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Financing Climate Change - Dr Andrea Pinna, EIB - EPA CC Conference June 2010

Financing Climate Change - Dr Andrea Pinna, EIB - EPA CC Conference June 2010






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    Financing Climate Change - Dr Andrea Pinna, EIB - EPA CC Conference June 2010 Financing Climate Change - Dr Andrea Pinna, EIB - EPA CC Conference June 2010 Presentation Transcript

    • CLIMATE CHANGE www.epa.ie Research Programme
    • Financing Climate Change: Climate Action at the EIB EPA Climate Change Conference Dublin, 30 June 2010 Andrea Pinna European Investment Bank 05/07/10 European Investment Bank
    • The Impact of Climate Change
      • Unequivocal proof of the human footprint on the global climate and the adverse impacts that will ensue
        • Climate change is a major threat to environmentally and socially sustainable development in all regions of the world
        • Significant damages are expected in the EU at a temperature increase of about 3° C.
        • Developing countries, and the poorest amongst them, least are being hit soonest and hardest
      05/07/10 European Investment Bank
      • Keeping global warming within 2° C requires atmospheric CO2 stabilization at 400-450 ppm
      • This requires strong mitigation by all
        • Global emissions need to be reduced by at least 50% from 1990 levels by 2050 which means they need to peak by 2020 and fall by between 1-3% per year thereafter.
        • Industrialized countries must take the lead in the global fight against climate change
          • For instance, the EU acknowledges that while the power sector around the world would have to be at least 60% de-carbonised by 2050, the bigger proportion of de-carbonisation needs to occur in rich countries (80 to 90%).
      • Shift in the world energy system away from fossil fuels
        • RE, EE, CCS, nuclear
      • Huge investments necessary on a global scale
        • <EUR 7t by 2030 according to IEA
      Financing Mitigation 05/07/10 European Investment Bank
    • EU Leadership Role in the Global Fight against Climate Change
      • The EU has set for itself the most ambitious climate reduction targets in the world. By 2020 it committed to:
        • Achieve unilateral 20% greenhouse gas emission reductions with respect to 1990 levels. This could be increased to a 30% reduction in the context of an ambitious new global climate agreement;
        • Ensure that 20% of the overall EU energy consumption will be from renewable energy sources;
        • Increase energy efficiency in the EU so as to save 20% of energy consumption
      05/07/10 European Investment Bank
    • The EIB Framework for Climate Change Action 6 Action Areas
      • Continuing to align the Bank corporate objectives, targets, principles and standards with the evolving EU and international climate policy
      • Scaling-up lending for climate change
      • Financing the accelerated development, commercialization and diffusion of cost-effective early-stage low-carbon technologies
      • Deploying new financing instruments
      • Scaling up lending and TA in vulnerable sectors (e.g. water) and constituencies where adaptation is urgently needed
      • Gradually mainstreaming climate change considerations into Bank operations, building staff awareness, capacity, and expertise
      05/07/10 European Investment Bank
    • 1: Supporting EU Climate Policy
        • Supporting the EU Energy and Climate package 2008 (20-20(30)-20 by 2020), UNFCCC commitments (KP and beyond), and Copenhagen pledges
          • $ 30bn until 2012 for adaptation and mitigation and $ 100bn/yr by 2020
        • Implementing EIB Revised Environmental and Social Statement
          • RE, EE, adaptation
      05/07/10 European Investment Bank
    • 2: Scaling-up lending for climate change
        • Climate change now a Key Performance Indicator in EIB, with annual volume targets (20, 22, and 25% of total lending for 2010, 2011, and 2012 respectively).
