DCC_bookCovs_CRA .qxd:Layout 1 1/16/09 11:59 AM Page 3 47893 v1 DEVELOPMENT AND CLIMATE CHANGE A Strategic Framework for the World Bank Group DCC_bookCovs_CRA .qxd:Layout 1 1/16/09 11:59 AM Page 4 CONTENTS Executive Summary 2 The Development Challenge 6 The Role of the World Bank Group 8 Six Areas for Action 12 Conclusion 23 Annex 1 ­ Impacts and Emissions 24 Annex 2 ­ Costs and Financing Sources 31 Annex 3 ­ Key Actions and Deliverables for Fiscal Years 2009­11 37 Abbreviations 42 Box 1: Major Initiatives 3 Box 2: Supporting Forests, Livelihoods and Climate Action through REDD 13 Box 3: An Opportunity to Scale Up Learning and Impact: Climate Investment Funds 16 Box 4: Helping Manage Climate Risks through Insurance and Reinsurance Markets 18 Box 5: Supporting Climate Action by the Private Sector: IFC and MIGA 19 Box 6: Accelerating Clean Technology and Energy Access in Africa 20 © 2008 The World Bank Group 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved. This volume is a product of the World Bank Group. The World Bank Group does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGH TS AND P ERMISSIONS The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank Group encourages dissemination of its work and will normally grant permission to repro- duce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet: www.copyright.com. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 1 FROM THE ANNUAL MEETINGS 2008 DEVELOPMENT COMMITTEE COMMUNIQUÉ ...We discussed and welcomed the strategic framework for the World Bank Group on Development and Climate Change. The framework benefited from extensive consultations with member countries and other stakeholders. It provides a basis for the WBG to fulfill its core mission of promoting economic growth and poverty reduction, at the global, regional and country levels, in the context of the chal- lenges posed by climate change. While re-emphasizing the primacy of the UNFCCC negotiation process, and taking account of the Bali Action Plan, we encouraged the WBG to support climate actions in country-led development processes in a holistic manner, and to customize support to climate change adaptation and mitigation efforts, as well as capacity building needs, in its member countries. Recognizing the enormous financial gap for addressing climate change, we encouraged the WBG to strengthen its resource mobilization efforts, including facilitating access to addition- al concessional financing, ensuring complementarity with other financing mecha- nisms (notably the Global Environment Facility and the Adaptation Fund), supporting the development of market-based financing mechanisms, leveraging pri- vate sector resources, and seizing opportunities for innovation. We encouraged the WBG to play an active role in supporting the development and deployment of clean and climate-resilient technologies, and facilitating relevant R&D and technology transfer. In this context we welcomed the recent successful launch of the Climate Investment Funds (CIF), including the Clean Technology Fund and the Strategic Climate Fund, as a positive first step, and called on the WBG to give increased attention to mobilizing resources for adaptation... --Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee), Washington, DC, October 12, 2008 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 2 EXECUTIVE SUMMARY This Framework is prepared at the request of the Development Committee during the Annual Meetings 2007. Upon reviewing the World Bank Group's com- parative advantages and boundaries in addressing the development challenges of global climate change, it articulates objectives, principles, areas of focus, and major initiatives to guide the World Bank Group's operational response. This Strategic Framework serves to guide and sup- port the operational response of the World Bank Group (WBG) to new development challenges posed by global climate change. Unabated, climate change threatens to reverse hard-earned develop- ment gains. The poorest countries and communities will suffer the earliest and the most. Yet they depend on actions by other nations. While climate change is an added cost and risk to development, a well-designed and implemented global climate poli- cy can also open new economic opportunities to developing countries. The WBG recognizes the very complex political process toward long-term cooperative action within the UN Framework Convention on Climate Change (UNFCCC). Climate change demands unprecedented global cooperation involving a con- certed action by countries at different development stages supported by "measurable, reportable and verifiable" transfer of finance and technology from developed to developing countries. Trust of devel- oping countries in equity and fairness of a global climate policy and neutrality of the supporting institutions is critical for such cooperation to suc- ceed. Difficulties with mobilizing resources for achieving the Millennium Development Goals and with agreeing on global trade exemplify the political challenges in reaching global deals. