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  • A serious and immediate threat to development prospects, affecting disproportionately the poor.Increasingly severe warnings of the scientific communityDanger starts close to 2C warming above pre-industrial (likely the best we can achieve)Impacts already being felt, falling disproportionately on the poor (developing countries could bear 75-80% of the costs of CC damages while contributing for 35% of GHGs already in the atmosphere – 2% only for low-income countries)Economic growth alone is unlikely to be fast or equitable enough to counter threats from climate change. Action or inaction is not a matter of choice between growth and climate change.A climate smart world is possible if we:Act now, under the leadership of high-income countries to stay as close as possible: to address both the urgency of the problem as well as the tremendous inertia in the climate system, in infrastructure and human systems. Any delay will reduce development options for mitigation and adaptation and raise costs of action. Besides mitigation efforts to avoid the un-manageable, immediate and substantial adaptation efforts in countries that are most vulnerable (and already suffering from first signs of CC) are required.Act together, for equity and efficiency reasons: postponing mitigation in developing countries could double mitigation costs, and that could well happen unless substantial financing is mobilized. Act differently, to call upon the tremendous ingenuity the human race is capable of, in order to tackle a complex problem that affects all dimension of development.Still, a formidable challenge:Finance [scope of this presentation]Technology [radically transform energy systems, make climate-resilient investment] Capacity [to maximize impact of climate finance: build enabling environment, grab technology, financial innovation]

Bulgaria forum presentation Bulgaria forum presentation Presentation Transcript

  • Climate change as a development challenge
    JariVayrynen, Sr. Environmental Specialist, World Bank
    Meeting the challenge is not a choice between growth and climate change…
    a climate smart world is within reach if we act now, act together and act differently…
    … and build on new finance, technology and capacity at scale.
  • WB Strategic Framework for Climate Chance and Development
    Objectives:
    • Enable WBG to effectively support sustainable development and poverty reduction, as climate risks and climate-related economic opportunities arise
    • Facilitate global action and interactions among all countries
    Key principles:
    • Working in partnerships guided by UNFCCC process
    • Country-led, country-driven, “no regrets” actions
    • Approach tailored to specific needs of diverse clients
    Knowledge &
    Capacity
    Bottom Up Momentum
    MDB & UN
    Partnerships
    Resource
    Mobilization
    Climate
    Investment
    Funds
    Regional / Country Strategies
  • Financing Climate Change Mitigation
    Scale of financing needs for mitigation estimated by UNFCCC at $200 billion annually
    Concessional resources are very limited for low carbon investments in developing countries and transition economies
    Mobilizing private sector finance is crucial
    Market mechanisms can play a central role
  • Finance scaled-up demonstration, deployment, and transfer of low carbon technologies
    Country Investment Plans:
    • Support country development strategies
    • Leverage financial products of International Financial Institutions
    • Stimulate private sector engagement
    Clean Technology
    Fund (CTF)
    ± $5 billion
    Targeted programs with dedicated funding to pilot new approaches with potential for scaling up
    • Pilot Program for Climate Resilience: Mainstream climate resilience into core development planning
    • Forest Investment Program: Reduce emissions from deforestation and forest degradation
    • Scaling Up Renewable Energy in Low Income Countries
    Strategic Climate
    Fund (SCF)
    ±$1 billion
  • Investmentplans endorsed with a total funding envelope of US$1.85 billion
    Average leverage US$ 1 to 10
    Pledges (+/-) US$5 billion
    Energy Efficiency - Replacing inefficient lighting and appliances; expected
    emissions reductions of 4 million tons of CO2 per year
    Urban Transport - 20 bus rapid transit corridors with low-carbon bus technologies
    Renewable Energy
    Proposed CTF » $500 million leverages » $6.2 billion
    Mexico
    Turkey
    Renewable Energy - Implementing "intelligent" grid management and control systems to support large-scale integration of wind power
    Renewable Energy and Energy Efficiency - Promoting private sector development through credit lines to local development banks
    Proposed CTF » $250 million leverages » 2.1 billion
    Wind Power - From <1,000 MW to 2,500 MW of electricity from wind
    Urban Transport - Six bus rapid transit corridors and five light rail route
    Proposed CTF » $300 million leverages » $1.9 billion
    Egypt
  • 6
    World Bank Carbon Market initiatives
    World Kyoto Funds under implementation reaching over $2 billion in funding and about 130 ER purchase agreements signed
    Progress with new facilities:
    Exploring possibilities for further engagement
    • Carbon in Agriculture sector
    • Carbon Capture and Storage (CCS)
    Forest Carbon Partnership Facility (FCPF)
    Operational since June 2008 - current donor pledges at $107 million
    37 Developing Country Participants
    Carbon Asset Development Fund (CADF) operational at €7 million
    Carbon Fund currently €100 million (minimumtarget €200 million)
    Carbon Partnership Facility (CPF)
  • How do carbon markets work?
