According to the International Energy Agency (IEA), full implementation of countries’ submitted pledges for low-carbon development will require USD 13.5 trillion in investments in energy efficiency and low-carbon technologies from 2015 to 2030. That’s almost USD 1 trillion every year. This means all hands need to be on the deck if the global community is to address one of the biggest development challenges of our times.
In 2014, Tajikistan applied climate analysis to maximize investments in an aging hydropower system upon which half a million people depend. Morocco continued the phased development of a 500 MW concentrated solar power complex — the first of its kind in Morocco and one of the largest in the world, promising to bring electricity to 1.1 million Moroccans. Indigenous peoples’ groups in Brazil presented and received approval for a $6.5 million plan to advance their participation in sustainable forest management.
These are just a few of the many progressive steps that 63 developing and middle income countries are taking to shift to low carbon, climate-resilient economies with support from the Climate Investment Funds (CIF).
With more than $8 billion in resources expected to attract at least an additional $57 billion from other sources, the CIF is accelerating, scaling up, and influencing the design of a wide range of climate-related investments in participating countries. While this may be only a small portion of the resources needed annually to curb global warming, the CIF is showing that even a limited amount of public funding, if well placed, can deliver investments at scale to empower transformation.
We’re doing a lot of talking and listening here at COP 20 in Lima about climate finance – how hundreds of billions of dollars were invested globally last year to clean up the air, get efficient energy to more people, make agriculture more productive, and build resilience to extreme weather events.
We all know and acknowledge much more still needs to be done – the International Energy Agency and others believe we need at least $1 trillion dollars of new investment each year to address climate change.
There’s no way that public money alone can meet that goal. We need to find ways to catalyze the limited public funds we have to unlock private investment. That, of course, means investors need to have the confidence that the right policies are in place to make long-term investments for the climate.
We’re about 16 months away from the 2015 UN climate meeting in Paris, intended to reach an ambitious global agreement on climate change. Now, more than ever, there is a need for innovation to scale up climate action.
The Bank’s Carbon Partnership Facility (CPF) is helping blaze that trail.
The role of the CPF is to innovate in scaling up carbon crediting programs that promote sustainable, low-carbon economic growth in developing countries. In its first set of programs, the CPF moved past the project-by-project approach to larger scale through the Clean Development Mechanism’s Programme of Activities, catalyzing investment in methane capture from landfills, small-scale renewable energy, and energy efficiency.
In January, World Bank Group President Jim Yong Kim urged the audience at the World Economic Forum in Davos to look closely at a young, promising form of finance for climate-smart development: green bonds. The green bond market had surpassed US$10 billion in new bonds during 2013. President Kim called for doubling that number by the UN Secretary-General's Climate Summit in September.
Just a few days ago—well ahead of the September summit—the market blew past the US$20 billion mark when the German development bank KfW issued a 1.5 billion Euro green bond to support its renewable energy program.
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.
As the Climate Investment Funds (CIF) and its stakeholders from the private sector, government, the multilateral development banks, civil society and indigenous peoples’ groups gathered in Istanbul to participate in the first CIF Private Sector Forum, their attention is increasingly focused on synergies between the private and public in addressing climate change. There is a growing understanding among both governments and private sector players - from investors to small project developers to large utility companies - that gains are much larger if common strategies are developed and new partnerships are forged.
Michael Liebreich, CEO of Bloomberg New Energy Finance, opened the day with an energetic keynote address, provocative and positive, setting up the stage for the day by announcing the scope of challenge and opportunities for dynamic, and pragmatic climate investment strategies. Sessions on private sector adaptation, and business attitudes towards climate risk followed. The `Matching Expectations' panel brought together indispensable partners, the triangle of project developers-investors-policy makers, into discussion of regulations, fund raising challenges and investors' expectations and requirements.
The day also showcased five CIF projects, beginning with the highlight of the Morocco Ouarzazate CSP project, a unique PPP model, presented by Paddy Padmanathan, the CEO of the project's developer ACWA Power.
Consensus emerged that the private sector will deliver much of the innovation and finance required for investments in low carbon technologies and climate resilience in rich and poor communities alike. With scientists warning that we are not on a path to limit global warming to 2° or less, there is growing urgency to identify effective ways in which the public and private sectors can best work together to tackle and adapt to climate change. The CIF provide a platform for learning by doing to develop such models for effective collaboration and share experiences among the network of CIF recipient and contributor countries.
