climate change as human development challenge (undp presentation)

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Climate Change as Human Development Challenge

Presented by Marina OlshanskayaTuesday, 16 December

RBEC DRR MeetingDecember 2008, Istanbul

2

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RBEC DRR Meeting, Istanbul 2008

Agenda

Climate Change as a Global ChallengeClimate Change as a Global Challenge

International Climate Change Negotiations

RBEC Context

Climate Change in UNDAF

Emerging Trends in Climate Change Financing

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The 21st Century Climate Challenge

Climate Change has three distinctive characteristics – it is cumulative, the effects are irreversible and it is global

Need for urgent collective response to avoid dangerous climate change

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Avoiding Dangerous Climate Change

Temperatures increase as CO2 emissions and concentrations rise

Defining dangerous – keeping below a 2 degree C increase in temperature

To keep within 2C threshold CO2e concentration should stabilize at 450 ppm

The UNDP 2007/2008 HDR estimated that the 21st Century carbon budget is set at 1,456 Gt CO2

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2°C t rise - internationally dangerous threshold

Increased exposure to coastal flooding: Accelerated melting of Greenland and Antarctic ice sheets will lead to sea levels rising by several metres and forced human resettlement on a vast scale – 180-230 mln people are predicted to be affected

Heightened water-energy insecurity: Accelerated glacial melt will compound already severe ecological problems across northern China, India and Central Asia initially increasing floods before reducing the flow of water to major river systems vital for irrigation and hydropower

Reduced agricultural productivity: Due to intensified droughts and changes in rainfall patterns an

additional 600 million people will face acute malnutrition by 2080s over and above the level in a no-climate change scenario

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To keep within 2C threshold CO2e concentration should stabilize at least at 450 ppm

• 450 ppm – 50% likeliihood to stay within 2°C

• 550 ppm - 80 % probability to exceed the 2°C threshold

• 650 ppm - 60 - 95 % of exceeding 3°C

• 883 ppm - 50 % chance of exceeding 5°C T increase

• Concentrations of CO2 are increasing at 2 ppm each year. At this growth rate, we will reach 450 ppm in 2035

• Continued growth of CO2 emissions for another 10 years will make it impossible to avert exceeding this threshold

8

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The 21st Century carbon budget is set at 1,456 Gt CO2 …

and is set for early expiry

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World Energy Outlook 2008 (IEA)

• Global GHG emissions, if left unabated, will rise 35% by 2030

compared with 2005 levels

• Around 97% of the growth in emissions will happen in

developing and transition countries (China, India, Russia, Brazil,

Mexico, South Africa)

• A 450 ppm trajectory could not be achieved without

commitments from developing countries, even if OECD countries

reduce their emissions to zero

10

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Charting a course away dangerous climate change: A window of opportunity of 100 months

A sustainable emissions pathway with respect to 1990 level is as follows

• The world – cuts of 50 percent by 2050 with a peak by 2020

• Developed countries – cuts of 80 percent by 2050

• Developing countries – cuts of 20 percent by 2050

Today 2020

11

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The problem of inertia - the case for Adaptation

• Changes in key climatic parameters are already evident, including in RBEC• Europe has warmed more than global average, with a 0.950C increase in last

100 years

Drought in Central Asia• Most of affected area semi-arid steppe with winter & early spring

precipitation• Precipitation between 1998-2001 less than 55% of long-term regional average• Drought exacerbated by early snow-melt and higher temperatures

Drying trends in South & South-East Europe• Southern & South-eastern Europe have become drier by up to 20% (past

century)• Frequency of “very wet” days has decreased in Southern Europe (past

century)

Consistent with projections of increased rainfall variability & intensity, more frequent drought, decline in snow and ice cover

12

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Water shortage Flood risk Fires Sea-level rise hazards

DRIER

Climate change impacts are evident and anticipated to intensify across the region

Source: Based on IPCC AR4 (projections for 2080-2099), NCs and other sources

IPPC TAR4 indicates increase of 0.410C/per decadeIn Central Asia, 1 to 2°C rise in temperature per century

