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The World Region

Communicating Climate Risks to Investors: the Next Major Ratings Failure

Alan Miller's picture

 Reserves of coal outside a power generation plant. - Photo: Shutterstock

Only a few years ago, the failure to properly quantify and communicate the risks of a widely traded commodity, mortgage-backed securities, caused major damage to the US and ultimately the global economy. According to the IMF, total losses will approach $4 trillion (pdf). A significant share of the losses were incurred by pension funds and insurance companies typically viewed as among the more risk-averse and cautious segments of the investment community.

A new report by the Carbon Tracker Initiative and the Grantham Research Institute on the Environment and Climate Change evaluates the failure to properly value the risks of climate policy to companies with major fossil fuel reserves and finds a similar potential for massive financial fall-out. They conclude that “Between 60-80% of coal, oil and gas reserves of publicly listed companies are ‘unburnable’ if the world is to have a chance of not exceeding global warming of 2°C.” (A short video explaining the research and mapping the amounts of investment at stake in different countries is available online).

Climate Change: Lessons in Cross-Sector Collaboration

Lucia Grenna's picture

 The opening panel at the Alcantara dialogues with speakers from the worlds of fashion, architecture, production, government and international development. Photograph: Connect4Climate/Leigh Vogel
The opening panel at the Alcantara dialogues with speakers from the worlds of fashion, architecture, production, government and international development. Photograph: Connect4Climate/Leigh Vogel

Climate change is a pressing issue. Everyone knows that, certainly the development community and they don't need to be reminded of it. What they do need reminding of is that no one group can possibly solve this problem.

Strategic collaborations around climate change issues and action are essential. As World Bank president Jim Yong Kim said recently: "To deliver bold solutions on climate change, we need to listen to and engage broader and more diverse audiences." This is what the Connect4Climate (C4C) team has set out to do since the program began in 2011.

C4C is a global partnership program dedicated to climate change and supported by the World Bank, Italy's environment ministry and the Global Environment Facility (GEF). We operate as a coalition of more than 150 knowledge partners ranging from major UN agencies to academic institutions to media organizations and NGOs.

Our aim is to convene different organizations, groups and individuals who wouldn't normally speak to one another, around the table to talk about climate change. The first audience we had to convince of the merits of building relationships and networks outside of those which seem immediately relevant, was our own within the World Bank.

Shaping the Next Generation of Carbon Markets

Rachel Kyte's picture

 Smoke coming out of two smokestacks at a factory in Estonia. - Photo: World Bank/Flickr

Right now, the carbon markets of the future are under construction in all corners of the world.

China is determined to pursue low-carbon development and is embracing the market as the most efficient way to do so. Wang Shu, the deputy director of China's National Development and Reform Commission, told us this week that he sees the "magic of the market" as the most efficient way to drive China's green growth.

Five Chinese cities and two provinces are piloting emissions trading systems with the goal of building a national carbon market. Chile is exploring an emissions trading system and focusing on energy efficiency and renewable energy. Mexico is developing market-based mechanisms in energy efficiency that could cut its emissions by as much as 30 percent by 2020. Costa Rica is aiming for a carbon-neutral economy by 2021.

Each of the countries pioneering market-based mechanisms to reduce their domestic carbon emissions are leaders. Bring them together in one room, and you begin to see progress and the enormous potential for a powerful networking domestic system that could begin to produce a predictable carbon price -- a sina que non for the speed and scale of climate action we need.

That's happening this week at the World Bank.


Climate Finance Untangled

Barbara Buchner's picture

Courtesy: CPIGlobal leaders have spoken strongly on the urgent need for climate action, putting it back on top of the 2013 agenda. During his inaugural address and State of the Union speech, President Obama gave clear signals about his intentions to address this issue in his second term. At the World Economic Forum in Davos, president of the World Bank Group Jim Yong Kim reminded economic leaders about the potentially devastating impacts that could occur in a world 4°C warmer by the end of the century.

Unlocking finance is an essential part of avoiding that future. But, before leaders can determine how much more money is needed, they need to establish how much is already flowing, what the main sources are, and where it’s going.

These are the key questions my team and I at Climate Policy Initiative aimed to answer with the release of the “The Landscape of Climate Finance 2012”. Our analysis estimated global climate finance flows at an average $364 billion in 2011. To put this in context, according to the International Energy Agency, the world needs $1 trillion a year over 2012 to 2050 to finance a low-emissions transition, so current finance flows still fall far short of what is needed.

