Transcript The World Bank New Carbon Initiative for Development

The World Bank New Carbon
Initiative for Development
Dr Ali Adan Ali
Team Leader
Climate Change and Environment Research Group
Centre for Biodiversity
NMK
Organization
•
•
•
•
•
•
•
•
Background to World Bank and Climate Change
Why Carbon Finance
Economies Highly Vulnerable to Climate Change
Need for a full range of policy instruments
Potential of Climate-Friendly Technologies
Policy for Market Readiness
World Bank Carbon Initiative for Development
examples
Concluding Remarks
2
World Bank and Climate Change
• World Bank’s mission is poverty reduction
• WB endorses IPCC predictions
• Climate change, a “global public bad”, affects the
poorest the most
• Private-public initiatives needed to mitigate
climate change
• Take advantage of Kyoto flexible mechanisms
• Develop core CDM/JI market
• Expand “carbon finance” into small projects
• Demonstrate implementation of carbon sinks
• Build capacity of Host Countries
Countries Highly Affected
Top Ten Countries Vulnerable to Climate Change
Drought
Floods
Storms
Sea Level Rise
Malawi
Bangladesh
Philippines
All Low-Lying Island
States
Ethiopia
China
Bangladesh
Vietnam
Zimbabwe
India
Madagascar
Egypt
India
Cambodia
Vietnam
Tunisia
Mozambique
Mozambique
Moldova
Indonesia
Niger
Laos
Mongolia
Mauritania
Mauritania
Pakistan
Haiti
China
Eritrea
SriLanka
Samoa
Mexico
Sudan
Thailand
Tonga
Mynamar
Chad
Vietnam
China
Bangladesh
4
Source: World Bank, Sustainable Development Network, Environment Department, 2008
Need for potential
transformative policies
Examples
Potential Transactional Barriers
for Renewable Energy
 Smaller project sizes
 Longer lead times
 Higher ratio of capital
costs to operating costs
 Newer technologies
 Less experienced sponsors
 Unfamiliar to financiers
 Either excess or absence
of concessional funding
 Higher transaction costs
 Higher development costs
 Need for longer-term
financing at reasonable rates
 Higher operating risks
 Higher completion and
operating risks
 Scarce/higher-cost capital
 Over-subsidized or
under-competitive
APEC Economies Have Already Set
Ambitious Targets for 2020
7
Developing Countries are already taking action…
BRAZIL: Reducing Amazon
deforestation by 70% by 2020;
biofuel program, energy
efficiency
ETHIOPIA: Integrating
adaptation in sustainable
land management, social
protection, hydropower
development, building
capacity programs
CARIBBEAN ISLANDS:
Adaptation to increasing
hurricanes and storms, using
catastrophic risk bonds
CHINA: Energy efficiency,
20% reduction in energy
intensity from 2005 to 2010;
15% renewable energy target
by 2020; Clean technology
R&D; sustainable transport
INDIA: Adaptation (drought,
floods, cyclones, glacier
melting), energy efficiency,
hydro and new renewable
energy, solar energy R&D
MOROCCO: Integrated approach
to tackling CC in water,
agriculture, and urban sectors,
Mediterranean Solar Plan
Initiative
• Synergies of national goal create a large zone of “no-regrets”
policies.
• Most developing economies, have established ambitious targets
to cap and reduce green house gas (GHG) emissions.
– However, these targets will not be achieved unless the full
range of policies are considered and implemented.
• Fiscal Policy will be central – and carbon pricing essential but not
sufficient
– It will need to be complemented by broader reforms to
liberalize financial and energy markets and strengthen
independent regulators to allow pass through of carbon
prices.
9
• There is a diverse range of climate friendly technologies (CFTs) used
and produced in some economies and they are well placed to exploit
these technologies.
• Market-readiness to finance and trade clean projects and carbon caps
will be crucial.
• Fiscal policies concerning adaptation will need to go beyond costing
of climate change and consider the cost and benefits of adaptation
strategies under conditions of uncertainty.
• Africa need to position itself well through enhanced regional
cooperation to advance climate change policies.
– Several Africa economies can already now use fairly advanced
market mechanism to achieve mitigation in domestic markets or
in bilateral trading.
– But for this to happen, they will need to build institutional,
technical and political capacity to manage the complexities of
these systems.
10
Synergies that create large “no-regrets” zone
Across Multiple Policy Goals
• First, countries are seeking to tackle national environmental
problems: e.g. CC mitigation goals and air pollution reduction
goals have synergy.
• Second, addressing energy security is another important goal,
as dependence on energy imports and global energy prices
rise. Apart from Russia, Canada, Australia, and Brunei, APEC and Africa
economies either already are or will become energy importers.