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Inverse relationship between climate change vulnerability and responsibility

- Some people walk more lightly than others

- Disaster risks is skewed towards developing countries:

• 1 in 19 people are affected in developing countries

• The corresponding number is 1 in 1,500 in OECD countries

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Agenda

Climate Change as a Global Challenge

International Climate Change International Climate Change NegotiationsNegotiations

RBEC Context



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Climate change entered the policy radar in 1979

COP 14, Poznan2008

COP 13, Bali: Bali Action Plan2007

IPCC Fourth Assessment Report: Nobel Prize2007

COP 12, Nairobi: Nairobi Work Programme2006

COP 15, Copenhagen Protocol ???2009

IPCC First Assessment Report: scientific basis for UNFCCC1990

COP 3, Kyoto: Kyoto Protocol adopted1997

First Conference of the Parties (COP 1), Berlin1995

UNFCCC enters into force1994 (May)

UNFCCC adopted at Rio Earth Summit1992 (June)

Intergovernmental Panel on Climate Change (IPCC) created1988

First World Climate Conference1979

Kyoto Protocol enters into force2005 (February)

COP 6 “bis” resumes in BonnCOP 7, Marrakech: Marrakech Accords

2001 (July)2001 (October)

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The Convention clearly links climate change to development

Convention objective

achieve stabilization of greenhouse gas

concentrations in the atmosphere at a

low enough level to prevent “dangerous

anthropogenic Interference” with the climate system

• allow ecosystems to adapt naturally to to climate change;

• ensure food production is not threatened; and

• enable economic development to proceed sustainably

within timeframe

sufficient to

UNFCCC signed by 191 Parties – near universal membership

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The Convention clusters countries in three groups

“Common, but differentiated responsibilities”

Industrialised countries &

Economies in Transition (EITs)

• Adopt policies and measures with aim of reducing GHG emissions to 1990 levels

• EITs have “flexibility” in implementing commitments

Annex I

Industrialised countries

• Provide financial resources to enable developing countries to:

• mitigate• adapt

• Promote and facilitate technology transfer to EITs and non-Annex I Parties

Annex II

Developing countries

• COP identifies activities to address non-Annex I needs and concerns

• no quantitative obligations

• Least Developed Countries given special consideration

Non-Annex I

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RBEC has mix of Annex I and NAI countriesAnnex IBelarus Bulgaria Croatia

Czech Rep. Hungary

LatviaLithuania Poland

Romania Russian Fed.

SlovakiaTurkey*Ukraine Non-Annex I (NAI): Albania, Armenia, Azerbaijan,

Bosnia and Herzegovina, Cyprus, Georgia, Kazakhstan*, Kyrgyzstan, Macedonia, Malta, Moldova, Montenegro, Serbia, Tajikistan, Turkmenistan, Uzbekistan

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UNFCCC negotiations are dominated by a few key positions

United States

• climate change is long-term problem

• premature to think about post-2012 framework

• focus on technologies that provide reductions in 20-30 years, not binding targets and timetables

European Union• climate change is urgent issue• chance to avoid dangerous

interference could be lost in next 10 to 20 years

• need binding targets & timetables

Developing countries (G77)• climate change urgent issue

• developed countries are responsible and must act first• priority is development,

poverty reduction• need climate-

friendly technologies

Economies in Transition are fragmented and voiceless

20

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Key issues at centre of climate negotiations

1. Establishing new emission reduction targets (post-2012) and designing new “Kyoto Protocol”

3. Engaging US (20% of global emissions) and non-Annex I countries in GHG reduction efforts (particularly China and India)

5. Financing for climate change mitigation and adaptation in developing countries:

- Modalities and funding for technology transfer

- New Climate Change Funds (e.g Adaptation Fund)

- Role of GEF and GEF Agencies (UNDP)

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Agenda



RBEC ContextRBEC Context



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Greenhouse gas emissions

Climate change impacts

Global climate change: change in mean global temperature, changes in regional temperature, rainfall,

pressure, circulation etc

Mitigation: reduce emissions, reducing magnitude of CC

Adaptation: reduce vulnerability to CC impacts, reducing losses

Basics of Climate Change Management: Mitigation vs adaptation

Adaptation and mitigation are complementary strategies

23

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All sectors and regions have the potential to reduce GHG emissions

