The Earth can support between 1.5 and 18 billion pending on consumption patterns of food, water, energy. If we consume as US – 1.5 billion; as Rwanda 18 billion. Biological capacity available per capita is now 1.8 global ha: obtained by dividing the number hectares of biologically productive land and water on this planet by the number of people alive gives. This assumes that no land is set aside for other species that consume the same biological material as humans Our current consumption and production patterns impact too heavily on natural resources. Biodiversity is being lost rapidly. Climate change is a significant concern in particular for developing countries which are disproportionately affected.We are reaching the limits of our planet’s “carrying capacity”. Vital resources, such as freshwater, are becoming increasingly scarce. On the eve of India’s independence, Mahatma Gandhi was asked whether he thought the country could follow the British model of industrial development. His response: "It took Britain half the resources of this planet to achieve its prosperity. How many planets will India require for development?"
The sums involved in a shift to a low-carbon economy are daunting but not impossible to achieve. Global capital markets, representing $ 178 trillion in financial assets, have the size and depth to rise up to the investment challenge (McKinsey, 2009). Additional investment is all too often understood as additional cost, and climate change management is thus perceived as an extra development burden. However, the bulk of this additional investment could generate attractive commercial returns. As shown by the Global GHG Abatement Cost Curve developed by McKinsey, close to 10 GtCO2 could in theory be abated at negative costs and close to 30 GtCO2 could be reduced a zero costs.
The total investment requirement to achieve the transition to low carbon and climate resilient societies as a pre-requisite for sustainable human development is immense. In the energy sector alone, US$10.5 trillion is estimated to be needed from 2010 to 2030 to put in place a low-emission energy infrastructure by 2030. Limited information is available about adaptation benefits and costs. Studies have provided a wide range of estimates for these benefits and costs, from $4 billion to $109 billion/year (World Bank, 2010). The reasons for this are threefold: (1) the inability to attribute many observed changes at local and regional scales explicitly to climate change; (2) the diversity of impacts and vulnerabilities across countries and within countries; and (3) the small body of research that focuses on adaptation actions (US National Academy of Sciences, 2010). Project Catalyst estimates that 60 billion per anuum in incremental cost financing by 2020 will help catalyze mitigation measures that deliver 2 degree C pathways. This amount of finance is far less that the fossil fuel subsidies – 312 billion in 2009 and small compared with the global spend on energy, estimated at 5 trillion/year on fossil fuels by 2020.While potentially earning a good return on investment, most renewable energy and energy efficiency investments require substantial upfront costs. The shift to a green, low-emission and climate-resilient economy frequently involves higher upfront capital costs, matched by lower operating costs. As pointed out by the IEA (2009), additional investment is too often understood as additional cost, and climate change management is thus perceived as an extra development burden. However, the bulk of this additional investment could generate attractive commercial returns. Energy bills in transport, buildings and industry could be reduced by over $8.6 trillion globally over the period 2010-2030 and by $17.1 trillion over the lifetime of the investments, according to the IEA. These investments could also translate into savings from air pollution control, estimated at up to $100 billion by 2030 compared with the business-as usual scenario. Although profitable adaptation investments exist for agriculture, water resources and other sectors, preliminary research shows that it will cost to adapt and that the main rationale for investment in adaptation will most often be to avoid higher costs.The International Energy Agency (IEA) estimates that approximately 40% of the global investment needed to transform economies must come from households, 40% from businesses, and just 20% from government. In this context, generating volumes of finance on this scale requires that limited international public funds be used to catalyze much larger scale private and national public investment.Supportive public policies are typically required to facilitate adoption of even highly profitable low-emission climate-resilient development actions. Global capital markets, representing $178 trillion in financial assets, have the size and depth to step up to the investment challenge (McKinsey & Company, 2009).As a critical first step, governments have committed in Copenhagen and Cancun to raise US$100bn/year in climate finance by 2020 to start to address these needs. Additional ecosystem finance estimated at 100 billion/year might also be available. It is clear that international public expenditure alone will be insufficient.
