Financing Climate Resilient DevelopmentFinancing Climate Resilient Development

A World Bank Perspective

Marjory-Anne BromheadThe World Bank

Some Guiding Principles from African LeadersSome Guiding Principles from African Leaders Implement climate change programs to

achieve sustainable development

Food security and poverty alleviation are overriding

Richer countries have financial obligations to help others achieve resilient growth

World Bank Strategy for Climate Resilient Development in Sub-Saharan Africa

Adaptation and disaster risk reduction are an integrated agenda Climate variability creates annual losses of 1-2% of GDP, increasing

floods and droughts, adaptation could cost 5-10% of GDP

There are mitigation and adaptation synergies Better land, water & forest management are key to adaptation but

deforestation and land degradation are 65% of Africa‘s CO2 emissions

Mitigation presents opportunities but increasing energy access is key: Only 8% of hydro potential realized , ample solar, cleaner coal is part of

the solution, wood fuels and biomass are key

Knowledge, capacity building & new technologies are key Improved climate knowledge, analysis &

strategy risk insurance, new technologies for energy, agriculture ..

Scaled up finance is necessary

Urgent action is necessary

Development Reduces VulnerabilityDevelopment Reduces Vulnerability

Diversified economies, strong institutions, sound land and water management and urban planning, as well as educated, healthy people reduce country vulnerability

Relative change in length of growing period (LGP) by 2050 compared to present Source: Thornton et al. (2006)

World Bank & Climate Finance: Guiding PrinciplesWorld Bank & Climate Finance: Guiding Principles

Primacy of UNFCCC process in design of climate finance models

Supports governance reform to increase developing countries voice

Our role: help developing countries access and lend development/private sector finance and new climate finance for sustainable development with adaptation and mitigation benefits

Our collaboration is through country-led programs

Sources of FinanceSources of Finance IDA 15 was scaled up in part to

help address climate change

Disbursements in agriculture, water supply, flood management & health were 17% higher 2008 than 2005-2007

New instruments complement development & private sector finance

Climate-Resilient Development with IDA/IBRD Agricultural development policy loan in Ghana (2008) supports

integration of climate risk/adaptation into development agenda

Himachal Pradesh DPL in N. India supports renewable energy & adaptation strategies for glacier melt

Credit to improve transmission of energy from Inga in DRC is ongoing (more than US$ 200 m)

Support to sustainable land management, irrigation, safety net/improved watershed management in Ethiopia (over US$ 300 m)

Arid lands, flood management & natural resource management programs in Kenya

Drought risk insurance in Malawi

Financing: New Instruments

WB/MDB Supported Instruments Climate investment funds (CIFs) Carbon Funds Gas-flaring Reduction Initiative Global Fund for Disaster Risk Reduction (GFDRR)

OthersAdaptation Fund (2% tax on CDM & voluntary contributions)Bi-laterals donorsUN agencies (e.g., UNDP $90M Africa adaptation Program)African-Union/AfDB/EU (ClimDev Africa) Norwegian Funding for Avoided Deforestation

Climate Funds

Overall aim: to pilot new financing instruments and help prepare countries to take advantage of post 2012 financial architecture, country-driven, cooperation between MDBs and development partners, learning is key

Carbon Funds (CF)

Existing Funds

(9)Prototype

Carbon support, Spanish

Fund, etc.~$2 billion

Carbon Partnership

Facility (CPF)

Expected $3-$5 billion

Forest Carbon

Partnership Facility(FCPF)

$100 million (readiness)

Ghana, Gabon, Kenya, DRC, Liberia and Madagascar

+ $200 million

Mitigation under UNFCCC framework

* As per November 2008 trustee report

Climate Investment Funds (CIF)

$5-6 billion*

Clean Technology Fund (CTF)$5 billion*

($500-700 million for Africa)

Strategic Climate Fund (SCF)$2 billion*

Scaled-up Mitigation

Big 5China, India,

Brazil, Mexico, South

Africa (+ 5-10

additional)

Pilot Program for Climate Resilience

(PPCR)$500 million

Climate resilienceShort term financing

Forest Investment Fund (FIF)

Target: $500 million

Sustainable forest

management(complement

of FCPF)Under Design

Niger, Zambia, Mozambique ($30-

70 million each)

Scaling-up Renewable

Energy Program for Low-Income

Countries (SREP) Target: $250MillionMitigation

Pilot Program under

preparation

Climate Funds

Mobilizing, Delivering and Leveraging Climate Finance

CDM & carbon offset markets, sector

crediting

Carbon taxes

Auctioning ofemission rights

Emissioncap and trade

General taxes and other taxes, special funds

“Baseline”Private and public

investment

Catalytic climate finance

Possible sources

US$ 4,620bln p.a.

(2008)

Median: $400 billion

Current (2009)funding~ $10 billion

Mitigation (2030)$140-657billion

Adaptation (2030)$30-90billion

Median: $75 billion

Mitigation~ US$9+bln p.a.

CleanDevelopmentMechanism

8 GEF

0.25

CIF1

Other1+

CleanDevelopmentMechanism

8 GEF

0.25

CIF1

Other1+

CleanDevelopmentMechanism

8 GEF

0.25

CIF1

Other1+

??

0.06 PPCR

0.1

0.06to 0.12

Other0.1+

LDCF&SCCF

AdaptationFund

Catastrophic, Weather & Climate ChangeRisk Management Tools

??