Note: estimates do not include non-technical options such as lifestyle changes

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Carbon intensity: RBEC & other regions (2004)

EU (15) Middle East CIS

0

500

1000

1500

2000

2500

3000

LDCs Asia RBEC Uzbekistan

Carbon intensity, tCO2/Mill. $Intl

World average

25

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POTENTIAL FOR GHG MITIGATION AT A SECTORAL LEVEL IN 2030 FOR DIFFERENT COST CATEGORIES, ECONOMIES IN TRANSITION

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Buidlings Industry Agriculture Energy supply Forestry Waste Transport

Gton CO2eq.

<20 <0 0-20 20-100

Cost categories* (US$/tCO2eq)

* For the buildings, forestry, waste and transport sectors, the potential is split into three cost categories: at net negative costs, at 0-20US$/tCO2, and 20-100 US$/tCO2. For the industrial, forestry, and energy suppy sectors, the potential is split into two categories: at costsbelow 20 US$/tCO2 and at 20-100 US$/tCO2.

Costs and potential for GHG emission reduction in EITs

26

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Residential & commercial buildings

energy efficient appliances; efficient lighting, thermal insulation, new building design, solar water heaters

RBEC’s key CC mitigation priority: buildings

How do you think about work the heating supply system in your apartment?

Bad30, 1%

Don’t work at all

20,5%No answer

1,8%

Good47, 7%

Turkmenistan: 50% of customers are not satisfied with heat systems

Actual performance: over-heated in summer and under-heated in winter

Source: UNDP/GEF Project Report TUK/01/G35

27

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Kyrgyzstan: 49% of final energy use in buildings

30% reduction in energy consumption (from 135 to 95 kWh/м2) in residential buildings will result in saving of 2,500 GWh/yr or 76 mln $/yr

0

20

40

60

80

100

120

140

Kyrgyzstan Russia Sweden

kWh/m2/yr

Source: UNDP/GEF EE Building Project in Kyrgyzstan

28

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Transport• more efficient cars and trucks, switching fuel to compressed natural gas, switching from cars to public transport, multi-occupancy lanes, etc.

Figure 1. Number of passenger cars in Romania, 1990-1998 (thousand cars)

0

500

1,000

1,500

2,000

2,500

3,000

1990 1991 1992

1993 1994 1995 1996 1997 1998

Figure 1. Number of passenger cars in Romania, 1990-1998 (thousand cars)

0

500

1,000

1,500

2,000

2,500

3,000

1990 1991 1992

1993 1994 1995 1996 1997 1998

Figure 2. Use of public transport (buses) in Romania, 1990-2000(million passenger-km)

0

5,000

10,000

15,000

20,000

25,000

30,000

1990 1993 1994 1995 1996 1997 1998 1999 2000

Number of passengers cars in Romania 1990-1998 (thousand cars)

Use of public transport in Romania 1990-2000 (million passenger-km)

Source: UNDP/GEF PDF B concept

RBEC’s other CC mitigation priorities: transport

29

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RBEC’s CC Mitigation priorities: renewable energy

Wind power: KAZ, Black and Caspian coats

Biomass: Central and Eastern Europe

Biogas: Ukraine, South-Eastern Europe

Landfill Gas: Large Urban Centers

Solar Heating: Central Asia, Turkey

Small hydro power: Caucasus and Central Asia

30

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Why renewables are important for UNDP

• Energy access0.5 – 1 mln Tajiks rely on wood fuel for their heating and cooking needs in winter

• Energy security 50% of Georgia’s power comes from imported oil and gas

• Economic competitiveness20% of power produced in Kazakhstan is lost during transmission from

North to South in highly centralized national grid

• Effective use of resourcesAt least 15% of the Northwest Russia energy consumption could be

covered by domestic wood waste if the annual cut is harvested for 100% and not for 40% as today

31

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Energy efficiency(Public/Municipal) -$32,383,000

