Presentation from Research Collaborative Tracking Finance for Climate Action Workshop, 1-2 October 2019

1. CONSISTENCY OF INVESTMENTS
AND FINANCING WITH CLIMATE
OBJECTIVES
Country pilot studies: Latvia and Norway
Alexander Dobrinevski and Raphaël Jachnik, OECD

2. 2
SCOPE AND METHOD
2Consistency of investments and financing - country case studies 228-Oct-2019

3. What is the scope of tracking?
majority of
GHG emissions
Focus on gross investment flows in physical assets
• New infrastructure and equipment
• Refurbishment of existing infrastructure
and equipment
Consistency of investments and financing - country case studies28-Oct-2019 3
National
climate
objectives
Taxonomies Technological
development
roadmaps
Scenarios
Climate consistency assessment using
multiple inputs and viewpoints
Complements other initiatives
analysing investment portfolios

4. International
• Inform potential future finance-
related disclosure initiatives by
the public and private sectors
• Identify potential data and
indicators for informing the
Global Stocktake under the
UNFCCC
• Identify possible finance-related
indicators in the context of
OECD green growth indicators
28-Oct-2019 Consistency of investments and financing - country case studies
Expected benefits
Domestic
Public sector and policymakers
• Determine state with respect to consistency with climate
objectives and complement physical indicators of progress
• Inform monitoring and evaluation of policies aimed at
shifting investment
Private companies and banks
• Provide input for assessing climate risks in physical
investments and financial portfolios
• Ensure eligibility of investments for green financing
instruments
Provide input for developing long-term, sustainable financing strategies
4

5. 5
COUNTRY PILOT STUDIES:
NORWAY AND LATVIA
5Consistency of investments and financing - country case studies 528-Oct-2019

6. Norway: Manufacturing industries
• 8 most significant industries in terms of emissions
and/or investments
• Remaining industry sectors treated as an aggregate
• Extractive industries (in particular, upstream oil and
gas) are excluded
6
6Consistency of investments and financing - country case studies28-Oct-2019
0 2000 4000 6000 8000
Aluminium
Cement and non-metallic…
Chemicals (excl. fertilisers)
Fertilisers
Food processing
Metals (excl. aluminium)
Oil refining
Pulp and paper
Other industries
Average yearly investment
[million NOK]
Average yearly emissions
[Mt CO2eq]
• Close collaboration with Ministry of
Environment and Climate
• Scope: industrial buildings,
infrastructure and equipment
located in Norway
• Investments and
sources of financing

7. Latvia: Transport
Road
Rail
Air
Water
• Infrastructure
• Vehicles (passenger, heavy-duty)
• Road-based public transport
• Non-motorised transport (bicycles)
• Railway infrastructure
• Locomotives and wagons
• Rail-based public transport
• Airport infrastructure, Aircraft
• Port infrastructure, ships
7
7Consistency of investments and financing - country case studies28-Oct-2019
• Close collaboration with Ministry of
Environmental Protection and Regional
Development
• Scope: transport infrastructure, equipment
and vehicles located (registered) in Latvia
• Investments and sources of financing

8. Data collection
Mainly publicly available data
• Investments: Eurostat Structural Business
Statistics, companies’ annual reports
(Brønnøysund Register of Enterprises)
• Sources of financing: Norwegian subsidies
providers, companies’ annual reports
• Emissions: Norwegian Pollutant Release and
Transfer Register, EU ETS
• Scenarios: IEA, Norwegian Ministry of
Climate and Environment
• Discussions with industry experts
(in particular Norsk Hydro ASA)
8
8Consistency of investments and financing - country case studies28-Oct-2019
Norway Latvia
Data collection from >26 transport sector actors
coordinated by MEPRD
• Investments and financing: Central Statistical
Bureau, Ministry of Transport, state and
municipal transport companies, Register of
Enterprises, Bank of Latvia, …
• Estimates for vehicle investments based on
registration data (Road Traffic Safety
Directorate) and expert consultations
(Automobile Dealers Association), …
• Emissions: UNFCCC National Inventory
• Scenarios: IEA, UNFCCC
• Expert discussions

9. Norway: Climate-consistency of investments
28-Oct-2019 Consistency of investments and financing - country case studies
EU (draft)
IEA
2°S
GHG emissions IEA 2° scenario
emissions targets
2030
Taxonomy
Klimakur
2020
Total
Climate-beneficial
EU Taxonomy
Consistent
Inconsistent
Not addressed
2050
GHG emissions
-51%
-30% -50%
-4% -38%
-76% -80%
-16% -38%
5 Mt CO2eq
5 bln
NOK
9
Averages from
2010-2017
Being updated