0.06 PPCR

0.1

0.06to 0.12

Other0.1+

LDCF&SCCF

AdaptationFund

??

0.06 PPCR

0.1

0.06to 0.12

Other0.1+

LDCF&SCCF

AdaptationFund

Catastrophic, Weather & Climate ChangeRisk Management Tools

??

0.06 PPCR

0.1

0.06to 0.12

Other0.1+

LDCF&SCCF

AdaptationFund

Catastrophic, Weather & Climate ChangeRisk Management Tools

??

0.06 PPCR

0.1

0.06to 0.12

Other0.1+

LDCF&SCCF

AdaptationFund

??

0.06 PPCR

0.1

0.06to 0.12

Other0.1+

LDCF&SCCF

AdaptationFund

Catastrophic, Weather & Climate ChangeRisk Management Tools

Adaptation~ US$1+bln p.a.

A huge gap: estimatedneeds vs. current resources

World Bank Carbon Funds & Facilities

Prototype Carbon Fund. $180 million (closed). Multi-shareholder. Multi-purpose.

Netherlands Clean Development Mechanism Facility. (closed). Netherlands Ministry of Environment. CDM energy, infrastructure and industry projects.

Community Development Carbon Fund. $128.6 million (closed). Multi-shareholder. Small-scale CDM energy projects.

BioCarbon Fund. $91.9 million (Tranche 1 and 2 closed). Multi-shareholder. Mainly CDM LULUCF projects; some REDD and soil carbon.

Italian Carbon Fund. $155.6 million (closed). Multi-shareholder (from Italy only). Multipurpose.

Netherlands European Carbon Facility. (closed). Netherlands Ministry of Economic affairs. JI projects.

Spanish Carbon Fund. $282.4 million (closed). Multi-shareholder (from Spain only). Multipurpose.

Danish Carbon Fund. $69.4 million (closed). Multi-shareholder (from Denmark only). Multipurpose.

Umbrella Carbon Facility. $737.6 million (Tranche 1 closed – 2 HFC-23 destruction projects in China).

Carbon Fund for Europe. $65 million. Multi-shareholder. Multi-purpose. Managed with EIB.

Total funds pledged = US$ 2.1 billion (16 governments, 67 firms)

Clean Technology Fund Aim is to help high emitting countries transform to

lower carbon growth: US$ 5 billion raised so far

Programs of about US$ 0.5 billion each approved for Turkey, Egypt, Mexico & under preparation for Nigeria and South Africa

Part of broad-based energy transformation programs

Focus on energy efficiency, renewables, transport shifts, urban planning

Pilot Program for Climate Resilience Aim is to help vulnerable countries mainstream climate

resilience into development planning: US$ 0.5 billion raised

9 countries & 2 sub-regions selected by independent panel Niger, Zambia and Mozambique; each country to get US$ 40 to

US$ 70 million, with preparation grants of US$ 1-2 million depending on readiness.

Likely to focus initially on key priority sectors (e.g. agriculture, coastal/urban flooding, watershed management, capacity building)

Programs still under early preparation (early lessons learnt session in late October)

Forest Investment ProgramForest Investment Program Aim is to catalyze practical

measures and funding for Reduction of Deforestation and forest Degradation (REDD), and promote sustainable forest management

US$ 260 million raised so far

Country selection process has not yet started: will include range of forest systems & biomes and willingness to participate in REDD

Operational in 2010

Scaling up Renewable Energy

The aim is to pilot new approaches to renewable energy in low income countries

Fund-raising and design still ongoing

Forest Carbon Partnership Facility

Aim is to build capacity and prepare countries to access large-scale REDD post 2012: US$ 107 million raised so far (UNDP and bank have complementary programs)

Countries prepare readiness plan idea notes then

Readiness plans with grants of US$ 1-3 million (ethiopia, kenya, uganda, cameroon, gabon, Congo, DRC, CAR, Ghana, Madagascar, Liberia)

Carbon Partnership Facility

Aim is to support strategic programs that move to low carbon investments

Target US$ 350 million

No African countries yet!

Disaster Risk Reduction Facility

Supports disaster preparedness and disaster recovery

Grants in CAR, Ethiopia, Ghana, Ethiopia, Mozambique, Madagascar, Namibia, Burkina, Seychelles

Year

Cash Floww

(-)

(+)

Grant Funds

CF

CTF

CF: Carbon Finance; CTF: Clean Technology Fund

Grant funds for initial breakthrough

Blending of Climate Financing Instruments Necessary

Blending of Financial Sources and Policy Instruments Necessary

Lighting switchIndustry: EE in cement

Power generation from landfill gas Grassland management

Reforestation

Wind

Solar

Policies and Regulations; Incentives for Barrier Removal

Technical Assistance; Capacity Development

Carbon financeSupport for R&D

Private investments

Public financing

Project/program needs to be financially solid to be able to deliver real, measurable and long-term benefits related to the mitigation of climate change

Development Financing

Mainstreaming Climate Resilience into CAS Mainstreaming Climate Resilience into CAS

Ongoing process: Ethiopia, Malawi, beginning in Senegal, Nigeria, Cameroon, Kenya, Namibia …

Climate resilient development and long term sustainable development are one and the same!

Thank you!