Transcript Carbon Finance, Climate Change Mitigation and

Climate change as a development challenge
Jari Vayrynen, Sr. Environmental
Specialist, World Bank
• Meeting the challenge is not
a choice between growth
and climate change…
• a climate smart world is
within reach if we act now,
act together and act
differently…
• … and build on new finance,
technology and capacity at
scale.
WB Strategic Framework for Climate Chance and
Development
Objectives:
 Enable WBG to effectively support sustainable development and
poverty reduction, as climate risks and climate-related economic
opportunities arise
 Facilitate global action and interactions among all countries
Key principles:
 Working in partnerships guided by UNFCCC process
 Country-led, country-driven, “no regrets” actions
 Approach tailored to specific needs of diverse clients
MDB & UN
Partnerships
Knowledge &
Capacity
Climate
Investment
Funds
Bottom Up
Momentum
Resource
Mobilization
Regional / Country
Strategies
Financing Climate Change Mitigation
• Scale of financing needs for mitigation
estimated by UNFCCC at $200 billion
annually
• Concessional resources are very limited for
low carbon investments in developing
countries and transition economies
• Mobilizing private sector finance is crucial
– Market mechanisms can play a central
role
Clean Technology
Fund (CTF)
± $5 billion
Strategic Climate
Fund (SCF)
±$1 billion
Finance scaled-up demonstration, deployment,
and transfer of low carbon technologies
Country Investment Plans:

Support country development strategies

Leverage financial products of International
Financial Institutions

Stimulate private sector engagement
Targeted programs with dedicated funding to pilot
new approaches with potential for scaling up
Pilot Program for Climate Resilience:
Mainstream climate resilience into core
development planning
Forest Investment Program: Reduce emissions
from deforestation and forest degradation
Scaling Up Renewable Energy in Low Income
Countries


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World Bank Carbon Market initiatives
World Kyoto Funds under implementation reaching over $2 billion in
funding and about 130 ER purchase agreements signed
Progress with new facilities:
Forest Carbon
Partnership Facility
(FCPF)
Carbon Partnership
Facility (CPF)
Operational since June 2008 - current donor pledges at $107 million
37 Developing Country Participants
Carbon Asset Development Fund (CADF) operational at €7 million
Carbon Fund currently €100 million (minimum target €200 million)
Exploring possibilities for further engagement
 Carbon in Agriculture sector
 Carbon Capture and Storage (CCS)
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How do carbon markets work?
What is the
underlying
principle?
Cost-effectiveness: a ton of CO2 emitted anywhere in the world has
exactly the same impact on climate change and should therefore be
reduced/ mitigated where the cost of doing so is lowest.
What is traded?
Units = tons of carbon dioxide (or equivalent) allocated as part of an
emission cap or “reduced” by a project or program activity. These units
are labeled based on the market segment in which they are traded :
AAUs, CERs, ERUs, EUAs, VERs, etc.
What are the
benefits?
• Lowers compliance costs for meeting emission reduction obligations; ;
• Catalyzes financial and technology flows to developing countries to
facilitate low-carbon growth;
• Creates a global and long-term price signal to lower carbon intensity.
Why should
this be of
interest?
• Significant new investments and financial flows
• Application of new technologies and financial instruments to reduce
emissions at lower costs; and
• Transition to a lower carbon economy better tuned to cope with
future resource and environmental constraints.
Kyoto Protocol-based carbon markets
“Business
as-usual”
projected
emissions
by 2008
1990
Baseline
Projected
emissions
increase
between 1990
and 2008-2012
Project-based
Offsets (CDM/JI)
Allowances from
IET
Domestic
actions
Kyoto target
Baseline
emissions
1990
Kyoto allowed
emissions
2008-12
Sources of
reduction
CDM: Offsets obtained from a
non-Annex I country
JI: Offsets obtained from
another Annex-I country;
IET: Kyoto allowances
obtained from another
Annex-I country
A significant amount of the
reduction must be achieved
through domestic measures
Beyond domestic actions to reduce emissions, a country can use trading to purchase
reductions in another country to achieve compliance with its Kyoto obligations.
Examples of trading options include:
• Buying emissions ALLOWANCES (called AAUs) from other countries with
commitments which are below their Kyoto cap (International Emissions
Trading)
• Purchasing carbon OFFSETS from projects which reduce emissions
• In developing countries (Clean Development Mechanism – CDM)
• In economies in transition (Joint Implementation – JI)
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How does Joint Implementation (JI) work?
Industrialized country
with an emissions cap
Domestic action
Emissions target
Project emissions
Baseline emissions
Baseline Scenario
Emission
Reduction Units (ERUs) ERU
Purchase of ERs
Purchase of
allowances
Project Scenario
Project benefits
from increased
cash flow
Carbon Market Values in 2008
(in M US$)
Project-Based
Transactions
Allowance Markets
Assigned Amount
Units
210
JI
300
CDM
6,500
Secondary
CDM
EU Emission
Trading Scheme
26,300
91,910
World Bank Carbon Finance
Projects in Bulgaria
• Joint Implementation projects:
– Sofia District Heating
– Pernik District Heating
– Svilosa Biomass
• Green Investment Scheme (GIS)–
options study
– GIS is a system where revenues from AAU trades are
reinvested in environmental projects
– To our knowledge Bulgarian Government has not yet
concluded any GIS transactions
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Conclusions
• Climate change is fundamentally a development issue, not
only an environmental issue
• Huge financing needs
– Carbon markets will continue to be play a major role in catalyzing
low carbon investments in developing countries and transition
economies
• The World Bank, through a range of financial
instruments and capacity building activities, is
deeply engaged in this effort
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Thank You.
Jari Vayrynen
[email protected]
Please visit us online at
www.carbonfinance.org