Dialogue. Insight. Solutions.

THE GREEN CLIMATE FUND AND

NATIONAL CLIMATE PLEDGES

LEADING TO PARIS Ned Helme, President

August 5th, 2015

Energy Sector Transformation Dialogue

Sacramento, California

OUTLINE

• The international context

• Opportunities in the energy sector

• Intended Nationally Determined Contributions

• The Green Climate Fund

• Next steps

• Parties to the United Nations Framework Convention on

Climate Change (UNFCCC) to sign an agreement in Paris

(December 2015) where all nations commit to action.

• Countries are to put forward Intended Nationally Determined

Contributions (INDCs) prior to negotiations in Paris

– Some developing countries will include both unilateral

targets and more ambitious goals conditional on international

support.

• The Green Climate Fund (GCF) is the incentive for action -

will be one of the principal sources of finance for developing

country mitigation and adaptation.

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THE INTERNATIONAL CONTEXT

THE INTERNATIONAL CONTEXT: RECENT MAJOR WORLD PLEDGES ON CURBING EMISSIONS

• 19 countries representing 56% of global emissions have put forward INDCs*

• US: 26-28% reduction below 2005 levels by 2025

• China: Emissions to peak around 2030, aim to peak early. – 20% of Primary Energy from Non-fossil

fuels by 2030

• European Union: 40% reduction below 1990 levels by 2030

• Mexico: – Unconditional: 25% below BAU by 2030

– Conditional: 40% below BAU by 2030

*As of July 20, 2015

• For many countries, the electricity sector is a major

source of emissions

• Many developing countries face significant challenges:

– Meeting rising electricity demand

– Maintaining system reliability

– Mitigating emissions

– Accessing affordable financing for energy sector investments

• Meaningful action in the energy sector will be a key

part of achieving targets set out in INDCs post-Paris

• The GCF provides an opportunity for countries to

access concessional financing for ambitious proposals

in the sector

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OPPORTUNITIES IN THE ENERGY SECTOR

INDC Demonstrating Leadership

Fighting Climate Change

Potential for Funding

Sustainable Development

Benefits

Capacity Building

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INDCS: AN OPPORTUNITY

• INDCs are countries’ contributions to a 2015 agreement, which will take

effect in 2020

• The total impact of INDC mitigation contributions will determine whether

world is on track to meet climate goals in 2025-30

• Several non-climate benefits flow from the development and implementation

of an INDC

Benefits of developing an INDC

THE PARIS AGREEMENT: A FRAMEWORK FOR CONTINUOUS IMPROVEMENT

1. Presentation

2. Review and Negotiations

3. Inscription of contribution

4. Implementation,

periodic updating

• The Paris agreement will likely set up a process for updating country contributions, rather than one-time pledges

• Convergence is growing around 5 year contribution periods (i.e. if first contribution is for 2025, 2nd is for 2030, etc.)

• Policymakers can consider transformative longer term energy reforms in addition to meeting current INDC targets

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INDCs

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FROM INDCS TO ACTION

Supported target

Unilateral target

Sector target

Investment

Public International

Private

Public Domestic

Policies

Sector target

Benefits of moving from high-level quantitative target to concrete implementation

plans:

• Identify the most cost-effective mitigation opportunities

• Provide clear signals to businesses to encourage private investment

• Identify and develop proposals for international support (e.g. the

GCF), and increase likelihood sufficient funds will be raised to meet

supported target

• Green Climate Fund (GCF)

– $10.3 Billion USD pledged to date

– First round of funding expected November 2015, 60% must be spent by 2017 to start next financial pledges

• This translates to 100 $30 million projects or 10 $300 million programs annually

– Eventual goal: $100 billion by 2020, counting both public contributions and catalyzed private sector investments

• NAMA Facility

– 8 projects pre-approved in 2 rounds of funding so far

– Supports projects € 5-20 million

– Up to €85 million to be disbursed in the Third Call for Proposals, which closed in July 2015

– EC and Denmark have joined NAMA Facility

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THE INTERNATIONAL CONTEXT: CLIMATE FINANCE IS FLOWING

GREEN CLIMATE FUND: BACKGROUND

• Financial mechanism of the UNFCCC

• Independent secretariat and 24 member board,

equal developed and developing country

members

• Achieving a paradigm shift to low-carbon, climate-resilient

development is overarching goal and distinguishes GCF from other

climate funds

• 50:50 balance between mitigation and adaptation

• Private Sector Facility to leverage private sector capital

• Funds to be delivered through accredited entities

• Proposals selected through competitive process based on 6 key

criteria (similar to NAMA Facility criteria)

• All GCF funds will be delivered through accredited entities

– Can be multilateral and bilateral development banks and

IFIs, or regional, national, and sub-national entities.

