Climate change presents serious and growing risks to the global economic system, with a number of recent studies showing the impact that climate change is already having on livelihoods and business models. For example, extreme weather, which can be exacerbated by climate change, caused economic losses of US$2.6 trillion from 1980 to 2012.
Addressing these risks is an economic and societal imperative. At the same time, it presents opportunities. Climate-smart investments in efficient, clean infrastructure, clean energy, resilient agriculture, and water resources offer stable, attractive returns for investors and communities when the conditions are right.
This week, I was in Lima at the Peruvian government’s Climate Finance Week and found many reasons to be optimistic that we can turn the climate challenge into an economic opportunity. This blog post shares some key themes that I took away from the event.
When President Barack Obama announced that the United States would cut CO2 emissions from its coal power plants by 30 percent below 2005 levels by 2030, he didn’t just talk about climate change – he was equally forceful about the local benefits that the regulations could bring. He stressed that those regulations would reduce pollutants that contribute to soot and smog by over 25 percent, reductions that could avoid up to 6,600 premature deaths and 150,000 asthma attacks in children; and that the regulations would build jobs, benefit the economy, and be good for the climate.
Demonstrating the value of multiple benefits that result from many policies and projects can provide a compelling economic rationale for action. It can speak to broad constituencies, local and global, and demonstrate the climate-smart nature of good development. A new report prepared by the World Bank in partnership with the ClimateWorks Foundation – Climate Smart Development: Adding up the benefits of actions that help build prosperity, end poverty and combat climate change – sets out to do just that.
At the Global Environment Facility’s (GEF) 5th Assembly and Council Meetings earlier this month, the World Bank Group sent a full team to give strong signal of our ongoing support to the GEF as it celebrated the launch of its next four-year period. Hosted by the Mexican government, the meetings included a special address from President Enrique Peña Nieto, who called upon all nations to take a longer term vision of the needs of future generations.
This highly effective and still rather unique public-private partnership model remains one of the best practice examples among the nearly 20 conservation trust funds that the Bank has helped support globally over the years using GEF funds. Our efforts strived for financial sustainability through a series of sequential GEF projects, each of which stepped up ambition while stepping down the reliance on external funds. It was extremely gratifying, years on, to see and hear firsthand that the goal of self-reliance and full financial sustainability sought for the national park system was alive and doing well. A visit to the thriving Parque Nacional Isla Contoy, organized by the government as part of the week's concluding events, confirmed this as we saw the results of one of the first protected areas the Bank-GEF program helped establish.
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"This meeting is going to be different. It’s going to be a turning point from the lofty, theoretical policy deliberation to real action on the ground to save our planet’s green lungs and our global climate." Those were my thoughts last week when I walked into a packed conference room in Brussels, Belgium, where a crowd of about 80 people from around the globe had gathered to learn about cutting-edge proposals from six pioneering developing countries with big, bold plans to protect forests in vast areas of their territories.
Chile, the Democratic Republic of Congo (DRC), Ghana, Mexico, Nepal, and the Republic of Congo came to the 9th meeting of the Carbon Fund of the Forest Carbon Partnership Facility (FCPF) to convince 11 public and private fund participants to select their proposal as one of a small group of pilots intended to demonstrate how REDD+ can work.
Climate change is a threat to global development and to poverty alleviation. And yet, reducing greenhouse gas emissions is proving difficult because all players in an economy contribute to the problem. To make a difference, we must reduce our emissions in a coordinated manner.
This is no easy task. So where do we go from here?
One approach involves pricing the “externalities” that are contributing to climate change. Pricing externalities into the costs of production is nothing new. A classic textbook example is the paper mill that sits upstream from a fishing village.
Discharge from the mill pollutes the river, diminishing the fishermen’s catch. The mill freely uses the water of the river in its production of paper, but does not pay for the damage of the negative externality that it causes. To remedy the situation, regulations can be put in place to stop waste from going into the river – or the mill can pay a fine equivalent to the loss of the fishermen’s revenue.
The latter is an example of an externality priced into the cost of production. The same can be done to combat climate change.
In this case, carbon emissions are the externality that must be priced. Doing so provides a cost-effective and efficient means to drive down greenhouse gas emissions as the cost of such pollution goes up.
In the climate negotiations under the United Nations framework, we are used to seeing geographical blocs and other blocs at loggerheads. The tension draws attention, but it isn’t the only story of blocs at the climate conference.
In Warsaw Thursday, members of the Climate and Clean Air Coalition – 75 countries and international organizations working together – met and talked about their progress so far and work for the future to slow climate change.
What do these countries – among them, Nigeria, Sweden, the United States, Ghana, Mexico, the United Kingdom, Chile, Morocco, and Canada – have in common?
Answer: The firm belief that we can work together and substantially reduce black carbon, methane, and other short-lived climate pollutants.