• Third, countries are also seeking technological advantage and
new sources of growth, and see low-carbon technologies as a
growth opportunity for the future.
11
The Ambitious Emissions Targets of APEC /AFRICA economies
will not be achieved unless the full range of policy
instruments is used.
• Many developed countries’ inability to reduce
emissions in line with their Kyoto Protocol targets,
as well as the challenges facing China.
• Need to go beyond low-cost policies:
– energy efficient buildings
– higher cost policy interventions with fewer immediate
co-benefits (but long-term market opportunities), such
as CCS.
• Opportunities for a green growth vision while
implementing Clean Development Mechanisms
12
Overview of Fiscal Policy Instruments
Carbon pricing
- Emissions trading
-Carbon tax
-Hybrid trading-tax
schemes
Technology-based
Fiscal Led
Regulations-Led
- Demonstration grants
-Public R&D
-Investment subsidies
-Public investment in
Venture Capital
-Public investment vehicles
-Feed-in tariffs
-Tax credits
-Public procurement
-Renewable energy
certificate trading
-Subsidies for energyefficiency purchases
-Improving information
availability
-Technology performance
standards
-Renewable fuel/energy
standards
-Building regulations
-Automobile regulations
-Information standards
13
Fiscal Policy and Pricing will have Central Role
 Low Energy Prices vs. Energy Efficiency
–
14
Can Have Gains – even double
dividends
– Global action on climate change by pushing down global
energy prices can raise revenues from 0.5% to more than
2% of GDP
– Could improve the terms of trade for most net energy
importing developing countries.
– Use of carbon revenue to offset other taxes
• A Bank CGE modeling study for South Africa concluded that a
reasonably high carbon tax combined with reductions in taxes on
labor and labor market reforms was actually welfare-improving
(ignoring climate benefits).
15
Carbon Pricing Will Be Essential But Not Sufficient–
- May not lead to Pass Through
- Under Rationing response may be different
– Inferior substitution to biomass or to oil
– Energy security issues
• Liberal energy policies, Independent
Regulators, offsetting assistance
• Complementary Technology Supporting
Policies
16
Large Potential of Climate-Friendly Technologies
“Win-win” measures–examples of countries
provided. But Strong Policy and Institutional Requirement
17
APEC countries are leaders in
climate friendly technologies
18
TOWARDS SUSTANABLE DEVELOPMENT
Overview
Green Growth is not “cost neutral” (e.g Energy)
But there are tools to help manage this
CO2 Abatement cost
Energy Efficiency
Renewable Energy
New Technologies
Energy pricing reforms
Regulations and financial
incentives
• Financing mechanisms
• Institutional reform
•
• Feed-in
Tariff or
Renewable Portfolio
Standard
• Tax on fossil fuel
• Support for R&D
• Financing
incremental cost
• Technology transfer
World Bank Group
Investment Policies to Support CFTs
• Clean Development Mechanism (CDM) permits investment in
ventures that reduce emissions in developing countries: hydroelectric
power, wind power, bio-mass methane avoidance projects.
• Public investment and subsidy programs in CFTs have
played a leading role – China: hydro-electric and (fit) PV Solar Power;
Thailand – tax, tari
• Private Investment: total investment in clean energy increased
from approximately USD 33 billion in 2004 to approximately USD 148
billion in 2007.
• Investment Certainty -current costs of CFTs, their
financing require a policy environment that encourages
more certainty on investment incentives: a number of
countries practicing this.
20
Green Growth through Mitigation
Policy & Regulatory
Menu of Financing Gap “bridging
factors”
• Green Building Codes
• Zoning and Land Use
Green Buildings & Urban Space
• Legislative Mandates
• Renewable Portfolio Standards
(RPS)
• Qualifying Projects
• Guarantees
• Grants
• Concessional Loans
Energy Efficiency
•
•
•
•
•
Alternative Fuels
• Fiscal Subsidies
• Tax Incentives
• Energy Efficiency Tax Credits
Renewable Energy
• Green Specifications
• Policy Targets
• Alternative Fuel
Obligations
• Reducing Emissions from
Deforestation and Degradation
Green Bank
Renewable Energy Credits
Feed-In Tariffs
Technology Risk Guarantees
Incubation
R&D Co-Funding
Carbon Offsets
• Carbon fund
• Carbon Exchange
World Bank Group
Policy For Market Readiness
• Importance of Markets and Financing.
• Offset mechanisms like CDMs, Reformed
CDMs.
• Sector-based crediting and trading.
• Crediting/payment systems based on
nationally appropriate mitigation actions
(NAMAs).
 Allowance-based emissions trading
systems (cap and trade).