Renewable energy -$19,309,000

Transport - $1,000,000

Energy efficiency (Industry)- $4,304,000

Other - US$2,600,000

RBEC GEF-funded CC Mitigation Portfolio 1998-2008

• Completed: 26.7 mln US$

• Under implementation: 32.9 mln US$

• Under development in GEF-4 (until 2010):

• Hard pipe-line (approved concepts): 26.4 mln US$

• Soft pipe-line: 24.4 mln US$

32

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Where we work (completed + under implementation):

• EU Members States: Slovakia, Czech Republic, Hungary, Poland, Slovenia, Bulgaria and Romania

• Western CIS: Armenia, Belarus, Georgia, Russia, Ukraine

• Central Asia: Kazakhstan, Kyrgyzstan, and Turkmenistan

• Western Balkans: Croatia, BiH and Albania

33

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CC Mitigation Pipe-line for GEF-4: 50.8 mln US$

• Hard pipeline (PIF approved):

• Soft pipeline (GEF approval is pending):

Slovakia, Tajikistan 1.83Transport

Russia, Turkey, Uzbekistan

24.57EE Buildings & Appliances

CountriesVolume (mln$)Strategic Priority

Serbia1.0Transport

Kazakhstan, Ukraine12.5EE Buildings &

Appliances

Turkey5.9Industrial EE

Albania1.0Small hydro

Bulgaria, BiH4.0Biomass

CountriesVolume (mln$)Strategic Priority

34

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Update on RAF: Individual allocations

3.73.710.9Uzbekistan

27.35 (31%)87.5 (43%)205.2TOTAL

-9.424.0Ukraine

6.26.219.4Turkey

1.11.16.4Slovakia

--3.5Serbia

15.265.987.1Russia

0.3 (SGP)0.315.5Romania

0.15 (SGP) 0.1515.2Kazakhstan

0.3 (SGP)0.3 8.8Bulgaria

0.4 (SGP)0.48.4Belarus

--6.0Azerbaijan

UNDP (% of utilized)

Utilized (% of RAF)

Total RAF, mln $Country

35

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Update on RAF: Group allocations

--Turkmenistan*

4.23 (100%)4.23 (11.7%)Up to 36.3TOTAL

0.90.9Tajikistan

1.11.1Montenegro

--Moldova

--Macedonia

1.01.0Kyrgyzstan

--Georgia

--Croatia*

1.011.01BiH

--Armenia

--Up to 3.3Albania

UNDP (% of utilized)

UtilizedRevised RAF, mln $

Country

36

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* Footnote

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A typical UNDP/GEF CC Mitigation project• Objectives are environmental: GHG reduction• …but day-to-day activities are in the policy/business world: - find a “client”: energy consumers (residents), suppliers (DH companies, IPPs), bill payers (municipalities) - prepare 'bankable‘ (cost-effective) energy efficiency/renewable energy projects and take them to potential financiers - work with relevant authorities to address policy/regulatory barriers: Heat/RE Laws, smart tariffs, norms & standards - capacity building for all partners involved - demonstration (co-financed): biomass, co-generation, decentralized heating systems, low-costs EE measures (insulation)

• Implementing partners: NEVER/RARE Ministries of Environment, but Energy, Economy, Municipalities, Education, Construction, NGOs

37

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Summary

• Climate Change is a global challenge which requires urgent

and collective actions to stay within dangerous 2C threshold

• World is divided: responsibility vs vulnerability

• RBEC is the most carbon intensive region globally: strong

linkages between GHG emission reduction and human

development

• CC impacts are already being felt, particularly in Central Asia

• Very low national capacities to deal with climate change

issues at national and global level

38

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* Footnote

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Summary - UNDP

- 10-years experience with GEF projects on energy efficiency

and renewable energy; ambitious pipe-line with main focus on

building sector;

- Few GEF-funded projects on adaptation (Hungary, Armenia,

Albania, Tajikistan), piloting territorial approach (Albania),

climate proofing (Armenia) and economic assessment of

climate risks (Croatia HDR)

