Clean Energy, Energy Efficiency and Sustainable Development G8 Climate Change Action Plan The Global and Brazilian Context

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Clean Energy, Energy Efficiency and Sustainable
DevelopmentG8 Climate Change Action PlanThe
Global and Brazilian Context

• Sao Paulo, 26 October 2005

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For 420,000 years the CO2 concentration in the
atmosphere has remained within tight bounds
Projected (2100)
CO2 Concentration (ppmv)
Current (2001)
(BP 1950)
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Historical Emissions of CO2
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World Energy-Related CO2 Emissions
70 of the increase in global CO2 emissions
comes from developing countries
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World Primary Energy Demand
Oil
Natural gas
Coal
Other renewables
Nuclear power
Hydro power
Fossil fuels account for almost 90 of the growth
in energy demand between now and 2030
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Global CO2 Emissions Reference Alternative
Scenarios
40 000
40 000
35 000
35 000
2
2
30 000
30 000
Mt of CO
Mt of CO
25 000
25 000
20 000
20 000
1990
2000
2010
2020
2030
1990
2000
2010
2020
2030
Reference Scenario
Reference Scenario
CO2 emissions are 16 less in the AS in 2030 but
still up more than 50 from 1990-levels
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World Primary Energy Demand in Reference
Alternative Scenarios
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Coal demand is down 25, oil 11, and gas 10,
solarwind up 30 and nuclear 12
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Contributory Factors in CO2 Emissions Reduction,
2002-2030
100
80
60
40
20
0
Improvements in end-use efficiency contribute for
more than half of decrease in emissions, and
renewables use for 20
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There are many paths leading to the
stabilization of atmospheric concentrations of
carbon dioxide. All require significant
global emissions reductions

• Stabilization Level Date for Global Date for
  Global Emissions (ppm) Emissions
  to Peak to be Below Current Levels
• 450 2005-2015 2000-2040
• 550 2020-2030 2030-2100
• 650 2030-2045 2055-2145
• 750 2040-2060 2080-2180
• 1000 2065-2090 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)

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(No Transcript)
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From Rio to GleneaglesInternational Responses
to Climate Change
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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)
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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.

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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/infrastructu
re, NRM/agriculture/forestry, climate risk
management, and expanded carbon finance and GEF
programmatic assistance
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G8 Climate Change InitiativeMilestone 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

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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 KP-CDM).

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Investment Framework InitiativeMajor 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 gt40 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

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Economically-feasible hydropower potential
100
Europe
North America
80
60
Asia (excl China)
developed
of potential
South America
40
China
Africa
20
0
0
0.5
1
1.5
2
2.5
Potential in million GWH/year
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Investment - a large and growing gap
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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

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Investment Framework InitiativeMajor 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

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Investment Framework InitiativeMajor 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
  under-leveraged.
• 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.

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Global CO2 Emissions Electricity Generation
PROSPECTS FOR CO2 CAPTURE ANDSTORAGE
Energy Technology Scenarios
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Energy is back on the Bank agenda

• Lending has recovered but WBG can do more in
  middle-income countries

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Role and Opportunities for Brazil
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Importance of Brazil

• Brazil is a global player
• Brazils role in climate change negotiations
• Hosted the first Earth Summit (Rio, 1992)
• mother of CDM
• First registered CDM project
• Issues for Brazil
• Hydro
• Existing mechanisms (Kyoto)
• S-S technology transfer (e.g., biofuels)

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Estimates of Greenhouse Gas Emissions in Brazil,
1994
Brazils Initial National Communication to the
UNFCCC, 2004
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Brazil CO2 Emission by Sector (1994)
Brazils Initial National Communication to the
UNFCCC, 2004
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Source Pietro Erber e Luiz Eyer
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CDM Market development activities in Brazil
Support the Designated National Authority of CDM
Competitiveness DPL - Improve CDM approval
system - Promote strategic studies - Capacity
building Waste Management Sector PHRD grant to
Ministry of Cities - Elaboration of 30
pre-feasibility studies - Capacity building of
200 largest municipalities in Brazil Other
activities ESMAP, financial sector support,
capacity building, advise WB clients on carbon
finance
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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

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Carbon Finance Work Program FY06
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Ethanol learning curve for Brazil
Source Goldemberg, J., et alii, 2004
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Source Jeremy Johnson, Life Cycle Environmental
and Economic Assessment Biomass processing for
ethanol production. April 5, 2005.
Corn Ethanol in the U.S.
Current natural gas prices in U.S. (Sep 2005)
USD 12.60 per MMBtu Current corn price in U.S.
(Aug 22 for Sep 05 delivery) USD 2.12/bushel
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World Raw Sugar and Gasoline Prices(real prices
in 4th quarter 2004 US)
Note Regular unleaded gasoline, Northwest Europe
monthly averaged prices, barges, free on
board. Source USDA 2005c, Energy Intelligence
(2005), U.S. GDP deflator from the IMFs
International Financial Statistics Online.
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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?

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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

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Questions for Brazil

• What are Brazils priorities and concerns
  regarding the G8 climate change initiative?
• How can the Investment Framework best support
  Brazils 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?