22
International Deployment of Selected Market
Mechanisms
TYPE OF SYSTEM
COUNTRIES/REGIONS
National emission trading systems(in
implementation)
European Union, New Zealand
National emission trading systems
Japan, Korea, Australia (concrete plans
stopped recently)
Regional emissions trading systems
USA
Company level GHG emission reporting
Mexico
Energy efficiency certificate trading
China (trial system), India (to be operational
end of the year)
Renewable certificate trading
EU (some member states), India
(operational end of the year) 23
Market Readiness Cycle
Assessment of
technical and
political context
Compliance and
enforcement
system
Selection of
instruments
Stakeholder Consultation and Participation
Questionnaire
Existing
capacity
Evaluate
results and
identify gaps
Identify key
stakeholders
Capacity Building
Design
capacity
building
programs
Implement
programs
Reporting
template
Monitor and
evaluate
effectiveness
Required
capacity
Monitoring,
reporting and
verification
system
Implementation
framework
Social, economic
and
environmental
impact
24
• Annual Natural Disaster Economic Loss (in US$ millions).
• In 2008, natural disasters cost the world US$200
billion. USA and China bore 90% of this burden.
• No country is safe from climate vulnerability
meteorological hazards:
– land area
– population
– industrial and agricultural areas
26
27
28
29
30
Fiscal Policy and Adaptation: In addition to
considering costing, decision making will be
Important. A First Approach to Investment
Principle Under Uncertainty
31
Green Growth through Adaptation
Menu of Financing Gap “bridging
factors”
Policy & Regulatory
• Unlock Urban Land
Values
• Zoning and Land Use
Sanitation and wastewater
• Legislative Mandates
• Privatize landfill/STP
management
• Establish PPP arrangements
Solid Waste Management
• Set Abatement Specifications
• Pay on abatement
• Establish insurance
mechanisms
Vulnerability to disasters
Redevelop Urban Land
• Guarantees
• Private financing
• Concessional Loans for
public good aspects
Redefine Roles and
Responsibilities for Brown
Agenda
Pay for achieving national
abatement standards
Establish Catastrophic Risk
Financing arrangements
World Bank Group
Carbon Initiative for Development
• The Carbon Initiative for Development (Ci-Dev)
was launched in December 2011.
• It will build capacity and develop tools and
methodologies to help the poorest countries of
the world access carbon finance, mainly in the
area of energy access.
• Supporting Energy Access with Carbon-Linked
Performance Payments.
• It will also use emission reduction-based
performance payments to support projects that
use clean and efficient technologies in lowincome countries.
Objectives of the Ci-Dev
• To demonstrate that performance-based payments in the form of
certified carbon emission reduction purchases can lead to
successful and viable business models that promote increased
private sector participation and share lessons for replication.
• To influence future carbon market mechanisms so that least
developed countries, especially in Sub-Saharan Africa, receive a
greater and fairer share of carbon finance that results in both high
development benefits and that avoid carbon emissions.
• To support poor countries in developing standardized baselines and
establishing "suppressed demand" accounting standards in such key
areas as rural electrification, household energy access and energy
efficiency.
• To contribute proposals to further improve and extend the scope of
the CDM for use by the poorest countries, especially for
Programmes of Activities (POA).
Examples of project
1. Reducing Carbon Emissions While
Making Money
• The Clean Development Mechanism (CDM),
which is part of the Kyoto Protocol, allows
developing countries to implement emission
reduction projects and count such projectlevel emissions reduction as saleable credits.
Carbon Market Development
10 Carbon Funds:
$2.5 billion
•Expanding the reach and boundary of carbon markets
•The WBG portfolio has more than 200 projects in 57
developing countries, spanning 23 technologies
•Africa accounts for one fifth of active projects in the WBG
carbon finance portfolio compared to 2-3% share of
projects in the CDM pipeline
Carbon
Partnership Facility
(CPF)
•Supporting programmatic and sector-wide
interventions
•Carbon Asset Development Fund – €7 million
•Carbon Fund - €100 million
•4 sellers participants, more programs in preparation
Forest Carbon
Partnership Facility
(FCPF)
•Supporting Country-readiness and piloting incentives for
reducing emissions from deforestation and forest
degradation - $160 million available
•37 participating developing countries
•11 Readiness grants signed
A growing menu of climate finance instruments
Adaptation
The Adaptation
Fund
Special Climate
Change Fund
Least Developed
Country Fund
(GEF)
Mitigation
Pilot Program
for Climate
Resilience
Global Facility for
Disaster Risk
Reduction &
Recovery
Risk
Instruments
Global
Environmental
Facility (GEF)
Carbon Funds
Clean Technology
Fund
Carbon
Partnership
Facility
Forest
Investment
Program
Forest Carbon
Partnership
Facility
Scaling Up Renewable
Energy for the Poor
Mobilizing Finance: Climate Investment Funds
Clean Technology
Fund:
demonstration,
deployment, and
transfer of low
carbon
technologies.