- Climate change is seen as “environmental issue”; linkages

with UNDP’s core areas are not realized/built upon

- Human capacities at COs and BRC are insufficient to remain

competitive in the field

39

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* Footnote

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Agenda



RBEC Context

Climate Change in UNDAFClimate Change in UNDAF


40

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* Footnote

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Agenda



Update on RBEC

Climate Change in UNDP/UN

Emerging Trends in Climate Change Emerging Trends in Climate Change FinancingFinancing

41

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Content

I. Climate change financing needs and challenges

II. Overview of carbon market

III. Financing for CC mitigation: how to make climate change

mitigation cost-effective

IV. Meeting financing gaps for CC adaptation

Source: UNFCCC, 2008

42

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Basic Economics of Climate Change

Costs of climate change = costs of mitigation ($/tCO2) + costs of adaptation

(the less is spent of mitigation, the more will be spent on adaptation)

Key tasks:

- Identify and finance most cost-effective measures for GHG emission reductions globally

- Provide funding for adaptation, particularly for the most vulnerable regions, sectors and groups of people

43

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Financing Requirements for Climate Change Mitigation

• Investment required in energy supply infrastructure worldwide to meet growing energy needs to 2030 ≈ $20 trillion. 50% in developing countries (IEA 2007)

• Additional investment (USD 200 billion) will be needed by 2030 to mitigate climate change (UNFCCC 2008)

• Estimated additional needs to address climate change is large comparing to what is currently available under Kyoto and UNFCCC, but small in relation to global GDP (0.3-0.5%) and global investment

• ODA and IFIs financing for energy average US$6-7 bn/year ( ≈ 2% of required); > 95% of financing needed from private sector or governments

• The double challenge: – find ways to attract enough investment to meet growing needs – avoid carbon intensive path and steer investment toward low

emission technologies (‘leapfrog’)

44

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35-45Energy RD&D

21Forestry

35Agriculture

88Transport

0.9Waste

51EE Building

36EE Industry

- 67Energy supply infrastructure

Global (US$ billions)Sectors


Additional Financing of US$ 200 bln will be needed in 2030 to return GHG emissions to current levels

45

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* Footnote

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Carbon market already plays important role in shifting investment flows

• Valued at US$64

billion in 2007,

100% increase to

2006;

• In 2007 CDM/JI

market value was at

US$8.2 billion, up

34% from 2006

• Voluntary market is

much smaller, but

growing v. fast

Source: World Bank 2008

46

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* Footnote

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Type of transactions on carbon market

• Allowance-based TransactionsBuyer purchases emissions allowances created and allocated by regulators under cap-and-trade regimes [Assigned Amount Units (AAUs) under Kyoto Protocol or EU Allowances (EUAs) under EU Emission Trading Scheme]

• Project-based TransactionsBuyer purchases emission credits from project that reduces GHG emissions. The most notable examples of project-based transactions are the Clean Development Mechanism (CDM) and Joint Implementation (JI) mechanisms of the Kyoto Protocol, generating Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs) respectively.

No difference in quality between emission allowances and project-based credits, once the latter are issued !

47

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* Footnote

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How CDM works: Cost-Effective CC Mitigation and Human development

Quota

EAUs

Every year in the North, a factory is given emission allowances to meet a particular quota. If it emits more than its quota, it must purchase missing allowances/ certificates

CERs

In the South, a wind generator is built instead of a coal power plant. This avoids emissions: the project gets a corresponding amount of certificates (CERs) and can sell them

48

Unit of measure

* Footnote

Source: Source 48


CDM Market Growth, tCO2e


49

Unit of measure

* Footnote

Source: Source 49


Prices: Primary/Secondary CERs, EUA

Source: World Bank 2007, PointCarbon 2008

50

Unit of measure

* Footnote

Source: Source 50


CDM delivers on clean energy financing (tCO2e)

