Climate Change Financeat the World Bank Group

ITU Symposium on ICT, Environment and Climate Change

Cairo, November 2-3, 2010

Sergio Margulis, The World Bank

Three strategic themes

Connect

World Bank’s ICT Sector Strategy (under preparation)

Use of ICT to transform delivery of public and private services

Connectivity infrastructure: Policy, sector reform, and investments

Use of ICT to foster innovation and industry development across the economy

ICTs larger impact lies in enabling energy efficiencies in other sectors

Potential Impact- ICT Sector Potential Impact - Other Sectors

ICT contribution to total Global Greenhouse Gases (GHG)

ICTs impact enabling energy efficiencies in other sectors

5 x’s ≈15 - 20%

• PCs and peripherals• Data centers• Telecoms infrastructure/devices• Other

E.G.• Smart grids• Smart buildings• Smart motors• Other

Opportunities to reduce GHG and increase energy efficiency - Mitigation

Financing Needs to Deal with Climate Change

… to catalyze sustainable investments

..enhance capacity & policy

… leverage other sources of finance

“Baseline”

Private &

Public

Investment

Climate finance covers additional costs and serves to..

Additional investment needs in developing countries, by 2030

75-100

Climate finance can cover additional cost to…

Facilitate policies, regulatory frameworks, institutions and markets support adaptation and mitigation

Catalyze transformational private and public investments and programs

• low-carbon technologies• terrestrial carbon• climate resilience

Support research, development and deployment of new technologies

Climate Finance is a Catalyst

CDM & C offset markets

Carbon taxes

Auctioning ofemission rights

Emissioncap and trade

General taxes and other taxes, special funds

“Baseline”Private and public

investment

Catalytic climate finance

Sources

Developing Countries are already taking action…

ETHIOPIA: Integrating adaptation in sustainable land management, social protection, hydropower development, building capacity programs

BRAZIL: Reducing Amazon deforestation by 70% by 2020; biofuel program, energy efficiency

MOROCCO: Integrated approach to tackling CC in water, agriculture, and urban sectors, Mediterranean Solar Plan Initiative

CHINA: Energy efficiency, 20% reduction in energy intensity from 2005 to 2010; 15% renewable energy target by 2020; Clean technology R&D; sustainable transport

INDIA: Adaptation (drought, floods, cyclones, glacier melting), energy efficiency, hydro and new renewable energy, solar energy R&D

CARIBBEAN ISLANDS: Adaptation to increasing hurricanes and storms, using catastrophic risk bonds

Financial and Investment Flows for Climate Action in DCs

Type of flow

Amount ($billion/yr) climate non climate

Monitoring issues

Carbon markets 6.6

• Multiple and confidential transactions• Actual payment/investment flows ??

UNFCCC 0.4Climate-specific concessional funds

~ 4

• Consistency and double-counting• Additionality

ODA3.6 105

• Co-benefits• MDBs do not report yet consistently

Non-DAC donor support ? ~ 7

• Non exhaustive coverage• Purposes unclear

Philanthropia ? ~ 49• Non exhaustive coverage• Purposes unclear

Domestic(core budget, fiscal, and pricing reforms)

? ?• Very scarce information, not harmonized

Underlying finance GFCFFDI

??

3,990522

• Non exhaustive coverage• Purposes unclear

9

A growing menu of climate finance instruments

Adaptation

The Adaptation

Fund

Special Climate

Change Fund

Global Facility for Disaster Risk Reduction & RecoveryLeast

Developed Country Fund

Mitigation

Global Environmenta

l Facility (GEF)

Carbon Funds

Carbon Partnership

Facility

Forest Investment

Program

Forest Carbon

Partnership Facility

Scaling Up Renewable

Energy for the Poor

Clean Technology

Fund

Pilot Program for Climate Resilience

(GEF)

Risk Instrument

s

Mobilizing Finance: Climate Investment Funds

Clean Technology Fund: demonstration, deployment, and transfer of low carbon technologies. Commitment: $4.5 billion

Strategic Climate Fund: Programs to pilot new approaches and scale-up: Commitment: $1.9 billionApproved in July 2008,

CIFs have balanced and equitable governance with equal representation from developed and developing countries

Clean Technology Fund

Thirteen investment plans endorsed with a total envelope of US$4.5 billion, mobilizing $36 billion (leverage ratio 1:8 with all other funding and 1:3 with private sector)