East Asia has shown us how economies can grow at a pace unparalleled in human history. What made it happen? Key ingredients included high savings rates and a willingness to invest them for the long term in people and infrastructure, leaders who kept their eyes on the long-term transformation of the economy, and a lot of serious attention to how investors respond to incentives.
But aren’t these some of the same ingredients we’ll need to make growth green?
This was one of the topics we discussed this week at the first Annual Conference on East Asian Development in Singapore organized by the Bank’s East Asia Pacific region and Singapore’s Institute for Policy Studies. This brought together senior policymakers and academics from throughout the region. Is it possible that the Region that brought us growth, could also be the leader in making that growth green?
But first, just how green has East Asia’s growth been so far? To over-simplify, the region has made pretty good progress in reducing the environmental damage per unit of output, but this hasn’t been able to keep up with the astonishing growth of the output. So, real GDP is up by near 400% since 1990, while energy use is up by 150%, sulfur dioxide emissions up by about 60%, and carbon dioxide up by nearly 200%.
This is a lot better than it might have been – but the environment is still getting worse at a serious rate. And this says nothing about water stress, loss of biodiversity and a host of other issues. (On a positive note, particulate emissions are down by 50%, and lead in fuel has almost disappeared).
Does East Asia need to lower its growth to ensure that the environment doesn’t deteriorate further? No, but it will require the same degree of commitment and long term focus that inspired the strong growth in the first place – but this time by internalizing environmental costs.
The December 2011 Climate Conference (COP 17) in Durban, South Africa, presents a tremendously important opportunity to advance both the globally critical goal of climate protection, and to do so synergistically with a local agenda of sustainable development and poverty alleviation.
The COP 16 meeting in Cancun last year, while in many ways an important step forward, particularly on the role of energy efficiency, did not result in decisions on the global accord, and much remains to be done. One remedy for this situation may be to achieve local successes that demonstrate how climate protection and clean and efficient uses of energy can directly benefit the poor.
The fact that the COP will take place in Africa, which has the highest unmet need -- and demand for reliable and affordable energy access – brings to a head the need to find new tools and paths that can meet both goals. As the plans for the Durban Conference evolve, there must be a premium on action that implements this strategy.
A new multi-donor program which is part of the Climate Investment Funds and is managed by World Bank Group and Regional Development Banks, may be an ideal component of that plan: the new Scaling up Renewable Energy in Low-Income Countries (SREP) program, provides an exciting avenue to meet both goals. Six pilot countries, Ethiopia, Honduras, Kenya, the Maldives, Mali and Nepal, were selected for initial blocks of funding to bring clean energy technologies rapidly to meet the unmet demand for energy. Discussions are underway to bring in funding to double this pilot group.
Last month in South Africa, I had the opportunity to see just how a program like the SREP could build on both local innovative capacity, and the political attention that COP17 can bring to climate and development needs. The World Bank office in Pretoria hosted a meeting of African Ambassadors to South Africa, where I had the opportunity to discuss with them (see picture above) both market changes taking place in the region, and technology options to rapidly bring clean energy to the poor.
Here in Cancun, the discussions on energy efficiency made me reflect on the "big picture" about energy efficiency in Africa. For years this subject has been near and dear to my heart. As Director for Energy in the World Bank I saw how much there is to gain from solid energy efficiency plans in developing countries. I saw how increasing costs of energy can encourage serious action on efficiency. Now, as Director for Sustainable Development in Africa, I see how committed African countries are to improving energy efficiency and making smart use of demand-side management in their efforts to combat climate change.
This week I met with at least nine Ministers of Environment at the margins of the Cancun COP. Each one of them mentioned the importance of energy access but this was qualified with the fact that this energy must be clean and it must be used efficiently. For many of these governments, it is no longer enough to speak of clean energy in isolation. They prefer to think about it in the context of their integrated low carbon development agendas.
Given that 560 million people in sub-Saharan Africa do not have access to modern energy, African countries must expand power generation and access if they're going to reduce poverty. The trick is they will have to do it in climate-smart ways and this is where energy efficiency is an important win-win.