Jan. 2005 to Dec. 2005 Clean energy: 11%

Jan. 2007 to Dec. 2007 Clean energy: 64%


51

Unit of measure

* Footnote

Source: Source 51


“Market is a marvel”: Carbon market finds the best investments

52

Unit of measure

* Footnote

Source: Source 52


China takes it all


53

Unit of measure

* Footnote

Source: Source 53


45

1915

27 26

20

6 63

5

Africa ArabStates

Europe& CIS

LatinAmerica

& Caribbean

Asia &Pacific

Number of countries

Number without a DNA

DNA Presence Across Regions

Countries are incurring carbon costs but realizing few benefits

21

10

5

7

4

Countries With A DNA But No Registered CDM Projects

Africa ArabStates

Europe& CIS

LatinAmerica

& Caribbean

Asia &Pacific

86 non-Annex 1 countries have yet to benefit from any registered CDM project activity

54

Unit of measure

* Footnote

Source: Source 54


6 to 12 months 1.5 months Crediting period of the project

Pro

ject

D

ev

elo

pe

rD

NA

DO

EC

DM

Ex

ec

uti

ve

Bo

ard

Project feasibility

assessment / PIN

CDM project developmen

t / PDD

Host country approval

Project validation

Project registration

CER issuance

Project verification

The CDM project cycle

55

Unit of measure

* Footnote

Source: Source 55


UNDP’s two-pronged carbon strategy

Capacity Development (under and outside Nairobi Framework)

Creating an ‘operational’ CDM framework in participating countries –

an environment in which functioning public institutions are able to

effectively interact with the private sector to jointly develop carbon

projects.

MDG Carbon Facility

Provides support to project developers – through provision of a

comprehensive package of services to assist private-sector

project developers with the preparation and implementation of

carbon projects.

56

Unit of measure

* Footnote

Source: Source 56


Fortis-BNP Paribas

Project Proponents

UNDP

Carbon Banking Services (purchase at fixed price)

MDG Carbon FacilityCompliance Activities

Project Management Services

Overview of the MDG Carbon Facility Partnership with Fortis

57

Unit of measure

* Footnote

Source: Source 57


MDG CF: Update in RBEC

• Eight host countries MoU signed:

• Armenia, Albania, Georgia, Kyrgyzstan, Macedonia, Russia, Ukraine, Uzbekistan

• One project at ERPA:

• Uzbekistan – gas leakage reduction

• Two Projects at MoU/Due Diligence Stage:

• Macedonia – biogas

• Ukraine – landfill gas

• Two Projects passed screening:

• Albania and Kyrgyzstan – small hydro

58

Unit of measure

* Footnote

Source: Source 58


Meeting the mitigation financing gap: Public International Mechanisms

• The World Bank recently launched the Climate Investment Funds, in which one fund, the Clean Technology Fund (US$ 6 bln), is specifically aimed at financing the demonstration and diffusion of large-scale climate change mitigation projects

• Cool Earth Partnership Fund (Japan): $8 billion in concessional financing and $2 billion in grants for clean energy.

> $ 20 billion Multilateral Vertical Funds

• EIB Climate awareness bonds: About $1 billion of climate awareness bonds issued by EIB in May 2007 to finance EE and RE projects. Yield is indexed to FTSE4Good Environmental Leaders Europe 40, which includes the Top 40 European companies recognized for their good environmental practices.

several $ billion Climate Change Indexed Bonds

• Global Environment Facility: Allocate about $ 250 million per year to market transformation activities to attract and drive direct investment towards lower carbon technologies

2006-2010: ≈ $ 1 billion

ODA

ExamplesFinancingOption

59

Unit of measure

* Footnote

Source: Source 59


WB CLIMATE INVESTMENT FUNDS (CIF)

• Approved by the WB Board on 1 July 2008

• Sept 2008: 10 donors pledged $6.1 billion to the CIF ($5.2 bn to CTF and $0.9 bn to SCF)

• Will complement the work of other multilateral financial mechanisms like the GEF and the Adaptation Fund and support programmes involving renewable energy; energy efficiency; improved transport sector efficiency and modal shifts; and improved efficiency of energy supply

• Practicalities:

- Country must request joint missions of the WB & RDB and can also request involvement of UN agencies or other development partners