Commitment:
$4.5 billion
Approved in July 2008, CIFs
have balanced and equitable
governance with equal
representation from
developed and developing
countries
Strategic
Climate Fund:
Programs to pilot
new approaches
and scale-up:
Commitment:
$1.9 billion
Why Carbon Finance
• Different cities face different challenges –
ranging from waste management and
improving air quality to reducing energy costs
and increasing urban green space.
• Carbon finance is an opportunity to improve
life in mega-cities
• The World Bank Institute helps cities to plan
low-carbon pilot projects.
40
Examples of project
• The residents of Dar-es-Salaam, the capital of
Tanzania, are exposed to bad air quality produced by
open fire cooking.
• The city plans to start a stove cooking project and is
looking into waste management improvements – both
of which will reduce the city’s greenhouse gas
emissions.
• Reducing Carbon Emissions While Making Money
• Cities have great potential to significantly save
energy and reduce greenhouse gas emissions.
• Two-thirds of the global energy savings could
occur in cities, considering the role cities play
in implementing national policies aimed at
reducing energy consumption.
• But developing country cities often don’t have
the capacity and know-how to develop such
policies and projects.
• There is a general lack of awareness about the
opportunities and lack of technical know-how
on CDM. Also there is limited capability
among local governments.
2. The Carbon Finance Capacity Building
Program
• Government and city officials face major challenges
such as institutional and technological barriers.
• And it is not easy to increase public awareness and
build consensus on climate change or boost the
necessary political support required to initiate changes
in domestic policies that combat climate change.
• But revenues and sustainable low carbon development
which would be generated through the clean
development mechanism are excellent opportunities to
bring the population on board.
• That’s where the World Bank helps. Its Carbon
Finance Capacity Building (CFCB) program
focuses on implementing CDM projects in
emerging mega cities of the South.
• CFCB program assists cities so that they can access
carbon finance for greenhouse gas mitigation and
low carbon sustainable development.
• Sharing knowledge on carbon finance, developing
project priorities, providing advice on project
development and launching pilot projects is part
of the program’s support.
• CDM is very useful for Africa but on the other
hand, the continent often face weak capacity
problem, so CFCB can help improve the
knowledge and capacity required-develop
human capital.
3. New Opportunities Through New Ways
of Learning
• The program is using e-learning, video knowledge
sessions and peer-to-peer workshops for city officials
and other stakeholders to share knowledge and raise
awareness.
• The CFCB program collaborates with a local partner in
the cities and launches pilot projects in cooperation with
a city’s requirements.
• This allows the cities to learn and solve their challenges
themselves by involving their own local organizations
The CFCB Address
• Institutional barriers
• Essential framework conditions
• Technological barriers.
• The CFCB offers a great opportunity for learning
more about carbon finance not only through
training which aims creating an institutional hub
on carbon and climate finance but also by
implementing a pilot project.
• CFCB assists us to build our capacity.
• Climate Finance is a Catalyst for development
Prototype Carbon Fund
• A partnership between seventeen companies
and six governments, and managed by the
World Bank, the PCF became operational in
April 2000. As the first carbon fund, its mission
is to pioneer the market for project-based
greenhouse gas emission reductions while
promoting sustainable development and
offering a learning-by-doing opportunity to its
stakeholders. The Fund has a total capital of
$180 million.
Carbon Funds and Facilities
• The Netherlands CDM
Facility
• Community Development
Carbon Fund
• BioCarbon Fund
• Italian Carbon Fund
• The Netherlands European
Carbon Facility
• Danish Carbon Fund
• Spanish Carbon Fund
• Umbrella Carbon Facility
T1
• Umbrella Carbon Facility
T2
• Forest Carbon Partnership
Facility
• Carbon Partnership Facility
• Carbon Fund for Europe
• Partnership for Market
Readiness
• Carbon Initiative for
Development
Concluding Remarks
• Africa may be well positioned to use regional
cooperation to advance climate change policies.
• Its voluntary and non-binding framework may give it
advantage to progress in these regional cooperation
areas.
• Harmonizing trade policies regarding climate friendly
technologies would be to review and remove tariff
peaks on environmentally friendly goods.
52
AND….
• Increasing coordination among regulatory
systems that will enable the growth of
regional markets for climate friendly
products is critical.
• Strengthening regional climate monitoring
efforts to inform progress in mitigation
efforts and long-run adaptation decisions.
53
Thanks for listening