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

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Presentation by Mr. Takayoshi KATO at COP22

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

  1. 1. Takayoshi KATO Policy Analyst, Environment Directorate, OECD COP22, Bab Ighli, Marrakech, Morocco 11 November 2016 Turning NDCs into investment plans: Way forward in countries of Eastern Europe, the Caucasus and Central Asia
  2. 2. • 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 2 About GREEN Action Programme (hosted by the OECD) *subject to approval
  3. 3. • 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. 3 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]
  4. 4. 4 Scope of analysis Bilateral donors (DAC Members) Multilateral Development 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
  5. 5. 5 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 System Note(*): The financial flows are delivered through bilateral (mainly DAC members) and multilateral channels and calculated as a two-year average between 2013 and 2014.
  6. 6. 6 Comparison across the regions (Finance committed vs GDP per capita) Annualfinancecommitted(USDbln peryear:averagein2013and2014) Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System GDP per capita PPP (USD: 2014)
  7. 7. 7 Large difference in amount of finance committed to each country Annual climate-related development finance and GDP per capita PPP (2-year average between 2013 and 2014) Source:OECD(forthcoming)FinancingclimateactioninEECCA,basedonOECD-DAC CreditorReportingSystem;WB(2016)WorldDevelopmentIndicators 0 10 20 30 40 50 60 70 0 200 400 600 800 1000 1200 Mitigation Adaptation Both Total per capita (USD mln) (USD per capita)
  8. 8. 8 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 0 500 1000 1500 Energy generation and supply Agriculture, Forestry and Fishing Water Supply and Sanitation Industry, Mining, Construction, Trade Policy… Banking, financial and business services Transport and storage Multi sector
  9. 9. 9 Potential to mainstream climate-consideration into development finance in some sectors Climate-related development finance as a share of total bilateral and multilateral development finance (2-year average between 2013 and 2014) (%) Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System
  10. 10. 10 But, still large financing gap to achieve EECCA’s climate targets
  11. 11. 11 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
  12. 12. • 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 12 Core climate policies are necessary for mobilising finance…
  13. 13. Mitigation (Un- conditional) Mitigation (Condition-al) Adaptation Needs for support quantified Armenia 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 13 Most EECCA countries submitted INDCs INDC elements
  14. 14. Intended Nationally Determined Contributions Nationally Appropriate Mitigation Actions Low Emission Development Strategy National-level adaptation strategy National- level climate strategy ARM AZE BLR GEO KGZ KYG MDA TJK TKM UKR UZB 14 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 ARM AZE BLR GEO KGZ KYG MDA TJK TKM UKR UZB Approved/submitted Being developed Sources:OECD(forthcoming)Climate-relateddevelopmentfinancein EECCA,basedonthecountries’INDCs
  15. 15. • “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. 15 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
  16. 16. FUEL and ENERGY Also, it’s NOT just climate policies that affect climate targets… TECHNOLOGY COMPETITION FISCAL SOCIAL TRANSPORT INVESTMENT CLIMATE 16
  17. 17. • 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 17 Misalignments between policies exist in EECCA (and most countries across the world)
  18. 18. • 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. 18 Misalignments between policies exist in EECCA (and most countries across the world)
  19. 19. 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. 19 Energy subsidies negatively affecting both public budget and low-carbon development Source: OECD (forthcoming), Energy Subsidies in the Eastern Partnership countries
  20. 20. 20 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 programming Pipeline development Analytical input to identify constraints Feasibility studies Proposal development
  21. 21. 21 The report accompanied by 11 country reports
  22. 22. • 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 22 More work under the GREEN Action Programme See also our latest Brochure https://issuu.com/oecd.publis hing/docs/from_eap_to_gree n_action_programme_?e=30 55080/36192948 See website http://www.green-economies-eap.org/
  23. 23. Thank you. Contact: Takayoshi Kato Takayoshi.KATO@oecd.org http://www.oecd.org/env/outreach/eap-tf.htmhttp://www.oecd.org/environment/

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