- The CTF Committee will approve projects based on: potential GHG emission savings, demonstration potential, developmental impact and implementation potential

60

Unit of measure

* Footnote

Source: Source 60


Meeting the mitigation financing gap: Private International Mechanisms

• Voluntary purchase of carbon offsets for their GHG emissions by public or private firms, institutions and individuals (growth rate 150%/year since 2002): BP, HSBC, City of Freiburg (Germany)…

≈ $ 265 million in 2007

Voluntary carbon markets

• MASDAR (UAE ) The $ 15 billion fund aims to support the development of cleaner and more efficient petroleum technologies such as carbon capture and storage (CCS) and hydrogen power generation, and renewable energies such as solar technologies. It will promote the transfer of environmentally friendly technologies from advanced countries to UEA, as well as other developing nations.

$ 117 billion in 2007, up 35% from 2006

Private Sector Investment Funds

• EU Emissions Trading Scheme ($ 50 billion in 2007): Trading of emissions allowances among EU countries;

• Clean Development Mechanism ($ 13 billion in 2007): Purchase of project-based carbon emission reductions between Annex I and non-Annex I countries.

• $ 30 billion in 2006• $ 64 billion in 2007

Regulatory Carbon Markets


Source: UNFCCC, 2007; World Bank, 2008

61

Unit of measure

* Footnote

Source: Source 61


Meeting the mitigation financing gap: Public National Mechanisms

• Bulgarian Energy Efficiency Fund provides low interest loans (4-7%) and Partial or Portfolio Loan Guarantees to energy efficiency projects in municipalities and small businesses• Japan Housing Loan Corporation provides low interest loans for construction of energy conservation-oriented houses

Low Interest Loans

• “California Solar Initiative” – California’s Solar PV subsidy program: $3.2 billion, 11-year plan to install 3 GW of solar PV by 2017 for homes, schools, businesses, and farms. 70% of PV system costs is subsidized through a performance-based incentive payments (from 2.5$/Wp)• German Market Incentive Programme -provides subsidies for RES-Heat (solar thermal and small scale biomass). A large increase in budget in 2007: from EUR 39 million to EUR 213 million

EU-15:5 bln € /yr

[versus 22 bln € for fossile

fuel subsidies]

Subsidies and rebates

• US Federal tax credits for wind energy since 1992: 0.019$/kWh in 2005• France tax credit for energy efficiency: 40% tax credit for the refurbishment of homes built before the first building code

Tax Credits


62

Unit of measure

* Footnote

Source: Source 62


Meeting the mitigation financing gap: Private National Mechanisms

• Feed-in tariff in Germany - in 2005 average level of feed-in tariff was 0.0953€/kWh (compared to an average cost of displaced energy of 0.047€/kWh).

€ 2.4 billion in Germany

Guaranteed Purchase Prices for Renewable Energy

Energy suppliers have to reach a mandatory level of renewable energy through projects or by buying certificates• UK Renewables Obligation ($3.2 billion per year)• Texas Renewable portfolio standard and renewable energy credits trading program (3% of generation from 1999 to 2009)

> 15 billion in 2010 (for 22% of RE in the EU)

Renewable Targets or Tradable Renewable Energy Certificates

Energy suppliers with mandatory targets directly finance projects or buy energy efficiency certificates from stakeholders with energy saving projects• UK Energy Efficiency Commitment ( $1.35 billion - 2005 to 2008)• France Energy Savings Certificates ($ 860million - 2006 to 2009)

> $ 750 million/year in 2007 UK-France

Utility DSM programs andWhite Energy Certificates


Source: REN21 2006

63

Unit of measure

* Footnote

Source: Source 63


Financing needs for climate change adaptation


$ (% to developing countries)

Sector

$8-130 bln (30%)Infrastructure

$10-11 blnCoastal zones

$12-22 blnNatural ecosystems

$5 bln (100%)Human Health

$11 bln (85%)Water supply

$14 bln (50%)Agriculture, forestry and fisheries

UNFCCC describes these estimates as conservative

64

Unit of measure

* Footnote

Source: Source 64


$10-170 B/yr

How can the adaptation financing gap be met?