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 3 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 3 The Framework will help the WBG maintain the operations are in developing countries, a solution effectiveness of its core mission of supporting must be global, with the leadership role played by growth and overcoming poverty while recognizing developed countries. Recognizing the primacy of added costs and risks of climate change and an the UNFCCC and its principle of common but evolving global climate policy. The WBG top priori- differentiated responsibilities, the WBG will work ty will be to build collaborative relations with devel- in partnership with the many international, region- oping country partners and provide them customized al, national, and local actors to increase its leverage demand-driven support through its various instru- and impact. ments--from financing to technical assistance to policy dialogue. It will give considerable attention to Within the Framework, the IFC, MIGA, IDA, strengthening resilience of economies and communi- IBRD, and other entities of the Group will support ties to increasing climate risks and adaptation. specific needs and priorities of their diverse clients. Six action areas--each providing tools for support- The Framework also explores what the WBG can ing both adaptation and actions with mitigation co- do to facilitate global progress. While the WBG's benefits--will allow the WBG's entities to build on 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 4 4 D E V E L O P M E N T A N D C L I M A T E C H A N G E BOX 1 MAJOR INITIATIVES Under the new Strategic Framework, the World Bank Group, in partnership with others, will: I Help some of the most vulnerable countries increase resilience to climate risks, with new adaptation financing. I Enhance development effectiveness of its operations by screening for: (i) climate risk in hydropower and major water investments with long life spans, and (ii) energy efficiency opportunities starting with energy projects. I Operationalize, execute, and share lessons from the Climate Investment Funds, Carbon Partnership Facility, and Forest Carbon Partnership Facility, and work with partners to improve monitoring of climate- related finance and its "additionality". I Support carbon market development through invest- ments in longer-term assets and currently by-passed reduction potentials, financial and quality enhance- ments of carbon assets, methodology development, and sharing lessons of experience. I Facilitate customized applications of climate risk insurance products. I Promote packaging of its development finance instru- ments with instruments provided by Carbon Finance, the Global Environment Facility, and the Climate Investment Funds. I Pilot new initiatives to support development and dis- semination of new energy technologies. I Facilitate global dialogue by launching the World Development Report on climate change. I Enhance the knowledge and capacity of clients and staff to analyze and manage development-climate linkages at the global, regional, country, sector, and project levels. The WBG will increase financing for energy efficiency and new renewable energy by an average 30 percent a year, from a baseline of US$600 million in average annual commitments during FY05-07, and expand lending to hydropower, with the share of low-carbon projects rising from 40 percent in fiscal years 2006­08 to 50 percent in fiscal year 2011. It will scale-up support to sustainable forest management, including reduced deforestation and forest degradation, afforestation and reforestation. It also foresees an increased demand for investing in sustainable agriculture and food production, transport and urban development programs. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 5 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 5 their relative strengths, increase their synergies, and The operational focus will be on improving partner with external players, basing the division of knowledge and capacity, including learning by labor on the comparative advantages and mandates: doing. The Framework will guide the operational programs of WBG entities to support actions 1. Support climate actions in country-led develop- whose benefits to developing countries are robust ment processes; under significant uncertainties about future cli- 2. Mobilize additional concessional and innovative mate policies and impacts--actions that have finance; "no regrets." 3. Facilitate the development of market-based financing mechanisms; The Framework outlines the key measures for 4. Leverage private sector resources; tracking progress over fiscal years 2009­11 (Box 1). 5. Support accelerated development and deploy- Over this period, the WBG will be flexible to ment of new technologies; and incorporate new developments in negotiations and 6. Step up policy research, knowledge, and capacity knowledge. An interim progress report will be pre- building. pared in the second half of fiscal year 2010. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 6 D E V E L O P M E N T A N D C L I M A T E C H A N G E DEVELOPMENT AND CLIMATE CHANGE A STRATEGIC FRAMEWORK FOR THE WORLD BANK GROUP I Responds to the request of the Development Challenge during the Annual Meetings 2007 to prepare a comprehensive strategic framework for the World Bank Group engagement on climate change while retaining focus on reducing poverty. I Reviews the World Bank Group comparative advantages and boundaries in addressing the development challenges of climate change while recognizing uncertainties about the future global climate policy. I Articulates objectives, guiding principles, areas of focus, and major initiatives to guide the operational response for the next three years.1 THE DEVELOPMENT CHALLENGE Global efforts to overcome poverty and advance development can no longer ignore an urgent need of addressing global climate change. The climate system's warming is unequivocal, very likely caused by anthropogenic greenhouse gas (GHG) emissions, mainly carbon dioxide (CO2) from burning fossil fuels and