• 20 entities accredited so far, including:

– World Bank, ADB, AFD, KfW, CAF, UNDP, UNEP, IBD, EBRD,

Deutsche Bank, Acumen Fund

– 9 national and regional institutions

• Role of accredited entities:

– Prepare proposals

– Implement projects and programs

– Ensure adherence to GCF safeguards and policies

– Conduct MRV and reporting

– Structure financial instruments and deliver financing

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GCF ACCREDITATION

TRANSFORMATIONAL NAMA PROPOSALS

• Host country-driven

• Combines dual goals of substantial GHG mitigation and sustainable development

Mitigation & Sustainable

Development

• Transformative sectoral policy changes

• Designed to address barriers to implementation

Paradigm shift – policy action

• Financial mechanisms designed to catalyze private sector investment

Financial Mechanism

GCF SELECTION CRITERIA

Six selection criteria reward ambitious and transformational proposals

in the context of sustainable development

Criteria Description

1. Impact potential Mitigation and adaptation impact

2. Paradigm shift potential Contribution to transformational shift toward low-carbon, climate-resilient development

3. Sustainable development potential

Wider benefits and priorities (economic, social and environmental)

4. Needs of the recipient Vulnerability and financing needs of beneficiary

country and population

5. Country ownership Beneficiary country ownership of and capacity to

implement a funded project or program

6. Efficiency and effectiveness Economic and financial soundness of program or

project

Energy sector transformation is well-suited to meet the

GCF selection criteria, including:

• Impact potential: emissions reductions and climate

resilience of energy sector

• Paradigm shift: “leapfrogging” traditional utility-centric,

supply-focused electricity generation models

• Sustainable development benefits: energy security,

job creation, cost savings, air quality improvements,

balance of trade, energy access

• Efficiency and effectiveness: with upfront

concessional financing, many renewable energy

investments can be cost-competitive with fossil fuel

alternatives

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ENERGY SECTOR TRANSFORMATION AND THE GCF

Legal arrangements (secretariat and IE/intermediary)

Letter of commitment (Interim trustee)

Calls for proposals and rolling submissions

(Secretariat)

Concept note (voluntary)

(Intermediary or project owner, in consultation with NDA.

Feedback from Secretariat)

Preparation and appraisal, no-objection, submission to the

Secretariat

(Intermediary, NDA)

Analysis and recommendation to Board

(Secretariat and technical advisory panel)

Board decision

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GCF PROPOSAL APPROVAL PROCESS

Feedback

in 2-4

weeks

3 weeks

Completeness check

(Secretariat)

1-2 weeks

4-6 weeks

GCF READINESS SUPPORT

Board committed up to $30 million to help prepare developing countries to effectively engage with the Fund – capped at $1 million per country

This includes : • Development of country work programs compatible with

existing national climate policy frameworks, including NAMAs

• Development of initial pipelines of project and program proposals

• Support for NDAs and/or country focal points, and preparing domestic entities for accreditation

• Can be carried out by national, subnational, regional and international entities selected by NDA or Secretariat in case of regional or international ones

NEXT STEPS: THE ROAD TO PARIS, AND BEYOND

• Negotiators will continue to develop 2015 agreement – Countries will submit INDCs by October

2015

• Countries should consider how an energy sector transformation can help them meet or exceed their climate goals

• Countries should consider how the GCF and other sources of climate finance can help achieve this transformation • To be considered at the 1st GCF spring

board meeting in 2016, full proposals should be submitted at least 13 weeks in advance (likely by early December)

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THANK YOU For more information,

please visit us at

www.ccap.org.

• Are host country-driven efforts to reduce GHGs and advance sustainable development.

• Apply technical assistance to surmount implementation barriers and foster replication.

• Finance catalytic projects for short-term results.

• Transform policies to sustain GHG reductions.

• Mobilize private investment through financing mechanisms that change the risk-return equation.

• Leverage public investments (e.g., infrastructure)

• Create a pipeline of investments for private sector, development banks and climate financiers.

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TRANSFORMATIONAL NAMAS

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WHAT MAKES A PROPOSAL TRANSFORMATIONAL?

Financial Mechanism

Economic & GHG impact

Policies & development

goals