Private finance dominates but public finance plays a key role

A couple of weeks ago in a freezing Washington I had the opportunity to share the findings of the report, and the Climate Finance Flows Diagram (or “spaghetti” diagram, so-called for its tangle of finance flows) to an expert audience of practitioners at the Word Bank’s premises.

Confirming last year’s findings, we found that private finance – predominantly of domestic nature – represented the lion’s share of this total, almost 74%. Public funds, estimated at $16 to $23 billion, played a pivotal role in catalyzing private investments, as well as providing bilateral aid to developing countries.

Engaging with Indigenous Peoples on forests

Benoît Bosquet's picture

A little while ago, I blogged about an unprecedented meeting of Indigenous Peoples’ representatives from 28 countries that took place on the idyllic islands of Guna Yala, Panama, in September 2011.

One and a half years later, it is fair to say that we have come a very long way as we welcome over 30 representatives of Indigenous Peoples and southern civil society organizations from Latin America, Africa, and Asia-Pacific for a workshop on the Carbon Fund of the Forest Carbon Partnership Facility (FCPF) here in Washington, DC this week. The Bank serves as the Trustee and the Secretariat of the FCPF, a global partnership that is helping countries draft REDD+ readiness plans and will provide carbon payments to countries that meet certain targets.

Since our initial meeting in Panama, Indigenous Peoples’ representatives adopted an Action Plan, travelled the world to meet, dialogue and learn, and gathered in regional follow-up meetings to build capacity and prioritize demands.

When I look back at the beginning of the series of dialogues with Indigenous Peoples, I remember that discussions mainly revolved about the role of Indigenous Peoples in REDD+ (which stands for Reducing Emissions from Deforestation and Forest Degradation). Indigenous Peoples were concerned that REDD+ could become a means for pushing them off their ancestral lands. With their livelihoods and cultural identity deeply connected to the forest and the land, losing access to them would mean losing everything. At the time, our engagement centered on broad questions such as, How do we ensure that REDD+ will not undermine customary rights to land?

A new treaty to control mercury…could be good for climate too

Laurent Granier's picture

courtesy: UNEP

Early in the morning on Saturday, January 19, 2013, negotiators from around 140 countries completed negotiations for the Mercury Treaty that will be adopted later this year in Japan. It will be known as the Minamata Convention, in deference to the victims of mercury poisoning from industrial pollution that occurred when residents of the Minamata Bay ingested contaminated fish and shellfish in the 1950s.

The Convention that took four years to negotiate under the auspices of the United Nations Environment Programme (UNEP) joins the ranks of a number of treaties that address chemicals and wastes. It is the first treaty to specifically address heavy metals.

Why is the international community concerned about mercury? Mercury is typically released into the environment in metallic, or “elemental”, form, or as an inorganic salt. In elemental form, it easily vaporises and can be transported great distances worldwide.  When deposited in the environment, mercury eventually can be transformed to its organic forms, including Methylmercury, which is highly toxic and readily accumulates and bioconcentrates in animals and humans. Eventually, mercury settles in cold climates and bioconcentrates up the food chains to the point that Indigenous Peoples in the North that rely on traditional foods are exposed to damaging high levels.

One of the reasons heavy metals are difficult to address is that they are mobilised through human activities, but they are also released in the environment through natural processes, for example through volcanic eruptions or in deep-sea vents. Nevertheless, estimates are that at any given time, 90% of the mercury cycling in the environment is linked to human activities – hence the need for action. The recently released UNEP Global Mercury Assessment 2013 outlines major sources of emissions, geographic and temporal trends, and behaviour in the environment. 

Moreover, international action is warranted because of the transboundary dimension of the issue. In the United States for example, it is estimated that half the mercury in fish caught in rivers comes from anthropogenic Continental sources – predominantly from coal burning – whilst the other half represents emissions from Asia. At the same time, by some estimates, approximately 50% of US releases are deposited beyond the country’s border. This is textbook justification for international action.

Doha: keeping hope alive - just

Rachel Kyte's picture

COP President Abdullah bin Hamad Al-Attiyah gavels through the decision text. Photo courtesy IISD

The UN climate conference in Doha this past week kept the fight to combat global warming alive – 194 countries agreed to extend the Kyoto Protocol and to put in place a new agreement by 2015. The extension avoids a major setback in climate negotiations, but it does not fully reflect the urgency of the problems facing the warming planet.