changing land use. The poorest countries and communities will suffer 1 The detailed technical paper on which this document is based is available as a separate publication and can be accessed at www.worldbank.org/climatechange 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 7 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 7 the earliest and the most. Climate change has the potential to reverse the hard-earned development FIGURE 1 THE CASE FOR gains of the past decades and the progress toward LONG-TERM COOPERATION achieving the Millennium Development Goals Projected Growth of GDP and CO2 Emissions Relative (MDGs). It can cause mass migration and con- to 1990 OECD=1 tribute to conflict. An effective response to climate 5 non-OECD change must combine mitigation of global GHG GDP, PPP 4 emissions--to avoid the unmanageable--and adap- tation at regional, national, and local levels--to OECD 3 GDP, PPP manage the unavoidable. 2 non-OECD The development challenge is to accelerate or CO2 emissions OECD maintain robust economic growth in poorer coun- 1 CO2 emissions tries despite the asymmetric impacts of climate 0 change. In addition to a higher burden of adapta- 1990 2000 2010 2020 2030 tion, these countries may also need to moderate their emissions trajectories within the constraints of Projected CO2-Intensity of GDP, 2030 much lower incomes and capacities than the now- 0.4 PPP industrialized nations (Figure 1 and Annex 1). The US$, OECD non-OECD per developed nations have contributed most to the 2 O Ck 0 stock of the emissions and will retain higher energy 0 50 100 GDP, PPP (trillion US$) use per capita for many years ahead. Guided by the principle of common but differentiated responsibili- 15 Projected emissions per capita, 2030 ties and respective capabilities, the United Nations OECD capita Framework Convention on Climate Change per 2 O (UNFCCC) and the Bali Action Plan, agreed by its Ct non-OECD 0 0 1 7 13th Conference of Parties in December 2007, Population (billion) require a cooperative arrangement to help develop- Source: Energy Information Administration, US Department of ing countries undertake "nationally appropriate mit- Energy, 2007. igation actions in the context of sustainable Note: Under future projections consistent across several development" without compromising growth, by sources, non-OECD emissions are expected to grow more transferring finance and technology from developed slowly than in OECD countries compared to the respective economic growth rates but faster in absolute terms. Bringing countries in a "measurable, reportable and verifi- global emissions to the levels recommended by the able" manner.2 Assistance is further needed to help Intergovernmental Panel on Climate Change cannot be developing countries adapt to a changing climate. achieved by reducing emissions from developed countries Access by developing countries to reliable energy alone. Yet GDP and energy use per capita, two MDG indi- cators, as well as emissions per capita, will remain lower in supplies and technologies is fundamental for eco- most of the developing countries than in the industrial coun- nomic growth and progress toward the MDGs. tries over the next decades. While these indicators will vary significantly across developing countries and between low- and middle-income groups, most of these countries will have lower incomes and capacities than the now-industrialized nations by and after 2030. A long-term cooperative action is 2 The Bali Action Plan, UNFCCC COP13/Decision 1. needed that would help slow the growth of emissions with- out hindering economic and human development progress in developing countries. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 8 8 D E V E L O P M E N T A N D C L I M A T E C H A N G E Climate change calls for strengthening the finan- The developing world looks to leadership from the cial architecture for development at a scale not developed countries to reconcile development and seen before. Mitigating and adapting to climate climate action. Developed countries can demon- change increases the cost of development. The strate leadership by meeting their current obliga- required economic adjustments to global climate tions under the Kyoto protocol; by setting an policies, including actions by other countries, may example for all countries to transform economic increase prices for energy, food, and other com- processes, behaviors, and lifestyles; and by providing modities, and change trade balances. Adaptation adequate assistance to those whose efforts to move will require more resilient infrastructure, broader up the development ladder are made more difficult disaster relief and preparedness measures, and new and costlier because of climate change. Reflecting a agricultural technologies and practices to counter growing consensus on the urgency of bolder climate increased climate risks. This may cause diversion action, several countries--developed and develop- of resources from other development programs ing--have recently taken important steps, including unless additional funding is made available. In adoption of national climate change strategies or some cases, the adoption of less GHG-intensive actions plans by a number of developing countries. technologies may need to be accelerated despite The political will to build on the momentum creat- the higher commercial costs and risks. The ed by these initiatives is critical. emerging and yet incomplete cost estimates of additional investments needed in developing countries--by public and private sources--are on THE ROLE OF