10. Norway: Comparison to investment needs
28-Oct-2019 Consistency of investments and financing - country case studies
• Costs for short-term abatement measures from
Klimakur 2020 study
• Investment and financing capacity appears to be
available in most subsectors
• Other constraints on investment in emission
abatement:
– Prioritisation of growth and capacity expansions
– Lack of business case based on level of carbon pricing,
level of current and future public support
– Expectations of long-term technological changes making
incremental measures obsolete
• Analysis of policy interventions to address such
barriers requires separate work
10

11. Norway: Financing sources
11
11Consistency of investments and financing - country case studies28-Oct-2019
• Difficult to identify sources of finance for
a significant share of investments
• Current sources of finance show different
ways of scaling up investments and
financing where necessary
• Retained earnings appear to be most
significant source of financing for
manufacturing industries
• Bonds and loans from banks are only
relevant for a few industries
0% 20% 40% 60% 80% 100%
Oil refining
Pulp and paper
Cement and non-metallic minerals
Food processing
Other industries
Metals
Chemicals
Total
Bonds Loans from credit institutions
Loans from corporates Retained earnings
Equity Subsidies
Unknown/other
Total

12. Latvia: Climate consistency of investments
EU
(draft)
IEA2°S
Taxonomy
NC5
Subsector
Air transport
Rail transport
Road transport
Water transport
TOTAL
Emission Targets
2030
2050
Trend
p.a.
⯅ 0.6%
⯆ 2.4%
⯆ 3.6%
Infrastructure
Heavy vehicles
Light vehicles
Infrastructure
Infrastructure
Infrastructure
Vehicles
Other
Climate-beneficial
EU Taxonomy
Consistent
Inconsistent
Not addressed
GHG emissions
GHG emissions
12Consistency of investments and financing - country case studies28-Oct-2019
tbc
- 11% - 50%Being updated

13. Latvia: Road transport GHG emissions
13
13
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2007 2009 2011 2013 2015 2017
emissions/2007emissions
GHG emissions from road transport
IEA 2° scenario Latvia NC5 Actual
Consistency of investments and financing - country case studies28-Oct-2019
0
50
100
150
200
250
0 10000 20000 30000 40000 50000
CO2emissions[g/km]
Price [€]
Stock of passenger cars
Petrol Diesel
Hybrid Electric
EU targets for
new vehicles
2015
2021
EU Taxonomy

14. Latvia: Sources of financing
SubsectorSources of
finance
Other/unknown
EU funds
Own funds
Road
Rail
Air
Water
Companies
Households
Government
Transport
actors
Latvian public
funds
Loans
analytical work in
progress
14
14Consistency of investments and financing - country case studies28-Oct-2019
Leasing

15. Lessons learned
15
15Consistency of investments and financing - country case studies28-Oct-2019
• Strong points:
+ Estimate breakdown of
emission reductions by
sectors and subsectors
+ Provide link to carbon budget
and global warming potential
• Limitations:
– Geographical and sectoral
granularity not always
sufficient
– Depend on macroeconomic
assumptions
– Do not address activities
without GHG footprint
Investments and financing
• Official statistics provide
high-level overview
• Firm-level data is required
for granular assessment
• Structure of financing varies
strongly between
subsectors
• Matching investments to
sources of financing is
difficult
Draft EU Taxonomy GHG scenarios
• Strong points:
+ Precise screening
criteria
+ Covers mitigation-
enabling activities
• Limitations:
– Currently limited
scope
– Focus on activities
with a significant
contribution
– Requires granular data

16. 16
LATVIAN POLICY AND
TRANSPORT CONTEXT
28-Oct-2019 Consistency of investments and financing - country case studies
Raimonds Kašs and Tatjana Titareva,
Ministry of Environmental Protection and Regional Development

17. Latvia: GHG dynamics in the transport sector
28-Oct-2019 Consistency of investments and financing - country case studies 17
0
500
1000
1500
2000
2500
3000
3500
4000
1990
1995
2000
2005
2010
2015
2020
2030
2050
ktCO2
Future targets and projections: Road transport
Mopeds and motorcycles Heavy-duty vehicles, buses
Light-duty vehicles Passenger cars
Forecast (total transport emissions)
Road
transport
93.9%
Rail
5.5%
Local
aviation
0.1%
Local
navigation
0.5%
Current state:
Transport sector responsible for 29% of the
total non-ETS emissions in LV

18. 18
NORWEGIAN POLICY AND INDUSTRY
CONTEXT
28-Oct-2019 Consistency of investments and financing - country case studies
Gard Lindseth, Ministry of Climate and Environment

19. Norway Case Study: Perspective from the
Ministry of Climate and Environment
• What we aimed to achieve
• Why the industry sector ? Characteristics of
the Norwegian industry sector
• Policy and public intervention needs in
Norway
• Data, methods and further tracking efforts
• The role of the Ministry in conducting the
study
• Relevance of the results
28-Oct-2019 Consistency of investments and financing - country case studies 19