    What is the underlying principle?
    Cost-effectiveness: a ton of CO2 emitted anywhere in the world has exactly the same impact on climate change and should therefore be reduced/ mitigated where the cost of doing so is lowest.
    Units = tons of carbon dioxide (or equivalent) allocated as part of an emission cap or “reduced” by a project or program activity. These units are labeled based on the market segment in which they are traded : AAUs, CERs, ERUs, EUAs, VERs, etc.
    What is traded?
    • Lowers compliance costs for meeting emission reduction obligations; ;
    • Catalyzes financial and technology flows to developing countries to facilitate low-carbon growth;
    • Creates a global and long-term price signal to lower carbon intensity.
    What are the benefits?
    • Significant new investments and financial flows
    • Application of new technologies and financial instruments to reduce emissions at lower costs; and
    • Transition to a lower carbon economy better tuned to cope with future resource and environmental constraints.
    Why should this be of interest?
  • Kyoto Protocol-based carbon markets
    “Business as-usual” projected emissions by 2008
    Project-based Offsets (CDM/JI)
    Projected emissions increase between 1990 and 2008-2012
    Sources of reduction
    CDM: Offsets obtained from a non-Annex I country
    JI: Offsets obtained from another Annex-I country;
    Allowances from IET
    Domestic actions
    1990 Baseline
    IET: Kyoto allowances obtained from another Annex-I country
    Baseline emissions
    Kyoto target
    Kyoto allowed emissions
    A significant amount of the reduction must be achieved through domestic measures
    1990
    2008-12
    Beyond domestic actions to reduce emissions, a country can use trading to purchase reductions in another country to achieve compliance with its Kyoto obligations.
    Examples of trading options include:
    • Buying emissions ALLOWANCES (called AAUs) from other countries with commitments which are below their Kyoto cap (International Emissions Trading)
    • Purchasing carbon OFFSETS from projects which reduce emissions
    • In developing countries (Clean Development Mechanism – CDM)
    • In economies in transition (Joint Implementation – JI)
    3
  • Purchase of ERs
    Emission
    Reduction Units (ERUs)
    ERU
    Baseline emissions
    Project emissions
    Baseline Scenario
    ProjectScenario
    How does Joint Implementation (JI) work?
    Industrialized country with an emissions cap
    Domestic action
    Purchase of allowances
    $
    Emissions target
    $
    Project benefits
    from increased cash flow
  • EU Emission Trading Scheme
    91,910
    Carbon Market Values in 2008 (in M US$)
    Project-Based Transactions
    Allowance Markets
    Assigned Amount Units
    210
    JI
    300
    SecondaryCDM
    CDM
    6,500
    26,300
  • World Bank Carbon Finance Projects in Bulgaria
    Joint Implementation projects:
    Sofia District Heating
    Pernik District Heating
    Svilosa Biomass
    Green Investment Scheme (GIS)–options study
    GIS is a system where revenues from AAU trades are reinvested in environmental projects
    To our knowledge Bulgarian Government has not yet concluded any GIS transactions
    11
  • 12
    Conclusions
    Climate change is fundamentally a development issue, not only an environmental issue
    Huge financing needs
    Carbon markets will continue to be play a major role in catalyzing low carbon investments in developing countries and transition economies
    The World Bank, through a range of financial instruments and capacity building activities, is deeply engaged in this effort
  • Thank You.
    JariVayrynen
    jvayrynen@worldbank.org
    Please visit us online at
    www.carbonfinance.org