THE WORLD the order of hundreds of billions of dollars a year BANK GROUP for several decades (Annex 2). Importantly, these resources are needed in addition to the present levels of official development assistance (ODA), The World Bank Group (WBG) is a multilateral so as not to compete with achieving the MDGs. institution with the core mandate of supporting growth and overcoming poverty in developing THE POLITICAL CHALLENGE countries. As one of the many players in a complex international arena of climate action, it adheres to Climate change requires unprecedented global coop- the principles, policies, and directions of the eration. The design of the global climate policy and UNFCCC process, the primary international insti- finance architecture is the main focus area of the tution to address global climate change. The ongoing international negotiations toward long-term WBG's mandate and operational focus on develop- cooperative action by all countries. Trust of develop- ing countries set both the directions and potential ing countries in equity and fairness of a global climate boundaries for its role on global issues. policy and in neutrality of the supporting institutions is fundamental for such cooperation. Difficulties with The WBG sees its comparative advantage as helping mobilizing resources for achieving the MDGs, developing-country partners to grow their notwithstanding the strong global consensus behind economies and achieve the MDGs under climate these goals, and with agreeing on global trade under- constraints. The adaptation dimension of the climate score the concerns of developing countries and the change agenda, in particular, is directly linked to the complexity of the international political process. WBG's mission of fighting poverty and will grow in 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 9 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 9 importance. The WBG has accumulated substantial growth, with a particular emphasis on access to ener- experience in working with developing countries on gy in Sub-Saharan Africa; supporting country-led reconciling development and climate. Consider its mitigation-related actions; and adapting to the effects partnership with the Global Environment Facility of climate change, which helped position adaptation (GEF), its robust business in carbon finance (CF), its as a major element of the climate change agenda for large lending portfolio in renewable energy and ener- developing countries both within and outside the gy efficiency, and its long-standing engagement with WBG. The CEIF has significantly strengthened col- energy and water sector reforms. Extensive global laboration among the multilateral development banks consultations indicate strong support for greater (MDBs) in the area of climate change. WBG engagement in climate change--with a devel- opment lens and with a major emphasis on risk man- WORKING WITH PARTNERS agement and adaptation.3 The WBG will attach top priority to building col- Yet efforts to protect development from climate laborative relations with developing-country part- change must be global. As a global player, the WBG ners. It will deepen its engagement with sees its role in helping to steer the global economic developing-country stakeholders through cus- transformation required by climate constraints in a tomized and demand-driven support to their manner that enhances growth and development out- national programs and priorities that help manage comes in developing countries. The WBG's experi- climate risks and contribute to global climate ence with global issues such as agriculture trade and action. It will focus on the inequality and develop- HIV/AIDS shows that it can make an impact ment implications of climate change rather than through research, policy and technical advice, facilita- global environment outcomes, which is the primary tion, constructive advocacy by representing the needs responsibility of other international institutions. of developing countries to developed countries, and building effective partnerships.4 The WBG has influ- The WBG will strengthen strategic partnerships enced the establishment of the GEF and, through with key actors to effectively support its develop- prototyping and demonstration, the development of a ing-country partners and have a global impact. It global carbon market. Recently, it has begun offset- will base the division of labor on the advantages ting GHG emissions from its own offices and travel. and mandates of the respective institutions and promote coordination among the aid agencies to The Clean Energy Investment Framework (CEIF), reduce fragmentation. The WBG will: formulated in 2005, established the foundation for moving toward a more comprehensive WBG I Advance collaboration with other MDBs engagement. Within three years, the WBG signifi- through the Climate Investment Funds (CIF) cantly expanded its activities and achieved good and coordinated approaches to analytical work results in all three focus areas: providing energy for and monitoring processes. 3 The face-to-face consultations, including videoconferences, reached over 1,800 participants from 76 countries. In addition, the Concept and Issues Paper and, subsequently, a full draft paper were posted on a WBG external website for virtual feedback. Moving into the implementation phase, the WBG will develop and implement a knowledge sharing and communication platform to provide for continuing exchange. See detailed information at: www.worldbank.org/climateconsult. 