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Briefing on Climate Investment Funds

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Title: Briefing on Climate Investment Funds


1
Briefing on Climate Investment Funds
  • Bangkok
  • April 1, 2008
  • Warren Evans
  • Director, Environment
  • Sustainable Development Network
  • The World Bank Group

2
Outline
  • Progress since Gleneagles (CEIF)
  • Towards Strategic Framework on Climate Change and
    Development (SFCCD)
  • Proposed Climate Investment Funds (CIF)
  • Scaling up Carbon Finance

3
Meeting Financing Needs Progress since
Gleneagles
  • Update on the Clean Energy Investment Framework
    (CEIF)

4
Reporting on CEIF
  • Progress Report to October 2007 Annual Meeting
    provided details on progress on Action Plan for
  • Energy for growth, with a particular emphasis on
    access to energy in Sub-Saharan Africa
  • Transition to a low-carbon development
    trajectory and
  • Adaptation to the impacts of climate change.

Report also outlined an approach to scaling up
actions on climate change and provides a review
of options to further reduce the financial
barriers to support low-carbon and adaptive
growth in developing countries.
Sustainable Development _at_ The World Bank
5
WBG Key Progress Since Gleneagles
  • Access and Low Carbon Energy (1)
  • Cumulative energy commitments of over US11
    billion for FY06FY08 to date are 57 higher than
    the energy lending in FY0305.
  • Energy financing to IDA countries also increased
    significantly, from annual average of US0.9
    billion between FY03 and FY05 to an annual
    average of US1.8 billion between FY06 and FY07.
    But energy access remains a policy and financing
    challenge in all regions, especially in SSA.
  • Share of support for low-carbon energy projects
    up from 28 in FY0305 to 40 since Gleneagles.
  • GEF and Carbon Finance contributed US546
    million, or 13 percent.

Sustainable Development _at_ The World Bank
6
WBG Key Progress Since Gleneagles
  • Access and Low Carbon Energy (2)
  • RE and EE for the period FY05 to H1FY09 was
    US2.3 billion, exceeding Bonn commitment 1.5
    years ahead of schedule
  • CEIF low-carbon work extended to other sectors,
    such as transport and urban sectors, showing good
    potential.
  • Two new Carbon FacilitiesCPF and FCPF approved
    in September 2007
  • Pilot program to begin measuring GHG emissions of
    the WBG lending portfolio is underway.

Sustainable Development _at_ The World Bank
7
Adaptation IDA and Climate Change results and
related work
  • CEIF argued for the need for a shift in approach
    to adaptation from a largely stand alone, project
    by project approach to one where the management
    of climate risk, current and future, was regarded
    as an essential part of development planning.
  • IDA and Climate Change report (2007) shows that
    the poorest countries are most vulnerable to
    climate change impacts and that such countries
    need to consider immediate interventions that
    will increase their resilience to climate change.

Sustainable Development _at_ The World Bank
8
Adaptation
Sustainable Development _at_ The World Bank
9
Adaptation- Progress since Gleneagles
  • New analytical tools and guidance for assessing
    and managing climate risk are necessary.
  • Resources made available through the GEF have
    been critical in promoting assessments, capacity
    building and initial project by project action,
    but fall a long way short of the resources
    required to support comprehensive adaptation.
  • Netherlands, UK, WB partnership on a Global
    Economics of Adaptation study to understand how
    to identify and prioritize adaptation measures
    and to estimate the financial costs of ensuring
    national development plans are climate
    resilient.
  • JBIC, ADB, WB partnership on Adaptation in major
    Coastal Cities.

Sustainable Development _at_ The World Bank
10
Key Lesson since Gleneagles- Thinking of climate
change differently
  • Beyond environmentcomplex and overaching problem
  • Affects all aspects of societieseconomy,
    technology, trade, equity, ethics, security,
    relations within and among countries
  • Financial aspects inceasingly important, both in
    regard of national budgets and international
    transfers- and financing needs are enormous and
    not being met.
  • Progress on implementing widespread adaptation
    has been hindered by the lack of sound estimates
    of the scope of the task and the financial
    implications.
  • Requires to run on two legs
  • mitigationto avoid the unmanageable,
  • adaptationto manage the unavoidable

Sustainable Development _at_ The World Bank
11
Call for MDB Suppport on Climate Change
  • UNFCCC recognizes the need for financial
    resources- in addition to the financial mechanism
    defined under article 11 of the UNFCCC, paragraph
    11(5) stipulates that developed country parties
    may also provide and developing country Parties
    avail themselves of, financial resources related
    to the implementation of the Convention through
    bilateral, regional and other multilateral
    channels.
  • Bali Action Plan- launch a comprehensive process
    to enable the full, effective and sustained
    implementation of the Convention through
    long-term cooperative action, now, up to and
    beyond 2012.
  • Under Paragraph 1 of Bali Action Plan, Parties
    decided to address ways to strengthen the
    catalytic role of the Convention in encouraging
    multilateral bodies, the public and private
    sectors and civil society, building on synergies
    among activities and processes, as a means to
    support mitigation in a coherent and integrated
    manner.