 

Example: Mexico $500 million, leverages $6.2 billion

Aims to reduce 20% of national energy consumption through energy efficiency

Enables shift to efficient, low carbon bus rapid transit systems and light rail, and to retire old buses

Develop renewable energy, particularly wind power and mini-hydro installations

Colombia, Egypt, Indonesia, Kazakhstan, Mexico, Morocco Philippines, South Africa, Thailand, Turkey, Ukraine, and Vietnam

Regional Program for Concentrated Solar Power in Middle East & N. Africa

Pilot Program for Climate Resilience (PPCR)

First operational program under the Strategic Climate Fund: $1 billion in grants IDA-like grants

PurposeHelp highly vulnerable countries pilot and demonstrate ways to integrate climate risk and resilience into core development planning

Participating countries: Bangladesh, Bolivia, Cambodia, Mozambique, Nepal, Niger, Tanzania, Yemen, Zambia,

Regional Programs: Caribbean (Dominica, Grenada, Haiti, Jamaica, Saint Lucia, Saint Vincent and Grenadines) and South Pacific (Papua New Guinea, Samoa, Tonga)

Example: Cambodia

TA for mainstreaming climate resilience

Piloting vulnerability assessments and investments on an ecosystem basis

Data collection on climate risks

Promoting participation of the private sector and civil society

FIP & SREP

• Forest Investment Program launched 2009, total pledges US$587 million – pilot countries Brazil, Burkina Faso, DRC, Ghana, Indonesia, Lao PDR, Mexico, Peru

• Program for Scaling up Renewable Energy in Low Income Countries launched in 2010, total pledges US$318 million – pilot countries Ethiopia, Honduras, Kenya, Maldives, Mali, Nepal

10 Carbon Funds: $2.5

billion

Carbon Market Development

•Expanding the reach and boundary of carbon markets•The WBG portfolio has more than 200 projects in 57 developing countries, spanning 23 technologies•Africa accounts for one fifth of active projects in the WBG carbon finance portfolio compared to 2-3% share of projects in the CDM pipeline

Carbon Partnership

Facility (CPF)

•Supporting programmatic and sector-wide interventions•Carbon Asset Development Fund – €7 million•Carbon Fund - €100 million•4 sellers participants, more programs in preparation

Forest Carbon Partnership

Facility (FCPF)

•Supporting Country-readiness and piloting incentives for reducing emissions from deforestation and forest degradation - $160 million available•37 participating developing countries•11 Readiness grants signed

Innovation in Carbon Finance: Biocarbon Fund

Costa Rica: Coopeagri Forestry ProjectThe project reimburses farmers for environmental services of biodiversity protection as a result of reforestation. Payments will be complemented with the income from the carbon sales. The project is expected to sequester around 0.56MtC02e by 2017.

China: Reforestation on Degraded Lands in NW Guangxi (8,000 ha)The project is blending three types of financing from multiple sources: loans (World Bank, commercial), private equity and carbon finance. Carbon revenues (expected from 2011) serve as a stable source of income up to 2017 that contributes to the repayment of commercial bank loans in the short-term, helping to bridge the gap before revenues from timber harvesting are produced.

Mobilizing Finance via Capital Markets

World Bank Green Bonds: $1.6 billion raises through 22 issuances in 15 currencies since November 2008

Cool Bonds: $31.5 million Eco Notes: $390 million

Products and Advisory Services for catastrophe risk financing

MultiCat Program Caribbean Catastrophe

Reinsurance Facility (2007, 2008, 2009)

CAT DDOs Weather hedges

Example: Mongolia Index-based Livestock Insurance Project

Livestock sector represents 87 % of GDP and supports half of the population.

[999 and 2002] one-third of the national herd was lost in successive harsh seasons, showing extreme vulnerability.

This project introduces a new market-based approach that spreads the risk across herders, government, and the private sector.

Example of Innovative use of ICT in Arab Countries

• How: Remote optimization of Load Sharing of Boilers used for steam production in the region

• Program of Activity (PoA): state of the art “Clean Development Mecanism (CDM)”

• Economy of scale, scalable and replicable, unlimited potential

• Production of Certified Emissions Reduction = Creation of an asset (can be sold).

• Increase the IRR of the underlying project• Rated best PoA by KfW

Thank you !!!

smargulis@worldbank.org