4 See Global Public Goods: A Framework for the Role of the World Bank (Washington, DC: World Bank), September 2007. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 10 10 D E V E L O P M E N T A N D C L I M A T E C H A N G E I Continue its strategic partnership with the GUIDING PRINCIPLES FOR GEF, focusing on a wider use of programmatic BANK GROUP ACTIONS approaches and greater leveraging. The objective of this Strategic Framework is two- I Participate actively in the UN system-wide fold. Its first objective is to enable the WBG to effort to provide a coordinated response to cli- effectively support sustainable development and mate change--and strengthen collaborative poverty reduction at the national, regional, and local arrangements with UNDP, UNEP, and the levels, as additional climate risks and climate-related UNFCCC Secretariat. economic opportunities arise. Its second objective is I Engage further with bilateral donors and the to use the WBG's potential to facilitate global action OECD on supporting analytical work, technical and interactions by all countries. While an impor- assistance, and learning-by-doing programs tant test of the WBG's ambition to play a larger role while emphasizing the continuing priority of in the provision of global public goods, as one of its core development finance. six strategic themes, the Framework is also support- ive of, and has strong links to, the other strategic I Scale up its work with civil society at the inter- themes, particularly those for poverty, knowledge, national, national, and community levels, rang- and middle-income countries. ing from fact-based advocacy on behalf of developing countries to supporting specific local The focus is on development outcomes. Building solutions that take account of the needs of vul- on the WBG's core mandate and competencies, the nerable groups and indigenous communities. Framework will help the IDA, IBRD, IFC, and I Expand collaboration with the private sector, MIGA increase the effectiveness and benefits of including new partnerships in financial markets their support to developing countries as develop- and technology. ment and poverty reduction efforts become con- strained and threatened by the added costs and risks I Enhance cooperation and outreach with inter- of climate change. Adaptation to climate variability national, regional, and national research institu- and change will be at the center of WBG support tions, with particular attention to research to developing countries, because it is critical to sus- communities in developing countries. taining and furthering development gains. It is important to stress that resources will not be divert- Communication and outreach. As part of its ed from financing core development needs. The greater engagement with multiple stakeholders in WBG attaches the utmost importance to increasing both developing and developed countries, including IDA resources--and has demonstrated its commit- various civil society groups, private sector, financial ment by providing its own funds--and to mobiliz- institutions, governments and academia, on devel- ing and helping developing countries access opment and climate, the WBG will strengthen its additional finance. communication and knowledge-sharing efforts. Its outreach will focus on representing the impacts of The Framework reinforces a country-based, country- climate change on developing countries and the led approach that is driven by client demand. importance of strong global action led by the devel- Access to energy will remain a top priority for the oped countries. WBG, to be addressed through the Sustainable 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 11 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 11 Infrastructure Action Plan, the Africa Action Plan, ing framework to handle multiple trade-offs and and the forthcoming Energy Sector Strategy. The major uncertainties over the very long term. WBG will focus on helping its clients acquire addi- Practical experience with reconciling development tional financial resources, technology, technical and climate is still very limited and skewed towards assistance, and knowledge for adaptation and miti- mitigation, mainly in energy. So, operational priori- gation--and use them well in their national, region- ties focus on intensive and structured learning, al, and local development programs with mitigation through developing knowledge, capacity, and new and/or adaptation co-benefits. Lessons of WBG business products, including learning by doing. The experience further point out that client demand WBG will be flexible to incorporate new develop- arises from the business opportunities of energy ments and lessons as international negotiations, sci- efficiency and renewable energy investments; the entific knowledge, development policy research, and multiple benefits from sustainable forest and land experience on the ground evolve. management; and the synergies between disaster risk reduction and climate risk management. Support will be customized to meet the diverse needs of WBG public and private sector clients. The Framework will inform and support--not The needs and priorities with respect to climate override--the operational strategies of WBG enti- action vary significantly across different countries ties. This Framework provides broad principles and and clients, depending on a wide range of economic, directions for the different entities of the WBG-- social, and environmental factors, including coun- including IFC, MIGA, and World Bank opera- tries' renewable and non-renewable natural tional divisions--to selectively enhance