Sustainable Development _at_ The World Bank
12
Towards a WBG Strategic Framework on Climate
Change and Development (SFCCD)
Sustainable Development _at_ The World Bank
13
Towards a WBG Strategic Framework on Climate
Change and Development (SFCCD)
  • WBG will maintain the momentum for implementing
    the CEIF action plan and expand its strategic
    thinking on climate change, in a more
    comprehensive, cross-sectoral manner and in
    alignment with the growing needs of developing
    countries.

Sustainable Development _at_ The World Bank
14
SFCCD Milestones
  • Requested by Annual Meetings 2007 as an evolution
    of the Clean Energy investment Framework (CEIF)
  • Concepts and Issues development, early
    consultations through March 2008
  • Full-scale Consultations April-June
  • Draft Final Paper July
  • Web-based consultations, select meetings per
    demand August-September
  • Final paper Annual Meetings in October 2008

Sustainable Development _at_ The World Bank
15
SFCCD is about development in the context of
climate change
  • Priority of growth, poverty reduction and MDGs
  • Importance of meeting energy needs of developing
    countries
  • Development imperative of helping to adapt to
    climate risks
  • Resource mobilization in addition to the current
    ODA levels

16
Relation to UNFCCC Negotiations
  • Neutral to any party position
  • Helping countries understand the impacts of
    alternative policies within the UNFCCC
  • Piloting innovative instruments and approaches
    that help inform the development of a future
    regime (e.g. Carbon Finance, IDA15 as a platform
    for mainstreaming adaptation)
  • Advocacy and capacity building

Sustainable Development _at_ The World Bank
17
SFCCD Objective
  • To integrate climate change and development
  • challenges, without compromising and rather
  • enhancing growth and poverty reduction
  • efforts through
  • Country, regional, and global operations
  • A multi-sectoral, multi-dimensional approach
  • The use of a strong and balanced results
    framework
  • Working with other development partners

Sustainable Development _at_ The World Bank
18
Working With Multiple Partners
  • UN agencies, UNFCCC Secretariat, GEF
  • A common UN-system approach to CC
  • Building blocks mitigation, adaptation,
    technology, finance
  • Other MDBs
  • Clean Energy Investment Framework
  • Bi-lateral donors
  • Initiatives by countries, sub-national (city)
    governments, private sector, NGOs
  • Scaling up WBG engagement based on its specific
    comparative advantages

Sustainable Development _at_ The World Bank
19
SFCCD Pillars
  • Make effective climate action both adaptation
    and mitigation - part of core development efforts
  • Address the resource gap through existing and
    innovative instruments for concessional finance
  • Facilitate the development of innovative market
    mechanisms
  • Create enabling environment for and leveraging
    private sector finance
  • Accelerate the deployment of existing and
    development of new climate-friendly technologies
  • Step-up policy research, knowledge management and
    capacity building

Sustainable Development _at_ The World Bank
20
Dual approach to integrating climate action into
development by
  • Focusing on multiple benefits and business
    opportunities
  • Mobilizing concessional finance to cover
    additional cost

21
WB lending in sectors with largest potential
for adaptation and /or mitigation
Numerous opportunities to make a difference
similar situation in IFC and MIGA GHG Emissions
and IBRD/IDA Portfolio, FY07
Sustainable Development _at_ The World Bank
22
… similar situation with IFC MIGA portfolios
IFC investment by Sector ( mln), FY07
MIGA Guarantees by Sector ( mln), FY07
23
Mobilizing Finance to Cover Additional Costs
  • Progress to date
  • Strong replenishment of IDA15
  • Adaptation Fund under special arrangement with
    GEF Secretariat
  • CIEF Increased volume and share of low carbon
    energy lending, in partnership with GEF
  • IFC leveraged private finance by 1 to 5
  • Robust increase in Carbon Finance
  • Forest Carbon Partnership Facility
  • New initiatives
  • WBGRDBs - Climate Investment Funds (CIF)
  • Carbon Partnership Facility
  • MIGA carbon credit delivery guarantee
  • IFC- Structured financing packages blending CF
    with loans and guarantees
  • WB Treasury - bonds at reduced rates to advance
    to projects with climate benefits
  • Climate Risk Insurance products customized to
    different needs

Sustainable Development _at_ The World Bank
24
Addressing the Resource Gap proposed Climate
Investment Funds
Sustainable Development _at_ The World Bank
25
Addressing the Resource Gap proposed Climate
Investment Funds
  • Scale of action- need to translate lessons from
    CEIF and longer-term GEF pilot and prototype
    projects and capacity building, into broader
    programs which will help transform economies so
    that the objective of alleviating poverty and
    fostering growth can be met through new ways of
    approaching low-carbon growth and enhancing
    resilience.
  • In consultation with interested parties, the WBG
    and Regional Development Banks (RDBs) are joining
    efforts to establish a portfolio of strategic
    CIF.
  • CIF to complement, build upon and enhance the
    activities of other existing instruments, like
    the GEF, IDA, International Bank for
    Reconstruction and Development (IBRD) and the
    IFC.