UNFCCC, 200750-170 B/yr

World Bank10-100 B/yr

Stern, 200615-150 B/yr

Funding available in USD Millions

Funding needs in USD Billions

870 M

EU, UK, Spain, DenmarkBilateral, 2007~500 M

UK, Canada, Sweden, Switzerland, Germany, US, EU, Denmark, Netherlands

Bilateral, 2000-5* 95 M

SCCF, LDCF, SPAMultilateral, 2002-7 275 M

* Jennifer Frankel-Reed, 2006

65

Unit of measure

* Footnote

Source: Source 65


How to meet adaptation financing gap: carbon market

• Adaptation Fund (2% levy on CDM proceed):

• Expected USD 80 – 300 million per year in 2008 – 2012

• Implementation modalities are under negotiation

•Extension of the 2% CDM levy on international transfers

of emission allowances (ERUs, AAUs)

• National Adaptation Funds (additional levy on CDM

proceeds):

• only country with robust CDM/JI portfolio can afford

additional CDM taxation (China)

66

Unit of measure

* Footnote

Source: Source 66


How to meet adaptation financing gap: carbon market

• Recycling of AAUs Auctioning • Recycling of 20% of EAUs auctioning could yield between $10 to 30

billion annually. Recent example: Climate Protection Initiative of

German Government - 400 mln Euro in 2008

• Green Investment Scheme:• sale of access AAUs/ “hot air” by Annex I countries

• International acceptance of “greening”

• Limited to a handful of Annex I parties: Russia, Ukraine, CEE

• Establishment of a non-compliance fee• Idea based on the Brazilian proposal introduced at COP-3 that

inspired formation of the CDM

67

Unit of measure

* Footnote

Source: Source 67


How to meet adaptation financing gap: global tax

• Air travel levy ($6.50 per passenger per flight ≈ 10 - 15 bln $ )

– UNITAID provides funding to help fight HIV/AIDS, malaria and tuberculosis

in developing countries (320-500 mln$ in 2007-2009); it is financed (80%)

from the proceeds of a tax on airline tickets implemented in France, Chile,

Côte d'Ivoire, Congo, Republic of Korea, Madagascar, Mauritius, Niger

• Low CO2 tax – Draft Swiss Proposal for a Global Carbon Tax for Adaptation: $2/ton in

Annex 1 countries, $ 1/ton in DCs/Non-Annex I countries and $ 0.5 /ton in

LDCs/Non-Annex 1.

–17.5 bln $/year from this low carbon tax, of which 16.1 $/year from Annex 1

countries, used to capitalized a Multilateral Adaptation Fund

68

Unit of measure

* Footnote

Source: Source 68


How to meet adaptation financing gap: insurance scheme

• Traditional Insurance schemes– Crop Insurance: past-facto settling of claims based on actual damage

• Weather Derivatives– Index-based schemes: In the case of weather derivatives for crop risks,

farmers collect insurance compensation if the index reaches a certain trigger (rainfall deficit, etc.). Implemented in India, Peru, etc.

• Insurance Bonds – Cat Bond: Risk-linked securities issued by a sponsor, which include a

specific trigger (certain categories of disasters). Investors are paid a higher interest rate. However, they lose their investment if the bound is triggered. The money is instead used by the bond sponsor to cover their losses from the disaster event

• Micro-insurance –Millennium Villages: Partnership between Swiss Re and Millennium Promise

for a climate adaptation programme to develop risk transfer tools for Millennium Villages against the effects of adverse weather

69

Unit of measure

* Footnote

Source: Source 69


• There is a XXX bln gap in climate change financing, particularly in developing countries

• An optimal combination of public policies, financial mechanisms and new and additional resources are needed to mobilize the necessary or redirect available investment and financial flows to address climate change

• Adaptation/mitigation will not happen unless financial investments and flows (e.g., public, private, increased ODA, and catalytic funds) are pooled

• Developing countries need financial and technical support to design an optimal policy mix for climate change management

Conclusion

climate change as human development challenge (undp presentation)

Self Improvement