Rather than a problem of capital generation, the key challenge of financing the transition toward a low-emission society is to address existing policy, institutional, technological,behavioural and technical skill barriers to redirect existing and planned capital flows from traditional high-carbon to low-emission climate-resilient investments. Removal of these barriers can complement and maximize the impact of capital finance such as concessional loan finance.The international community has developed a number of complementary policy and financing instruments o shift investments from fossil fuels to more climate-friendly alternatives over the past few years. The UNFCCC review of Annex I countries’ Fourth National Communications refers to more than 1,000 GHG mitigation policies and measures (OECD, 2009). Despite the turmoil in the world’s financial markets in 2008, and the subsequent economic crisis, the past two years have witnessed continued strong investment in clean energy technologies. According to The Pew Charitable Trusts (2011), in 2010 the clean energy sector grew by 30 percent above 2009 levels to achieve a record $243 billion worth of finance and investment.Over the medium to long term, and with the appropriate public sector support, private investment in clean energy technologies is expected to reach $450 billion by 2012 and $600 billion by 2020 (UNEP, 2010).UNDP experience shows that aligning development and climate management goals is critical to scale up climate investments. The necessary policy action to tackle climate change and catalyse climate capital will meet with stronger public consensus and be more effective if it helps address local development issues, such as the provision of basic services, greater energy and food security, and employment. People in developing countries who lack basic services and economic opportunities are primarily concerned with improving their living conditions. One critical factor affecting their livelihoods is whether they have access to affordable and reliable energy services for household and productive uses. The lack of clean and efficient sources of energy can limit access to clean water, prevent children from attending school regularly, expose communities to health hazards and restrict women’s choices and ability to pursue fulfilling activities. Of the 1.2 billion people living on the equivalent of one dollar a day, 70 percent are women. Because of their traditional responsibilities for collecting fuel and water, in many developing countries women and girls would benefit the most from access to improved energy services. The time and physical effort expended by women and girls to gather fuel and carry water seriously limits their ability to engage in educational and income-generating activities (UNDP, 2004).
While the establishment of the Green Climate Fund might facilitate some harmonization among climate funds and centralize a slice of international public climate finance, the coming years are likely to see a continued increase in the total number of international public climate funds. This diagramme sets out a possible emerging architecture for international public climate finance.
All developing countries will need to access appropriate climate finance. However, there is much evidence that climate finance remains geographically clustered with the majority of finance be used for mitigation projects rather than adaptation and more for large countries with high biological diversity mainly in the tropics and far less resources for temperate countries. The distribution of Clean Development Mechanism projects—with 80% of projects clustered in five large economies—is a case in point. Current financial flows do not always reflect the needs and realities on the ground as indicated by climate science and national poverty reduction priorities. Reforming the international sources of finance to remedy this problem looks increasingly difficult. There already more than 50 international public funds, 45 carbon markets and 6,000 private equity funds providing green finance. Creating a single fund that could channel these funds is a near-impossible task; promoting universal access to climate finance must therefore focus on developing the capacity at the country level to sequence and integrate multiple sources available to national and subnational governments. Human Development in a Changing Climate: A Framework for Climate FinanceAddressing climate change in isolation form development jeopardizes a major opportunity to move the world to a long time sustainable future and eradicate poverty, one of the ultimate goals of the UNFCCC strongly reaffirmed in Cancun. While it is critical that climate finance is additional to ODA at source, it is essential that both finance sources are delivered in ways that realizes important synergies between them. Climate finance offers an opportunity to advance national development significantly by providing finance that can support poverty reduction, increase resilience, and promote the MDGs. Promoting the MDGs in turn improves countries ability to address climate change, as well as manage and direct climate finance, through improved national economic, social and governance factors. The Cancun Agreements reaffirm that international assistance must be driven by “…the legitimate needs of developing countries Parties for the achievement of sustained economic growth and the eradication of poverty, so as to be able to deal with climate change”. Moreover, climate-proofed ODA can contribute to clean technology development and improved resilience. Thus, channeling climate finance into projects that aim at only reducing GHG fails to take advantage of the major dividends and synergies between climate, development and poverty reduction.