        • Lending for climate change in 2009 was € 16.9bn or ~20% of total lending
      05/07/10 European Investment Bank
      • Climate change is a growing course of action for EIB in four major sectors of activity:
      2: Scaling-up lending for climate change 05/07/10 European Investment Bank
        • Renewable Energy
        • Energy Efficiency
        • Sustainable transport
        • RD&I
    • 05/07/10 European Investment Bank EIB´s RE Lending 2005-2009: €10,128m 2: Scaling-up lending for climate change
    • 05/07/10 European Investment Bank EIB´s RE Lending 2005-2009: €10,128m 2: Scaling-up lending for climate change
    • Global reach of EIB action in climate change Direct investments 05/07/10 European Investment Bank
      • Energy efficiency is the most cost-effective way of reducing emissions and improving the security of energy supply
      • Lending for projects involving improvements in energy efficiency has totalled € 730mn in 2008 (first year when new definition was introduced) and was over € 1.5bn in 2009
      • The EIB systematically screens projects to identify energy efficiency opportunities, and require that projects make use of BAT
      • The EIB will only finance new coal and lignite power stations when they replace existing ones and provide for a decrease of at least 20% in carbon intensity
      05/07/10 European Investment Bank 2: Scaling-up lending for climate change
      • The EIB is scaling up support to accelerate the development, commercialization and diffusion of cost-effective early-stage low-carbon technologies such as:
          • Photovoltaics
          • Off-shore wind
          • Concentrated solar power
          • 2nd generation biofuels
          • Carbon capture and storage
      • Recent further emphasis to RDI activities such as;
        • Engine and fuel technologies which reduce emissions from cars and airplanes
        • Energy-efficient smaller cars
      • Lending for CC-related RDI has grown considerably and reached about € 4.7bn in 2009
      3: Supporting early-stage low-carbon technologies 05/07/10 European Investment Bank
    • Offshore wind 05/07/10 European Investment Bank
      • Belwind Project
      • Capacity: 165MW (55 wind turbines, 3MW/ unit)
      • Location: 46 km off the Belgium coast, depth 20-37 m
      • Sponsors: Colruyt, Econcern, Financial Investors
      • Total project cost : EUR 619.4 M
      • Construction contracts: Vestas & Van Oord
      • Long term O&M by Vestas
    • Concentrated Solar Power 05/07/10 European Investment Bank * * Contractually guaranteed load factor taking into account molten salt storage and auxiliary firing on natural gas. Promoter : ACS/Cobra & Solar Millennium EIB financing : EUR 120m direct risk (RSFF), EUR 109.2m interm.
    • Concentrated Solar Power 05/07/10 European Investment Bank Promoter: Abengoa Installed capacity: 11MW and 20MW Storage: no Project site: Seville Net electricity production: 22.3 GWh and 46.4 GWh/year EPC price: EUR 48.5m for PS10 and EUR 95.35m for PS20 EIB financing: EUR 50m direct risk (RSFF), EUR 78m intermediated. Solucar – Central Solar Receiver PS10 and PS20 First tower mounted central receiver solar thermal plants in europe and the first in the world in commercial operation.
    • Concentrated Solar Power 05/07/10 European Investment Bank Gemasolar - Central Solar Receiver First tower mounted central receiver solar thermal plant using molten salt as thermal fluid and energy storage.
      • Promoter: Sener / Abu Dhabi
      • Installed capacity: 17MW
      • Storage: 15h
      • Project site: Fuentes de Andalucía ( Seville)
      • Net electricity production: 96 GWh/year
      • EPC price: EUR 200 m
      • EIB financing: EUR 80m direct risk (RSFF).
    • 4: Deploy New Financing instruments The EU Dimension
      • Risk-Sharing instruments including the Risk-Sharing Finance Facility (RSFF) : aims at promoting research and innovation investments;
      • European Clean Transport Facility : provides funding for investments, from R&D to production of more fuel efficient vehicles;
      • MARGUERITE : a joint fund of the EIB and other European Financial Institutions to support the European Economic Recovery Plan, providing equity and quasi equity for projects in the Energy/Climate, Renewables and Transport sectors;
      • European Local Energy Assistance (ELENA) : € 15 million grant fund of the European Commission reserved to accompany the EIB’s operations in developing the potential of urban projects for renewable energy and energy efficiency.
      05/07/10 European Investment Bank
      • ESF, Facility for Energy Sustainability and Security of Supply (€ 3bn in 2007-2013 on top of existing external mandate), promotes cleaner energy growth paths by promoting the transfer of clean technologies between the EU and developing countries
        • Examples, € 500m China Climate Change FL, € 141mn Panama Dos Mares Hydroelectric Plant, € 79mn Mexico La Venta III Windfarm
      • GEEREF (€ 200mn target) is a fund of funds aimed at investing in regional risk capital funds catalyzing private investment in energy efficiency and renewable energy projects in developing countries and economies in transition
      • Six existing carbon funds (Multilateral Carbon Credit Fund, Carbon Fund for Europe, EIB/KfW Carbon Purchase Programme, Post 2012 Carbon Fund, Carbon Fund Morocco, EIB/KfW II), with combined capital in excess of € 550mn). Mediterranean Carbon Fund being considered
      • CCTAF: Climate Change Technical Assistance Facility . 5 million TA facility to cover carbon crediting activities of projects expected to be financed by the EIB
      4: Deploy New Financing instruments Outside the EU 05/07/10 European Investment Bank
    • 5. Adaptation
      • Climate change pose significant risks to many types of projects financed by the EIB. These risks are not just environmental, but also credit, insurance, reputational and possibly even legal risks
        • Projects at risk, examples: Projects in risky sectors (esp. projects exposed to water cycle); projects located in vulnerable areas (e.g. costal zones); projects potentially affecting livelihoods already near the limit of tolerance (e.g. the Sahel)
      05/07/10 European Investment Bank
    • 6: Adaptation 05/07/10 European Investment Bank Adaptation also a business opportunity Examples of adaptation projects financed in last decade: Sub-sector Project countries Total project cost (€bn) EIB loans (€bn) Flood risk management Germany, Netherlands, Czech Republic 1.94 0.95 Coastal and riverbank protection Italy, Bulgaria, Russia 5.30 1.57 Erosion and landslide prevention Poland 0.07 0.05 Total 7.31 2.57
    • 6: Mainstreaming Climate Change
      • Assessing the induced carbon footprint of financed projects, according to sector-specific methodologies
      • Accounting for the cost of carbon emissions of thermal power generation projects for the purpose of calculating their economic rate of return
      • Assessing the carbon impact of road projects by measuring the carbon emissions of the vehicles that will use them
      • Systematically screening projects for climate risks and requesting promoters to effect design changes where appropriate
      • Systematically screening early stage projects to identify potential for generating carbon credits and provision of TA to promoters to seize these opportunities
      05/07/10 European Investment Bank
    • For more information…
      • Thank you!