Sustainable Development _at_ The World Bank
26
Climate Investment Funds Principles
  • Financing needs for climate change are enormous
    widespread recognition that all multilateral
    institutions must work with their clients to
    address this agenda in support of the Bali Action
    Plan.
  • Climate Change is a development issue, and
    therefore MDBs have an essential role to play.
    The central role of the GEF and UN agencies in
    the financial architecture to address climate
    change is fully recognized.
  • The CIF aims to fill a critical gap scaling up
    investments while transforming development paths
    of the countries. This will contribute to
    promoting an international environment supportive
    of a global agreement to address climate change.

Sustainable Development _at_ The World Bank
27
Building on New Initiatives
  • UK Environmental Transformation Fund
  • US Clean Technology Fund
  • Japan Cool Earth 50
  • Strategic Climate Fund
  • Clean Technology Fund

ADB, AfDB, EBRD, IDB and the WBG joined forces to
establish a portfolio of Climate Investment Funds
Sustainable Development _at_ The World Bank
28
Where We Are
  • Current status
  • Strong interest from several donors
  • Support from MDBs
  • Demand from countries
  • Agreement with GEF and preliminary discussions
    with UN agencies and UNFCCC
  • Ongoing Actions
  • Consultations with recipient countries
  • Expand donor base
  • Broader and deeper consultations with others
    (UNFCCC, GEF, UN partners, private sector)
  • Advance design of funds and financial instruments

Sustainable Development _at_ The World Bank
29
Proposed Funds Clean Technology Fund Strategic
Climate Fund
Sustainable Development _at_ The World Bank
30
The Gap in Mitigation Financing
  • Absolute financing gap is 100 billion per year
  • In long-term, could be filled by combination of
  • growing market for carbon trading (could reach
    100 billion after 2012), and
  • policy instruments such as carbon taxes
  • In the interim, concessional financing is
    critical to catalyze increased flow of
    commercial capital in this area

Sustainable Development _at_ The World Bank
31
Proposed Clean Technology Fund
  • Accelerates transformation to low carbon
    economies
  • Finances cost-effective mitigation of greenhouse
    gas emissions
  • Focus on investments that reduce GHGs at scale or
    have demonstration impact that will lead to scale
  • Speed and nimbleness essential, given urgency
  • Scales-up and replicates lessons of GEF
  • Focuses on engaging private sector
  • Complements existing financing
  • Utilizes the right blend/suite of instruments
    (concessional loans, grants, guarantees)

Sustainable Development _at_ The World Bank
32
Proposed Funds Clean Technology Fund Strategic
Climate Fund
Sustainable Development _at_ The World Bank
33
Proposed Strategic Climate Fund
  • Composed of Partnerships for targeted initiatives
  • Pilot Program for Climate Resilience
  • Ecosystem Services
  • Pre-commercial Technologies
  • Forest Investment

Sustainable Development _at_ The World Bank
34
Pilot Program for Climate Resilience
  • IDA is strong platform to promote
    climate-resilient development. The successful
    IDA-15 replenishment was partly testament to that
    (42)
  • MDBs have already begun incorporating adaptation
    concerns into their programs
  • GEF Voluntary Funds
  • Special Climate Change Fund
  • Least Developed Countries Fund
  • GEF Trust Fund Strategic Priority on Adaptation
  • Adaptation Fund (GEF-administered) could reach
  • 100-500 million through 2012, can increase to
    2 billion per year after 2012.
  • Bilateral donors providing additional resources

ca. 300 million
Sustainable Development _at_ The World Bank
35
Gaps in Adaptation Financing
  • Financing gap UNFCCC estimates that in 2030,
    2867 billion/year required to help developing
    countries adapt
  • Knowledge gaps are impediments to integrating
    climate risks into development
  • Until large-scale funds are operational, interim
    financing is necessary to proceed with adaptation
    mainstreaming in development and to build
    knowledge base

Sustainable Development _at_ The World Bank
36
Proposed Climate Resilience Pilot Program
  • Pilot and demonstrate ways to mainstream climate
    risk management and climate resilience into core
    development planning and budgeting
  • Pilots will be country-led and build on National
    Adaptation Programs of Action (NAPAs)
  • Report lessons learned to the Board of the
    Adaptation Fund, and share them widely with IDA
    and similar programs in MDBs and UN
  • Explore how to support country efforts through
    international finance, consistent with Paris
    Declaration on Aid Effectiveness