I learned this week that Durban got its name in 1835 from Sir Benjamin d’Urban, the first governor of the Cape Colony. His name seemed particularly apt as COP17’s urban-in-Durban yielded important contributions. During the first weekend at Durban City Hall, just next to the COP17 venue, 114 local governments signed the Durban Adaptation Charter, committing signatory cities to accelerate local adaptation efforts, including conducting risk assessments and more city-to-city cooperation. An impressive complement to last year’s Mexico City Pact that calls for similar efforts to measure and promote mitigation in participating cities. More than 200 cities have now signed on to the Mexico City Pact.
The following Monday at the COP venue, an important partnership was announced. All five multi-lateral development banks (MDBs) launched an unprecedented partnership committing all of the world’s development banks to particularly cooperate on cities and climate change efforts. The MDBs – that provide about $8.4 billion of basic services support to cities annually – will work toward common tools and metrics for GHG emissions and urban risk.
During COP17 itself, cities that were leading this effort shared their experiences: Rio de Janeiro presented their revised GHG emissions inventory, an important leadership contribution; Tokyo outlined the impressive first year operation of its first-ever city-based emissions trading system; Mexico City issued the first Annual Report of the Mexico City Pact; Mayor Parks Tau of Johannesburg chaired a well attended C40 event. By my count, in just seven days, there were at least 100 events highlighting the critical role for cities to lead the world’s mitigation efforts, and better prepare to adapt to changing climate.
If you closely read the 20-page draft decision on the Clean Development Mechanism prepared at COP16 in Cancun, you will see a tiny reference to the possibility of including ``city-wide programs’’.Those few words represent an enormous effort: mainly championed by Amman, Jordan, with support from the World Bank, the European Union, UN-HABITAT, C40 Cities, ICLEI, United Cities and Local Government(UCLG) and others.
There is reason to be excited. Cities are the every-day face of civilization, the rough and tumble, action oriented arm of government: The ones you call when you need to get things done. And in Cancun they got the call.
Making sense of the COP, the ‘Conference of the Parties’ (cities would call it a meeting, ‘fiesta’ if you added beer and a beach) is a full time job. Thousands of people jet across the planet arguing over commas and clauses while climate change waits for true political will. But that political will does not come from countries at a COP. No, first and foremost it needs to be understood, nurtured, and acted-upon in cities. Countries get their marching orders mainly from urban residents, not the other way round.
I was part of a ``historic’’ moment in Xcaret, on the Mayan Riviera of Mexico, earlier this month. Here representatives of indigenous organizations worldwide had gathered together with government representatives of various governments, including Bolivia, Panama, Philippines, Trinidad and Tobago, Guyana, Bangladesh, and Peru to prepare a strategy for giving voice to the concerns of the indigenous groups in the COP-16 negotiations in Cancun in November.
This was the first time a country has supported indigenous peoples in preparing for a COP, normally dominated by policy wonks and government negotiators. Historically, relations between indigenous groups and states have been confrontational in nature; in Latin America in particular, there has been a history of violent events, including the long civil war in Chiapas. The process of inclusion, however, is fundamental in many Latin American countries, as indigenous peoples form a significant demographic group─15 million in Peru, 12 million in Mexico, and about 6 million in Bolivia and Guatemala.
Against this backdrop, it was heartening in Xcaret to see, indigenous leaders and government officials, jointly preparing a strategy to voice their preoccupation and concerns over issues that will come with climate change and have the potential to affect all groups. In the meeting, indigenous peoples presented themselves as first and foremost “citizens” of those countries, even though different from the mainstream. This time, the governments were actually listening to their voices. It is becoming increasingly recognized that indigenous peoples are among the most vulnerable to climate change, due to their dependence upon, and close relationship with, the environment and its resources. Climate change is expected to exacerbate existing inequity faced by indigenous communities in the form of political and economic marginalization, loss of land and resources, and ultimately their distinct ways of life.
A year ago I was assigned from a World Bank operations team providing support to countries in Europe and Central Asia on energy, climate mitigation and adaptation to work in a Bank administered trust fund, the Energy Sector Management Assistance Program (ESMAP), as a thematic coordinator for energy and climate change in this program. One of my roles is to coordinate a program that is providing support to six emerging economies—Brazil, China, India, Indonesia, Mexico and South Africa—that are proactively seeking to identify opportunities and related financial, technical and policy requirements to move towards a low carbon growth path.
The program has been underway for two years and individual country studies have been managed by World Bank operational teams. The governments of these countries have initiated country-specific studies to assess their goals and development priorities, in conjunction with greenhouse gas (GHG) mitigation opportunities, and examine the additional costs and benefits of lower carbon growth. This requires analysis of various development pathways—policy and investment options that contribute to growth and development objectives while moderating increases in GHG emissions.