Takayoshi KATO Policy Analyst, Environment Directorate, OECD

COP22, Bab Ighli, Marrakech, Morocco11 November 2016

Turning NDCs into investment plans: Way forward in countries of Eastern Europe, the Caucasus and Central Asia

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• The OECD has supported countries of Eastern Europe, the Caucasus and Central Asia (EECCA) to reconcile their environment and economic goals since 1990s.

• Rebranded this year from the EAP Task Force to the GREEN Action Programme Task Force.

• Planned work areas for 2017-2018*– National green economy dialogues and strategies – Green finance and investment, and– Integrating environmental, economic and sectoral

policies for green growth, and– Strengthening water management

About GREEN Action Programme(hosted by the OECD)

*subject to approval

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• Objectives: – Improve clarity on how 11

EECCA countries and their development co-operation partners are working together to finance climate action in the countries; and

– Explore how these countries can assess readiness to access various climate finance sources.

OECD work on financing climate action in countries of EECCA (Eastern Europe, Caucasus and Central Asian)

NEW:OECD(2016), Financing climate action in Eastern Europe, the Caucasus, and Central Asia, OECD publishing, Paris, [LINK]

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Scope of analysis

Bilateral donors (DAC Members)

MultilateralDevelopment Banks

Climate funds (CIF, GEF etc)

Domestic budget (Public)

Private sector investment

EECCA countries

Committed in 2013-14

Co-financed with international public finance

INDC targets

Priority sectors

Institutional arrangements

Country analysis

Climate policies

Analysis of finance flows

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Significant amount of (public) climate-related development finance* committed to EECCA (2013-2014)

EECCA receives USD3.3bln/year)

Global: USD 47.3bln/y

2013-2014

Mitigation vs Adaptation (USD bln/y)

Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting SystemNote(*): The financial flows are delivered through bilateral (mainly DAC members) and multilateral channels and calculated as a two-year average between 2013 and 2014.

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Comparison across the regions(Finance committed vs GDP per capita)

Ann

ual f

inan

ce c

omm

itted

(U

SD

bln

pe

r yea

r: av

erag

e in

201

3 an

d 20

14)

Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System

GDP per capita PPP (USD: 2014)

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Large difference in amount of finance committed to each countryAnnual climate-related development finance and GDP per

capita PPP (2-year average between 2013 and 2014)

Sour

ce: O

EC

D (f

orth

com

ing)

Fin

anci

ng c

limat

e ac

tion

in E

ECC

A, b

ased

on

OEC

D-D

AC C

redi

tor

Rep

ortin

g Sy

stem

; WB

(201

6) W

orld

Dev

elop

men

t In

dica

tors

Armen

ia

Azerba

ijan

Belarus

Georgi

a

Kazak

hstan

Kyrgyz

stan

Moldov

a

Tajikis

tan

Turkmen

istan

Ukraine

Uzbek

istan

AVERAGE0

200

400

600

800

1000

1200

0

10

20

30

40

50

60

70

Mitigation Adaptation Both Total per capita

(USD mln) (USD per capita)

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Largest amount committed to energy sector, reflecting high infrastructure investment needs

Annual climate-related development finance by sector (2-year average between 2013 and 2014) (USD Million, 2013-price)

Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System

Energy generation and supply

Agriculture, Forestry and Fishing

Water Supply and Sanitation

Industry, Mining, Construction, Trade Policy and Tourism

Banking, financial and business services

Transport and storage

Multi sector

0 500000 1000000 1500000

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Potential to mainstream climate-consideration into development finance in some sectors

Climate-related development finance as a share of total bilateral and multilateraldevelopment finance (2-year average between 2013 and 2014)

(%)

Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System

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But, still large financing gap to achieve EECCA’s climate targets

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Seizing opportunities in the evolving climate finance landscape is a complex practice…

National priorities and needs

Updated info. on sources of support

In-country coordination

Pipeline development

Monitoring, evaluation and learning

Clear picture of finance flows within the country

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• They need to: – Be stable and predictable– Provide a strong price on carbon, so that

low carbon investments are competitive with carbon intensive technologies (e.g. coal)

– Provide strong regulatory support in areas where price signals are not efficient, such as in energy efficiency measures

– Provide targeted support for low-carbon technologies

Core climate policies are necessary for mobilising finance…

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Mitigation (Un-

conditional)

Mitigation (Condition-al) Adaptation

Needs for support

quantifiedArmenia YES YES YES

Azerbaijan YES

Belarus YES YES

Georgia YES YES YES (Adaptation)