      • [email_address]
      • Tel: (+352) 43 79 - 82554
      05/07/10 European Investment Bank
    • EPA Climate Change Conference 2010 Advancing national climate policy development Owen Ryan Climate Change Policy Department of the Environment, Heritage & Local Government
    • Climate Change Agenda
      • International agenda
        • UN Framework Convention on Climate Change (1992);
        • Kyoto Protocol (1997);
          • (Commitment period 2008-2012)
        • IPCC – 4th scientific assessment report (2007).
      • EU agenda
        • European Climate Change Programme; and
        • 2008 Climate and Energy Package.
      • National agenda
        • 1st National Climate Change Strategy published 2000.
        • 2 nd Strategy (2007-2012) published April 2007.
        • Programme for Government commitment to Climate Change Bill 2010.
    • Ultimate objective
      • Ultimate objective of UN convention:
        • stabilisation of atmospheric greenhouse gas concentrations at levels that would prevent dangerous anthropogenic interference with the climate system.
      • Convention strengthened by Kyoto Protocol in 1997; but Protocol targets expires at end 2012.
    • A short history over a long-time
      • 1992: UNFCCC finalised in response to 1st assessment report published by the IPCC in 1990.
      • 1995: COP-1; agreed the “Berlin Mandate” as basis of KP, i.e. developed countries lead on emissions reduction.
      • 1997: COP-3 (Kyoto); adoption of the Kyoto Protocol with legally-binding targets for developed countries & flexible mechanisms.
      • 2005: COP-11 (Montreal), KP in force and start of talk about talks, i.e. future of process beyond 2012.
      • 2007: Bali Action Plan agreed.
      • 2009: Copenhagen Accord agreed at COP 15.
    • Article 3.9 review of Kyoto Protocol
      • Kyoto Protocol came into effect in 2005.
      • A 3.9 requirement to initiate consideration of further commitments for Annex I Parties “at least seven years before the end of the first commitment period”.
      • COP 11 (Montreal) established the Ad Hoc Working Group on further commitments for Annex I Parties under Kyoto Protocol.
      • AWG-KP to complete its work by end 2009.
    • Further Action under Convention
      • Bali Action Plan adopted at COP 13 in 2007.
      • Launched comprehensive process to enable full, effective and sustained implementation of the Convention – through long-term co-operative action now, up to and beyond 2012 .
      • Established Ad Hoc Working Group on Long-term Cooperative Action under the Convention:
        • complete its work in 2009 and present outcome for adoption at COP 15 in Copenhagen.
    • Bali Action Plan
      • Decision 1/CP.13 – key elements:
        • shared vision for long-term cooperative action;
          • achieve ultimate objective of convention;
          • Fundamental principle – common but differentiated responsibilities and respective capabilities.
        • enhanced action on mitigation; adaptation; technology development & transfer; and provision of financial resources and investment.
      • Two year programme of work to be completed in time for COP 15 in 2009.
    • Ongoing international negotiations
      • Focused on finding a successor international treaty to the Kyoto Protocol.
      • EU pressing for a comprehensive treaty based on keeping global temperature within 2 ˚ C of pre-industrial levels;
        • must be broader in scope that KP and reflect both tracks of ongoing negotiations.
      • Copenhagen Accord (Dec ’09) contains positive commitments on action but falls well short of EU ambition for a post-2012 international treaty;
        • not legally binding!
