stern review)
 Additional annual investment and financial flows
for adaptation are estimated to be US $ 86
billion annually by 2015 according to the
2007/08 Human Development Report of the
UNDP.
 Increase in donor aid to 1% GDP (Stern)
 Challenge of new, additional and predictable
aid in a) context of financial crisis b) projected
failure to even meet 0.7% on development
assistance by 2015
Adaptation Funding Mechanisms
Under UNFCCC:
Least Developed Countries Fund
Special Climate Change Fund
GEF Trust Fund’s Strategic Priority for
Adaptation
All based on voluntary pledges and
contributions from donors- receipt and
dispersal rates low.
Adaptation Fund paid for by 2% levy on
CDM transactions
Why Integration?
 Real danger that action in one policy area undermines
that in another:
(i) climate change actions and investments miss important
opportunities to tackle energy poverty and;
(ii) attempts to tackle poverty are inconsistent with action to
reduce GHGs, thereby further exacerbating poverty.
Climate change ‘is a massive threat to human
development and in some places it is already
undermining the international community’s efforts
to reduce extreme poverty’.
(Human Development Report 2007-8)
Sustainable Development in a
Changing Climate
 ‘We are disappointed that DFID could not provide us with
more evidence of progress it has made since 2002
towards fully integrating climate change into its
poverty alleviation programmes, especially in Africa’.
 Critical of emphasis on ‘one-off projects rather than clear
evidence of a mainstreamed approach. We believe that
such initiatives should become the norm throughout
DFID's country programmes. The Department should be
able to demonstrate much more clearly that climate
change is informing its policy decisions in all the
countries in which it works.’
(IDC 2009)
Examples of integration failure: EIB
 Discrepancy between EIB’s stated climate change
awareness and its overall lending in the energy sector
with an ongoing bias in financing fossil fuels.
 A Bankwatch analysis in 2007 of the EIB’s investments
in the energy sector from 2002 to 2006 shows that out of
total EIB energy investments of €23.7 billion, €11.3
billion went for fossil fuels, while only €3.0 – 3.6 billion
was for renewable energy
 Globally, over half of the EIB’s transport investments
have gone to roads and air transport
Integration failure: World Bank
 World Bank: During its 2008 fiscal year the WB and
IFC increased funding for fossil fuels by 102%
compared with only 11% for new renewable energy
(solar, wind, biomass, geothermal, small hydro)
(Bank Information Center 2009)
 Less than 30% of the World Bank’s lending to the
energy sector has integrated climate
considerations into project decision-making. As
late as 2007, more than 50% of the World Bank’s
energy-sector portfolio did not include climate
change considerations at all (WRI 2008)
Extractive Industries Review
 It’s own 2004 Extractive Industries Review called for
the Bank to phase out investments in fossil fuels.
 "phase out investments in oil production by 2008 and
devote its scarce resources to investments in
renewable energy resource development, emissionsreducing projects, clean energy technology, energy
efficiency and conservation, and other efforts that delink
energy use from greenhouse gas emissions. During
this phasing out period, WBG investments in oil should
be exceptional, limited only to poor countries with few
alternatives”.
Towards a coherent aid strategy
 Integrating climate concerns into aid and state support related to trade
and investment: Export Credit Agencies. No project has ever been
denied ECGD support on environmental grounds.
 The combined annual emissions of hydrocarbons from 2 ECGD
supported projects, the Baku-Tbilisi-Ceyhan (BTC) pipeline and the
Bonny Island liquefied-natural-gas plant in Nigeria –will result in the
emission of 660m tonnes of carbon dioxide, more than the entire annual
output from the whole of the UK (WWF 2007).
 Guidelines as recommended by EAC (2008) & amendment to Climate
Change Act requiring reporting of carbon emissions for large-scale
projects. ECGD prefers voluntary response.
 Need to climate-proof infrastructural lending & mainstreaming climate
change & clean development considerations into general environmental
& non-environmental lending.
UK leverage in a global context
 Recipients of DFID multilateral assistance (over
40% of DfiD’s total budget):
 The European Commission’s development
programme (£991m)
 World Bank (£493m)
 United Nations (£250m)
(Figures for 2007/08: DFID 2008).
Making the most of UK influence: In
Europe
 In Europe: The European Union as a whole
provides over half (57%) of the world’s Official
Development Assistance (ODA), £36 billion.
 The European Commission alone manages 17%
of this figure directly, making it the second
largest aid donor in the world (after the US).
 In 2008 EIB approved €60 billion in loans- over
twice that of the World Bank including €9 billion
in the energy sector.
Some positive developments
 €3 billion Energy Sustainability and Security of Supply Facility,
authorised in June 2007 by the Governors of the Bank
 EU Global Energy Efficiency and Renewable Energy Fund
(GEEREF) was designed in 2006 to support small and medium
sized energy projects in order to support sustainable development in
developing economies and economies in transition. It offers loans in
order to mobilise private investments in energy technologies
 €5 million Climate Change Technical Assistance Facility
(CCTAF) provides advance funding for activities associated with the
development of project-based carbon credits under the Joint
Implementation (JI) and Clean Development (CDM) mechanisms of
the Kyoto Protocol on a conditional loan basis.
Making the most of UK Influence: In
the world
 UK providing £800 million over three years for international work on climate
change through the International Environmental Transformation Fund,
administered by DFID/DEFRA.
 Most of this money is to be channeled into the WB Climate Investment
Funds (£60 million of first £100 million tranche for the Clean Technology
Fund)
 Issue of ensuring WB financing does not undermine or overshadow UN
processes for mitigation funding- sensitivities of developing countries
about access & control.
 IDC (2008) has noted UK government (DfiD) should make use of all
positions available to it to in the WB to advance a reform agenda- does
now have full-time executive director to WB.
Rt. Hon. D. Alexander MP, has acknowledged that: … “as well as providing
extra resources, we should aim to exert more influence over the policy
choices made by institutions”.
Leadership starts at home
 Mixed messages: In 2002, EIB approved a loan
of EUR 390 million to BAA for the Terminal Five
development at Heathrow airport.
 What’s good enough for you: Kingsnorth &
Malawi
‘In Malawi the market has been coal but 80% of
people are without electricity; are we going to
turn around to them and say ‘You cannot have
this’ or ‘By the way, we can but you cannot?’
(DfiD Minister 2008)
Future challenges
 Demand-driven: Working with and through NGOs to
identify pro-poor interventions where aid can make a
big difference in tackling poverty & climate change
simultaneously.
 Improving donor coordination to ensure those that
need aid most receive it, reduce duplication and ensure
value for money.
 Improving policy integration within government and
among international institutions to maximise impact and
enhance credibility
 Not just about what UK can do alone, but how it can use
its regional and global influence to shape aid, trade
and investment flows.
 Support IDC (2008) call for an audit of current bilateral
and multilateral funds for available for climate change
work that should raise many of these issues.