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climate finance

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?

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.

Climate Lessons from a Hotter Arab World

Rachel Kyte's picture

Photo credit: Curt Carnemark/World Bank

This week in Doha, the marble corridors of the Qatar National Convention Center resonate with voices from around the world. Over half way through the conference, as ministers arrive and the political stakes pick up, a sense of greater urgency in the formal negotiations is almost palpable. But in the corridors, negotiations are already leading to deals and dreams and action on the ground.

UN Secretary-General Ban Ki-moon opened the discussions by saying we need optimism, because without optimism there are no results. He reminded us all that Superstorm Sandy was a tragic awakening. He reiterated the call for a second commitment period of the Kyoto Protocol, a global agreement and 100 billion in climate finance by 2020.

Meanwhile our focus was firmly on the region ...

When we look at the Middle East and North Africa, the challenges of climate change are evident. Farmers have been planting in drylands and dealing with climate variability and water shortages since the beginning of agriculture. They understand adaptation here, but no one is prepared for what we could face if the world doesn’t act to stop human-induced climate change now.

We published a report last week examining the science of climate change, and the findings should be alarming to anyone. If governments don’t take action to reduce greenhouse gas emissions, globally we’re headed for a 4 degree Celsius increase. The rise will be even higher across the Arab world, and the effects on water, agriculture, and livelihoods will be far more pronounced than what people here already face. Climate models show that over the last 30 years, temperatures in the Middle East and North Africa have increased 50 percent faster than the global average.

Aggressive mitigation is needed to slow greenhouse gas emissions, but here and in much of the world, adaptation is now critical to survive the changes that are already underway.

In a new report released today, Adaptation to a Changing Climate in the Arab Countries, we draw on the knowledge and expertise of the Arab world in adapting to changing climates. The authors, the majority of whom are from the region, consulted with civil society, academia, and governments, and worked in partnership with the League of Arab States.

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 deep dive into climate finance

Ari Huhtala's picture

What does climate finance really mean? Do we mean dedicated funds mobilized by donors in the carbon market, or do we mean funds actually used for mitigation and adaptation action? Definitions and publications abound, but the Climate Policy Initiative (CPI) has now taken the bull by the horns and launched two initiatives with an attempt to lend clarity. Last week, Director of the CPI Venice office, Dr. Barbara Buchner, was a guest speaker at the World Bank’s Washington DC office.

There have been a plethora of reports on climate finance by UN agencies, IFIs and think-tanks, but by far the most comprehensive attempt is a report The landscape of climate finance, launched by CPI last October. It describes the flows of finance, including the sources, intermediaries, instruments, channels, and end-users. After presenting estimates of current flows based on available data, describing the methodology, and discussing the sources of data, the paper offers recommendations on how to improve future data-gathering efforts.

CPI research suggests that at least US$97 billion is being provided to support low-carbon, climate-resilient development activities, US$55 billion by the private sector while at least US$21 billion comes from public budgets. Most of the flows can be classified as ``investment’’ or more generally including ownership interests.

Time to engage the private sector on climate finance

Alan Miller's picture

I was at the Climate Investment Funds meetings in Cape Town last week with several other representatives from development banks, NGOs and governments to discuss results, impacts and the future of this financial mechanism. One of many themes cutting across meetings in Cape Town was the importance and challenge of engaging the private sector in climate finance. The private sector is by far the largest source of investment, the dominant provider of technology, and often essential for implementation of mitigation and adaptation measures. However, based on the discussions this week, it’s apparent there is much to learn about what is actually expected or sought from the business community. Here are some of my observations from the meeting:

  1. In my experience references to “the” private sector are common but largely meaningless and often confusing in failing to distinguish between entities as different as major multinational manufacturers, international financiers, and locally- based entrepreneurs. Some speakers even used the term more broadly to encompass markets, including policies directed at consumers.
  2. There are some unavoidable tensions between emphasizing country plans and priorities and the promotion of markets for climate-friendly products and services. This is particularly true in smaller and poorer countries. Control of donor resources is fundamental for many governments but sometimes difficult to reconcile with the flexibility, consistency, and speed required by investors. Public-private partnerships (the focus of a Cape Town session) is one solution but not always appropriate or workable.   Finding models which can blend the two, as in the collaborative IFC/World Bank Lighting Africa project, will be increasingly important. The World Bank was able to build a relationship with energy ministries while IFC focused on helping businesses. Together, they have been able to address a wide range of issues from regulatory systems to that of supply chain development.

A bond for climate solutions

Laura Tlaiye's picture

Why would a group of large investors care about climate change when their primary concern is ensuring adequate returns for their investment portfolio to meet their future financial obligations? This group includes pension funds, insurance companies or foundations. Pension funds alone are estimated to hold over US$25 trillion globally

 

As Alan Miller indicated in his recent blog, a report published by Mercer (a well-known investment advisor) estimates that uncertainty around climate policy could contribute as much as 10% to overall portfolio risk for investors to manage over the next 20 years. So, investors are beginning to pay attention. Choosing to support investments that help address climate change or increase climate-resilience also helps reduce the exposure of portfolios to this risk. 

 

Green bonds issued by the World Bank is one such instrument. Funding raised through green bonds is earmarked for eligible low-carbon and adaptation projects financed by IBRD in its member countries. For example, the money could be used for funding an eco-farming project in China, or improving the solid waste management in Amman, Jordan. On the mitigation side, eligible projects could include solar and wind farms. On the adaptation side, it could be protection against flooding or droughts.

 

Earlier, this month, a 'Green Bond Summit' gathered about 110 representatives of the investment community. The event was hosted by State Street Global Advisers -- an asset manager with over $2 trillion under management in different asset classes. The goal was to discuss how green bonds could attract greater participation from large investors to scale-up financing of climate solutions through the capital markets. The World Bank, a pioneer of the green bond, and other issuers such as ADB, EIB, and IFC deliberated with the participants on prospects for common green bond standards, the financial characteristics investors expect, and the policy issues that underlie the demand for climate investments.  

 

Look under the canopy: There are people, not fences

Gerhard Dieterle's picture

This week I was at the UN Forum on Forests  meeting in New York where the International Year of the Forests was formally launched.

The Year of the Forests starts with a cautiously optimistic message: FAO’s report on the State of the World’s Forests  released at the forum says that the forest loss across the world has slowed down over the last decade.  Now the pattern of deforestation varies and is country-specific rather than being negative across the board. China, Vietnam and Costa Rica among others are countries where the forest cover is actually going up. 
 

More importantly, I see an opening in how the problems of deforestation and forest degradation are being addressed internationally. Like the logo of the International Year of Forests, people are seen at the heart of this effort now. This has not always been the norm. Take the case of REDD  (Reduced Emissions from Deforestation and Forest Degradation) which was debated in Bali at the first Forest Day in 2007. At that time, reducing emissions meant simply putting up fences to conserve the last pristine forests in the Amazon, the Congo basin and in Indonesia.
 

Now our understanding of how to address deforestation has evolved.  Forests today are more strongly linked in people’s minds to questions of food security, improved livelihoods and the general resilience of the people. This is where REDD + comes in, with approaches that go beyond restrictive approaches and focus now more and more on approaches to enhance forest stocks and restore degraded landscapes. It is good news for people and forests that the role of forests in climate change mitigation is being understood in a much broader context.

 

10-year-old Felix Finkbeiner speaks at the United Nations Forum on Forests. Watch the full speech here. 

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