    • Copenhagen Accord
      • Positive provisions include:
        • recognition of 2 ˚ C objective;
        • continuation of both Ad Hoc Working Groups;
        • Parties accounting for 80+% of global GHG emissions have associated or expressed support;
        • new mechanisms on forestry and technology;
        • financial commitments by developed countries – short and longer-term;
        • Copenhagen Green Climate Fund;
        • quantified nationally appropriate mitigation actions (NAMAs) from many developing countries; and
        • implementation review by 2015.
    • Looking forward
      • COP-16, Cancun 2010;
        • fundamental objective unchanged, i.e. a robust and legally-binding global agreement;
        • stepwise approach, building on Copenhagen Accord;
        • integrate political guidance in CA into formal negotiating texts;
        • decisions needed at COP 16 to anchor CA in UNFCCC negotiating process and address remaining gaps.
      • COP-17, South Africa 2011;
        • agreement on new post-2012 international treaty?
    • Existing EU policy for 2020
      • Unilateral EU target to reduce greenhouse gas emissions by 20% by 2020.
        • underpinned by the 2008 EU Climate and Energy legislative package.
      • Conditional offer to step up to 30% as part of a global & comprehensive international agreement for the post-2012 period:
        • provided other developed countries commit to comparable reductions and developing countries contribute adequately according to their responsibilities and respective capabilities.
    • EU – stepping up to 30%
      • Live issue – as reflected in recent Commission Communication.
      • Timing not right for step up; EU conditions have not been met at an international level.
      • Analysis important for informed discussion as Europe exits the economic downturn.
      • Council to revert to the issue later in the year; in advance of COP-16.
      • More detailed analysis to be undertaken by Commission on policy options, costs and benefits – including at Member State level, as appropriate.
      • Key preparations in anticipation of right time to step up.
    • Broader EU 2020 agenda
      • Commission communication (March ‘10) on Europe 2020: a strategy for smart, sustainable & inclusive growth .
      • Three mutually reinforcing priorities:
        • smart growth , developing an economy based on knowledge and innovation;
        • sustainable growth , promoting a more resource efficient, greener and more competitive economy; and
        • inclusive growth , fostering a high-employment economy delivering social and territorial cohesion.
      • Mainstreams climate change agenda, and underscores importance of transition and environmental sustainability.
    • Ireland’s GHG targets
      • EU target under Kyoto Protocol – reduce GHG emissions by 8% (compared to 1990) over the commitment period 2008-12;
        • under internal EU burden-sharing, Ireland to limit total national emissions to 13% above 1990 levels.
      • Under 2008 EU Climate & Energy Package:
        • installations participating in EU-ETS to reduce overall GHG emissions by 21% compared to 2005 by 2020 period; and
        • Member States to address other (non-ETS) emissions at national level; Ireland required to reduce GHG emissions not covered by ETS (transport, waste, agriculture, commercial and residential, etc) by 20% compared to 2005.
    • Ireland’s 2020 target in context
      • To achieve the EU unilateral 20% target for 2020, total GHG emissions must be cut by 14% on 2005 levels, which has been translated into:
        • 21% reduction in ETS emissions, and
        • 10% reduction in non-ETS emissions; individual Member State targets in a range from +20% to -20% - Ireland has strictest target at -20%.
      • Land use, land use change and forestry (forest sink, etc) not factored into 2020 target; commitment to revisit unilaterally if no international agreement by end 2010.
      • EU-ETS to be administered by Commission from 2013.
    • National Policy Development
      • National Climate Change Strategy 2007-2012 (published April 2007)
        • addressed both mitigation and adaptation;
        • target based approach – emission reductions supplemented as necessary by purchased carbon units.
      • Annual Carbon Budget
        • Introduced 2007 to progress policy development.
      • Climate Change Bill to provide, i.a.:
        • statutory basis for policies and principles; and
        • national mitigation and adaptation plans.
    • Stakeholder input to policy
      • Opportunities for stakeholder input on Climate Change Bill when details of Heads are announced.
      • Bill will address policies and principles on both mitigation and adaptation.
      • Potential impact of historic and current greenhouse gas emissions:
        • major issue for Ireland, e.g. agriculture and forestry sectors; and
        • underscores the link between global mitigation and local adaptation.
      • Outline of national adaptation framework to be announced with details of Heads of Bill.
    • Conclusion
      • Climate change – threat, challenge and opportunity.
      • Key cross-cutting policy issue for the Irish Government and the EU.
      • Global GHG emissions must be halved by 2050; developed countries in aggregate must reduce emissions by 80% or more.
      • EU targets determine minimum level of ambition for Ireland.
      • Transition to a low-carbon, climate-resilient and resource-efficient future essential.
      • CC Bill – next major step in national policy development; effective engagement & input of stakeholders welcome.