Kazakhstan YES YES

Kyrgyzstan YES YES YES YES

Moldova YES YES YES YES

Tajikistan YES YES YES

Turkmenistan YES YES

Ukraine YES

Most EECCA countries submitted INDCs

INDC elements

 

Intended Nationally Determined Contributions

Nationally Appropriate Mitigation Actions

Low Emission Development Strategy

National-level adaptation strategy

National-level climate strategy

ARMAZEBLRGEOKGZKYGMDATJKTKMUKRUZB

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Good deal of national-level climate policy documents already exist/planned in EECCA

 

Intended Nationally Determined Contributions

Nationally Appropriate Mitigation Actions

Low Emission Development Strategy

National-level adaptation strategy

National-level climate strategy

ARMAZEBLRGEOKGZKYGMDATJKTKMUKRUZB

Approved/submitted Being developed

Sour

ces:

OEC

D (f

orth

com

ing)

Clim

ate-

rela

ted

deve

lopm

ent

finan

ce in

EEC

CA,

bas

ed o

n th

e co

untr

ies’

IND

Cs

• “Rushed” process of developing INDCs and other climate policies often undermined translation of targets into implementation strategies over the years.

• Policy targets are set, but often lack secondary legislations/ by-laws/ technical specifications.

• Limited capacity in implementation and access to finance from domestic and international sources.

• An INDC does not necessarily line up with the country’s infrastructure investment plans.

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Challenges in implementation of climate policies: cases from EECCA

e.g. Renewable energy• Stability of government support• Price level of feed-in-tariff and indexing to foreign exchange rates• Transparency in power purchase agreements• Conflict with energy-sector development that focuses more on fossil fuels

FUEL and ENERGY

Also, it’s NOT just climate policies that affect climate targets…

TECHNOLOGY

COMPETITIONFISCAL

SOCIAL

TRANSPORT

INVESTMENTCLIMATE

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• Fiscal policies: • Environmentally harmful subsidies and incentives• Existing budgeting rules not allowing public agencies

to benefit from energy savings achieved

• Investment promotion policies: • Difference in the ease of accessing finance between

small and medium sized entities and larger enterprises such as state-owned entities (SOEs).

• Overly strict requirement for collaterals • Lack of regulatory stability on financial markets• “Shallow” financial markets • High political risks that limit investors interests

Misalignments between policies exist in EECCA (and most countries across the world)

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• Energy sector policies: • Competition between renewable energy and

development of offshore oil and gas fields.• Enhancing energy access through coal fire power

plants.

• Transport sector policies: • Well connected transport network, coming with heavy

reliance on fossil fuels and internal combustion engines.

• Competition policies: • A lack of fair and transparent competition between the

state-owned enterprises producing or using fossil fuels and independent producers of clean energy.

Misalignments between policies exist in EECCA (and most countries across the world)

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Experiences from the EU’s Eastern Partnership countries (i.e. ARM, AZE, BLR, GEO, MDA and UKR)• All major subsidy types exist in the countries (direct budget

transfers, tax expenditure, transfer of risk to government and induced transfers), but the scales vary across the countries.

• Most of the (quantified) fossil fuel subsidies in the region aim to benefit residential consumers. Often, such subsidies are seen as social measures.

• Under-taxing certain fuels, and reduced VAT and excise taxes (or tax exemptions) on energy carriers: leading to substantial drain on government budgets.

• Government support to energy efficiency measures and renewables is still limited and largely incomparable to the subsidies conferred to fossil fuels.

Energy subsidies negatively affecting both public budget and low-carbon development

Source: OECD (forthcoming), Energy Subsidies in the Eastern Partnership countries

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Planned OECD work for enhancing climate finance readiness of EECCA countries

OECD work on policy assessment

Others’ work on climate finance readiness

Climate policies

Non- Climate policies

Targets

Natl’ strategies

Policy instruments

Energy

Transport

Water

Agriculture

Effectiveness, coherence and misalignments

Fiscal/Investment

Country programmingPipeline development

Analytical input to identify constraints

Feasibility studiesProposal development

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The report accompanied by 11 country reports

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• Greening finance– Reforming energy subsidies– Facilitating access to private-sector finance for green

investments (e.g. environmental lending)– Better financial planning in the public sector

• Greening industry• Water resource management and green growth• Measuring green growth

More work under the GREEN Action Programme

See also our latest Brochurehttps://issuu.com/oecd.publishing/docs/from_eap_to_green_action_programme_?e=3055080/36192948

See website http://www.green-economies-eap.org/

Thank you.

Contact: Takayoshi KatoTakayoshi.KATO@oecd.org

http://www.oecd.org/env/outreach/eap-tf.htm http://www.oecd.org/environment/