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Carbon pricing – delivering economic & climate benefits

Thomas Kerr's picture

 TonyV3112/Shutterstock

A dangerously warming planet is not just an environmental challenge – it is a fundamental threat to efforts to end poverty, and it threatens to put prosperity out of the reach of millions of people.  Read the recent Fifth Assessment Report from the Intergovernmental Panel on Climate Change if you need further evidence.

If we agree it is an economic problem, what do we do about it?  There is general agreement among economists that a robust price on carbon is a key part of effective strategies to avert dangerous climate change. A strong price signal directs finance away from fossil fuels and toward a suite of cleaner, more efficient alternatives.

This logic is not lost on governments and companies.  Momentum is building around the globe to put a price on carbon.  Consider these facts:

Disaster Risk: Using Capital Markets to Protect Against the Cost of Catastrophes

Michael Bennett's picture
Hurricane Sandy / NOAA
Hurricane Sandy / NOAA


In addition to their often devastating human toll, natural disasters can have an extremely adverse economic impact on countries. Disasters can be particularly calamitous for developing countries because of the low level of insurance penetration in those countries. Only about 1% of natural disaster-related losses between 1980 and 2004 in developing countries were insured, compared to approximately 30% in developed countries. This means the financial burden of natural disasters in developing countries falls primarily on governments, which are often forced to reallocate budget resources to finance disaster response and recovery. At the same time, their revenues are typically falling because of decreased economic activity following a disaster. The result is less money for government priorities like education or health, thereby magnifying the negative developmental impact of a disaster.

To address this problem, the World Bank Treasury has been helping our clients protect their public finances in the event of a natural disaster. The most recent innovation is our new Capital-at-Risk Notes program, which allows our clients to access the capital markets through the World Bank to hedge their natural disaster risk. Under the program, the World Bank issues a bond supported by the strength of our own balance sheet, and hedges it through a swap or similar contract with our client. The program allows us to transfer risks from our clients to the capital markets, where interest in catastrophe bonds is growing.

Green Bonds Market Tops $20 Billion, Expands to New Issuers, Currencies & Structures

Heike Reichelt's picture

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Annual Green Bonds Issuances


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.

What Does Piketty’s Capital Mean for Developing Countries?

Gabriel Demombynes's picture

The economics book that has launched a thousand blog posts, Thomas Piketty’s Capital in the Twenty-First Country, tells a grand story of inequality past and present. One would expect that a book on global inequality would have much to say about development. However, the book has limited relevance for the developing world, and the empirical data he marshals for developing countries is weak.

Piketty’s central story is that convergence in the developed world and slower population growth will leave us with a permanently modest economic growth rate (g). Coupled with a constant return to wealth (r), concentration of capital ownership, and high rates of savings among the wealthy, the low g leads to rising wealth inequality over a longish run—something like the second half of the 20th century.

A low-g future for the developed world is a mostly uncontroversial assumption. (He assumes future GDP per capita growth of 1.2 percent for the U.S.) But Piketty draws conclusions for the world as a whole, and we are a long way from global convergence. As Branko Milanovic noted in his review, catch-up growth could fend off Piketty’s inequality dystopia for some time.
 

Making the Case for Universal Health Coverage

Donna Barne's picture

UN Secretary-General Ban Ki-moon, World Bank Group President Jim Yong Kim, and Nigerian Finance Minister Ngozi Okonjo-Iweala at the Toward Universal Health Coverage by 2030 forum. © Simone D. McCourtie/World Bank

With people around the world struggling to afford health care, countries as diverse as Myanmar, Nigeria, Peru, Senegal, Kenya, South Africa, and the Philippines are warming to the idea of universal health coverage. This growing momentum was the subject of a high-profile Spring Meetings event examining the case for universal health coverage and the steps to get there.

Some 70 governments have asked the United Nations for help to achieve universal health coverage, said Secretary-General Ban Ki-moon. He spoke at Toward Universal Health Coverage by 2030, co-sponsored by the World Bank and World Health Organization and moderated by the WHO Director-General Margaret Chan.

“We can celebrate the fact that virtually all mothers in Sweden survive childbirth,” Ban said. “But in South Sudan, one in seven pregnant women will not live to see their babies. Addressing this inequality is a matter of health and human rights … To secure health, we have to take preventive action. The concept of universal health coverage could be an important catalyst.”

Ban was part of a panel including World Bank Group President Jim Yong Kim; Harvard University President Emeritus Lawrence H. Summers; Nigeria Minister of Finance Ngozi Okonjo-Iweala; and former New York City Mayor Michael Bloomberg, now the U.N. Special Envoy for Cities and Climate.

Teaching 21st Century Skills to Ready Students for the World of Work

Mohammed A. Khan's picture


What are the jobs of the future? How can I steer my daughter to a career which offers the best potential for secure employment? If I am honest with her, no one really knows. A decade ago, who had heard of an App Developer or a Chief Listening Officer? These jobs, like so many others, simply didn’t exist.

TPP & TTIP: More Questions Than Answers

Miles McKenna's picture

Incense stick production in Hue, Vietnam. The country could be one of the biggest winners of a potential Trans-Pacific Partnership trade agreement. Source - Austronesian Expeditions.If you follow trade negotiations, then you know there are few more contentious than those for the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).
 
On February 4, the World Bank’s International Trade Unit hosted Phil Levy, a senior fellow on the global economy at the Chicago Council on Global Affairs, who has been following both negotiations closely. Levy spoke with World Bank staff about the potential implications for developing countries as negotiations move forward in what he calls “bargaining among behemoths.”
 
At this point in the negotiations, one thing is clear: there are still more questions than answers.

Safe Food for Thought for the Holiday Season

Juergen Voegele's picture

Cleaning food in Moldova. Michael Jones/World BankIn the lead up to the holidays, much will be written about how we, as consumers, can safely prepare food to ensure that friends and family remember a wonderful holiday meal and not the bout of food poisoning that landed a loved one in the emergency room.

But it often strikes me that other major threats to food safety – those that lie undetected in farms and factories and other vulnerable points along the food supply chain – are not part of the conversation until tainted food surfaces in grocery stores and on dinner plates, making millions sick and even killing people along the way.

As global headlines have illustrated – packaged salads in the United States, sprouts in Germany, milk and infant formula in China – food safety is a serious issue that affects all of us: individuals, nations, and businesses.  No country is immune, and as global agri-food value chains become more integrated, food safety hazards that were once geographically confined can now span countries and continents with ease.

One Bloc Moving Climate Progress Forward at Warsaw

Rachel Kyte's picture

 CCAC

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.

Inside the G8: Why the Meeting Was Critical in the Effort to End Poverty

Jim Yong Kim's picture

LONDON -- I'm just back from the G8 meeting in Northern Ireland, and under the leadership of Prime Minister David Cameron, we focused on some critical but often overlooked elements on how the world can end extreme poverty in a generation: taxes, trade, and transparency. Watch the video to see why I feel so strongly about this.


 


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