Catalyzing Climate Change Finance for Sustainable Human Development
Catalyzing climate change finance for sustainable human development<br />Veerle Vandeweerd, Director, Environment and Energy Group, UNDP<br />Climate change and development – nexus between UN Conventions and EU Accession, Roundtable, Ljubljana, Slovenia, 25-26 May 2011<br />
We have a global problem for which we need global solutions<br />
We are 6.92 billion people today and the World population is predicted to reach 9 billion by 2050 …..<br />2.6 billion lack basic sanitation<br />1.3 billion no access to clean water<br />1.6 billion lack access to electricity<br />1.1 billion lack adequate housing<br />900 million no access to modern health care<br />925million undernourished<br />The Richest 20% consume 83% of the resources<br />The Poorest 20% consume 1.3% of the resources<br />
Carrying Capacity of the Earth is 1.5 – 18 billion people –pending on consumption levels (food, water, energy)<br />Unsustainable levels of consumption threatening progress in human development<br />Source: BBC (2010), “How many people can live on planet Earth?”<br />
Charting a course away dangerous climate change: A shrinking window of opportunity <br /> To keep within 2C threshold CO2e concentration should stabilize at 450 ppm<br /> The UNDP 2007/2008 HDR estimated that the 21st Century carbon budget is set at 1,456 Gt CO2<br />A sustainable emissions pathway will require the world to cut emissions by at least 50 percent by 2050<br />
A new development model is needed… <br />UN Panel on Global Sustainability<br />50-50-50 challenge: <br />How can we reduce GHG emissions by 50% while feeding and nurturing a human population that in 2050 could be 50% larger than today?<br /> <br />Will the 9 billion people expected in 2050 have the opportunity to thrive?<br />Transition to GREEN, LOW CARBON and CLIMATE RESILIENT SOCIETY<br />Source: United Nations Human Development Index<br />
It can be done<br />But it requires business unusual and global monitoring and assessment to stay within the 2 degrees Celsius limit<br />
Global GHG Abatement Cost Curve<br />Source: Global GHG Abatement Cost Curve v2, McKinsey (2009)<br />
Finance Needs to achieve transition are huge, but possible to achieve<br />10.5 trillion for low emission energy infrastructure by 2030; 4 – 109 billion/year for adaptation; 60 billion/year in incremental cost funding by 2020 for mitigation actions needed for 20 C pathways; Less than fossil fuel subsidies: 312 billion in 2009<br />Substantial upfront costs, but attractive commercial returns – energy bills reduced by over 8.6 trillion; savings from air pollution 100 billion <br />IEA: the global additional investment needed in 2020 will come from:<br />Global capital markets 178 trillion in financial assets<br />200 billion /year for ecosystem and climate finance committed<br />40%<br />households<br />40%<br />businesses<br />20% governments<br />
Key Challenge in Financing the Transition<br />Address barriers to redirect existing and planned capital flows<br />Traditional <br />High Carbon<br />Low emission and climate resilient <br />CRITICAL:<br />Aligning development and climate management goals<br />
Proliferation of sources of Environmental Finance <br />By 2010, global<br />Global Environment Trust Funds<br /><ul><li>GEF Trust Fund
... few developing countries can access the new sources<br />Key Environmental Finance Challenges faced by developing countries <br />Access new and innovative sources for climate and ecosystem finance <br />Promote synergies between development, climate and ecosystem finance <br />Use limited sources of public finance to catalyze much larger private flows <br />
GET FiT incentive structure<br />20<br />Source: DBCCA, 2010<br />
Four-step process for selecting the appropriate combination of policy and financial instruments<br />
Methodology for selecting an optimal financing mix<br />
Policy and financing mix to promotewind power in developing countries<br />
UNDP Response: Low-Emission and Climate Resilient Development<br />Poverty, gender, capacity development, democratic governance<br />National planning -- LECRD Strategies/<br />Investment Roadmaps<br />Establish Enabling Environment to catalyze capital <br />(barrier removal, blending of different sources of funds)<br />Learn & Apply New Knowledge<br />KM networks<br />Capacity development, democratic governance <br />Implementation and Reporting Support Services to enhance national programme management capacity<br />
National ClimateFunds<br />Indonesian Climate Change Trust Fund<br />Guyana REDD Investment Fund<br />Costa Rica Green Bond Fund<br />Philippines National Survival Fund<br />India Clean Energy Fund<br />Nigeria National Strategic Climate Change Trust Fund<br />Thailand Energy Efficiency Revolving Fund<br />Maldives Climate Change Trust Fund<br />Ecuador Yasuni Trust Fund <br />China Funds for the Environment<br />China CDM Fund<br />Bangladesh Climate Change Resilience Fund<br />Brazil National Fund on Climate Change<br />Amazon Fund of Brazil<br />Cambodia Climate Change Alliance Fund<br />
Whatdidworkwell? Whatdid not? <br />Objectives and functions: financial mechanisms vs. coordination mechanism/clearing house/NIE/PDF/capacity development mechanism/development bank/national climate agency. <br />Ambition vs. Capitalization<br />Partnership organization vs. new vertical institution <br />Streamlined project cycle-avoiding a « double » project cycle<br />Stakeholder engagement to identify needs and requirements, best and poor practices<br />Unambiguous appraisal and performance criteria and public information systems <br />Tailored fiduciary standards vs. « one size fits all » approach<br />Stability vs flexibility (two-phase approach)<br />Multiple implementing partners and investment in capacity development<br />Unbundling and interdependencies<br />Delivery multiple development benefits vs. Sectoral benefits<br />Private sector incentives: direct subsidies vs. enabling environment<br />