Sustainable Development _at_ The World Bank
37
Proposed Climate Resilience Pilot Program
  • Board of Adaptation Fund will be invited to
    participate in design and governance
  • Primary decision making at country level
  • Oversight Committee developing countries all
    recipient countries, donors, the developing
    country Co-Chair of the Adaptation Fund Board,
    MDBs, UNDP, UNEP, GEF, civil society
  • 5-10 pilot countries to receive scaled-up support
  • Pilot countries will be IDA eligible or SIDS
  • 3-5 year time frame
  • Technical assistance (1-2 million)
  • Additional financial resources to fund
    investments (up to 100 million per country)

Sustainable Development _at_ The World Bank
38
Summary Key Common Features of Climate
Investment Funds
  • Support investments based on country-led
    strategies, and
  • Be flexible and efficient to respond to country
    demand and provide innovative solutions to
    mobilize private sector
  • Maximize co-benefits, particularly in relation to
    poverty reduction and sustainable management of
    natural resources and ecosystem services
  • Encourage fast-tracking of early action (both
    mitigation and adaptation) and market-based
    solutions to climate change
  • Utilize skills and capabilities of international
    financial institutions to raise and deliver
    concessional climate financing at a significant
    scale

Sustainable Development _at_ The World Bank
39
CIF Issues and Opportunities
  • In further developing the proposal for climate
    investment funds, the MDBs are engaged in
    extensive consultations with key stakeholders,
    particularly potential recipient countries and
    other interested parties and advance the design
    of funds and financial instruments.
  • The final proposal will focus on
  • Supporting UNFCCC Bali Action Plan and
    consistency with Paris Declaration
  • Country ownership- low carbon growth strategies
    and NAPAs to support national sustainable
    development
  • Learning by doing- for example enhancing
    knowledge base for Adaptation Fund operations
    through pilots
  • Inclusive, effective and efficient governance
  • Optimizing impact

Sustainable Development _at_ The World Bank
40
Scaling up Carbon Finance
Sustainable Development _at_ The World Bank
41
Pioneering Carbon Finance
  • World Banks experience
  • A global pioneer and catalyst in the carbon
    market US180 million Prototype Carbon Fund
    (PCF) initiated in 1999, before the Kyoto
    Protocol became effective
  • BioCarbon Fund LULUCF (Land use, Land use
    Change and Forestry) pioneer since 2004,
    including for Reducing Emissions from
    Deforestation and Degradation (REDD) at the
    project level
  • Now managing 10 carbon funds, and over US2
    billion
  • 16 countries and 66 private sector companies have
    made contributions to funds

Sustainable Development _at_ The World Bank
42
Scaling up Carbon Finance
  • New! Carbon Partnership Facility (CPF)
  • Objectives
  • Target long-term emissions
  • Scale up
  • Support strategic, transformational interventions
    in power sector development, energy efficiency,
    gas flaring, transport, urban development, etc.
  • Features
  • Programs, away from individual projects
  • Partnership between buyers and sellers
  • Fostering both demand and supply in uncertain
    market
  • Target size 5 billion over 5 years first
    tranche 350 million

Sustainable Development _at_ The World Bank
43
Scaling up Carbon Finance
  • New! Forest Carbon Partnership Facility (FCPF)
  • Objectives
  • Pilot system of positive incentives for post-2012
    that includes REDD
  • Remain neutral to UNFCCC negotiations
  • Catalyze / leverage private sector investment to
    enable scaling up 300 million will not save
    worlds forests
  • Features
  • Balanced governance structure (developing
    countries, industrialized countries and carbon
    fund participants have balanced voting rights on
    Participants Committee)
  • Voluntary participation
  • Two mechanisms
  • 100 million readiness fund for capacity building
  • 200 million carbon fund for purchase of emission
    reductions

Sustainable Development _at_ The World Bank
44
Forest Carbon Partnership Facility (FCPF)
  • Argentina
  • Bolivia
  • Cameroon
  • Central African Republic
  • Colombia
  • Costa Rica
  • Dem. Republic of Congo
  • Ecuador
  • El Salvador
  • Gabon
  • Ghana
  • Guatemala
  • Guyana
  • Indonesia
  • Kenya
  • Laos
  • Liberia
  • Madagascar
  • Malaysia
  • Mexico
  • Nicaragua
  • Pakistan
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Philippines
  • Republic of Congo
  • Senegal
  • Sierra Leone
  • Sudan
  • Thailand
  • Uganda
  • Vanuatu

34 Requests for Participation/ Cooperation
Sustainable Development _at_ The World Bank
45
Thank You if you want a copy of this
presentation or the next CIF design document,
then email me at wevans_at_worldbank.org
Sustainable Development _at_ The World Bank
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