To understand the true scale of those problems, read the new report Turn Down the Heat: Why a 4°C Warmer World Must Be Avoided. Its review of the latest climate science provides a powerful snapshot of what the future could be and warns that the world is on path to a 4°C (7.2°F) warmer world by century’s end if we don’t take action.

The report was referenced repeatedly during COP 18 and is one of several reports helping to put science at the center of policy making.

As is often the case in large international conferences these days, the greatest signs of momentum in Qatar were not inside the negotiating rooms but in the meeting halls where the informal process was underway. The World Bank played a key role in several agreements that will form a part of our ongoing commitment to step up to the climate challenge.

Working Coalitions

Increasingly like-minded coalitions are forming, across dividing lines of developed and developing countries, public, private sectors and civil society, in order to get on with the business of emissions reductions. One highlight of the conference was the meeting of the Climate and Clean Air Coalition, a remarkable group of countries united to reduce SLCPs, short-lived climate pollutants - methane, HFCs, black carbon.

Forging a new path forward on climate change

Vipul Bhagat's picture

As world leaders convene in Doha for this year’s UN Climate Change Conference  developing countries are looking for ways to maintain momentum for change to help them transition to climate-smart growth.

When it comes to delivering improved, cost-effective infrastructure and services – a precondition for green growth – public-private partnerships (PPPs) are one way forward. At a recent event co-sponsored with the United Nations Development Programme (UNDP) in Doha, we shared our unique perspective on public sector efforts to attract and leverage private sector climate finance through PPPs.

Some key takeways from the event include:

  • PPPs help tap new money for infrastructure:  Since the 2008 financial crisis, governments have limited financial resources to devote to capital expenditures and expanded public services. Involving the private sector offers a solution.
  • PPPs boost efficiency through cost savings and shorten delivery periods. They also spur innovation by bringing in private sector know-how.
  • PPPs facilitate projects under one umbrella: When it comes to climate initiatives, PPPs can efficiently organize and consolidate the numerous and complex arrangements that make a renewable energy (or any other climate-related) project work.
  • PPPs allow for appropriate allocation of supply and risk demand to the private sector, reducing taxpayer costs.
  • Since 1989, IFC has been the only multilateral institution providing advice to national and municipal governments on designing and implementing PPP transactions to improve infrastructure and access to basic services such as water, power, agribusiness, transport, health and education.

A Wake Up Call

Rachel Kyte's picture

Photo courtesy IISD

This week, negotiators from nearly 200 countries have gathered at the UN Climate Conference in Doha to try to hammer out an agreement on a second commitment period of the Kyoto Protocol.

Once again, the gathering of the parties to the Framework Convention on Climate Change highlights the lack of action on climate change, and the subsequent threat to the prosperity of millions. Climate change may roll back decades of development.

Several reports in the last month have reached the same conclusion. First, the science is unequivocal: humans are the cause of global warming, and major changes can be observed today. Second, time for action is running out – if we don’t act, we could experience a 4°C warmer world this century, with catastrophic consequences.

The World Bank commissioned the Potsdam Institute for Climate Impact Research and Climate Analytics to better understand the potential impact of a 4°C warmer world on developing countries. Turn Down the Heat provides a stark picture of the state of the planet in a 4°C warmer world and the disruptive impacts on agriculture, water resources, ecosystems and human health. It also gives a snapshot of changes already observed. 

Global mean temperatures are about 0.8°C above pre-industrial levels. Current greenhouse gas emission pledges place the world on a trajectory for warming of well over 3°C, even if the pledges are fully met. 

A tribute to John Hoffman, an unsung champion of the global environment

Alan Miller's picture

The accomplishments of mid-level bureaucrats, particularly in this time of anti-government sentiment, are rarely celebrated. It was therefore striking to see major newspapers devote significant space to obituaries for John Hoffman, a long-time friend and former colleague who did as much as any one individual I know to design and implement measures to protect the global environment.

I first met John as a young lawyer in the late 1970s, while working on the then new issue of ozone depletion – he for US EPA, me for an environmental advocacy group. We quickly became close confidants working to leverage a unilateral US phase-out of CFCs to achieve an effective international agreement, the Montreal Protocol (recently celebrated at events hosted by the World Bank).

Before almost anyone, he saw the linkages between ozone depletion and climate change, and used his office to produce the first major government report on climate policy – “Can We Delay a Greenhouse Warming?” – in 1983. He was equally adept at highly technical matters such as the creation of a single metric for comparing the impact of ozone depleting substances and policy issues such as the design of environmental regulations.