their resources. The WBG will improve its knowledge assistance strategies and operational programs to and capacity to help clients with managing climate help WBG clients--public and private--under- risks and taking advantage of climate-related eco- stand, analyze, manage, and adapt to climate nomic opportunities in various sectors and thematic change. It does not attempt to impose climate- areas where such risks and opportunities exist. These related priorities or conditions. Instead, it enables cover energy, transport, industry, urban develop- addressing climate risks and supporting climate ment, water, agriculture, forestry, biodiversity, eco- actions, by providing tools, incentives, financial nomic management, and social and human products, and measures to track progress. It also development. Climate considerations can also play a seeks to promote greater synergies among the role in cross-sectoral programs, such as integrated WBG entities to increase the effectiveness of their approaches to water and energy development or development assistance. coastal zone management. For the next three years, the Framework empha- The Framework further seeks to position the sizes learning and capacity building, and remains WBG to play a global role, as a knowledge flexible to incorporate new knowledge. The global provider, a facilitator of North-South and South- policy and financial architecture has yet to be nego- South cooperation, a partner of global institutions, tiated by the parties to the UNFCCC. Scientific and an advocate of an efficient and just global cli- and economic knowledge about climate-develop- mate policy implemented through neutral and well- ment links is rapidly evolving, particularly at governed processes and institutions. It has initiated national and local levels. There is no decision-mak- and will continue facilitating an informal dialogue 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 12 12 D E V E L O P M E N T A N D C L I M A T E C H A N G E among finance and development ministers from 1. Support climate actions in country-led both developed and developing countries during the development processes; Joint World Bank and International Monetary 2. Mobilize additional concessional and innovative Fund Annual and Spring Meetings. Building on its finance; development experience in multiple contexts, the 3. Facilitate the development of market-based WBG will help understand and articulate the spe- financing mechanisms; cific development needs, constraints, and opportu- 4. Leverage private sector resources; nities of different groups of countries, including 5. Support accelerated development and deploy- those whose economies have been geared toward ment of new technologies; and meeting global energy needs. 6. Step up policy research, knowledge, and capacity building. The WBG is neutral to any party's negotiating position and will make a conscious effort not to ACTION AREA 1: SUPPORT prejudge the outcomes of ongoing negotiations. In CLIMATE ACTIONS IN supporting the UNFCCC process, the Strategic COUNTRY-LED DEVELOPMENT Framework sees the WBG's role as threefold. The PROCESSES first is improving local, national, regional, and global knowledge. The second is sharing lessons of The WBG will support actions whose benefits to experience with implementing the financial mecha- developing countries are robust notwithstanding nisms under the UNFCCC and other relevant uncertainties about future climate change policies activities, including innovative approaches and and impacts. This includes financial and technical business models. The third, in partnership with assistance to managing climate risks, especially other UN agencies, is building capacity of develop- focusing on those countries that are lacking capaci- ing countries to manage the development-climate ties and infrastructure to deal with present climate linkages, understand the implications of alternative variability, as can be witnessed by their vulnerability climate policies, and participate effectively in the to floods, droughts, and hurricanes. Another exam- UNFCCC negotiations. ple of "no regret" actions that would yield develop- SIX AREAS FOR ACTION ment benefits under any future scenario of climate policies and climate risks is support to investments that respond to expanding market and business The WBG's operational response to climate change opportunities for energy efficiency and already draws on the strengths of its different entities. In competitive forms of renewable energy. Other implementing this Framework, the WBG will make examples include critical "learning by doing," with a dedicated effort to grow resources and capacity for the help of additional financing to cover the incre- supporting resilience to climate risks and adaptation mental cost, such as building capacity to take efforts and work towards closing the gap in the vast- account of future climate risks in development ly different levels of knowledge, experience and planning, or supporting reduced emissions from financial resources currently available for adaptation deforestation and forest degradation, or facilitating and mitigation. Each of the six action areas provides the adoption of an advanced technology, such as for tools for addressing both adaptation and mitigation, clean and affordable energy supply or increased corresponding to key items in the Bali Action Plan: 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 13 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 13 water use efficiency, in a different country context. water and agriculture projects. It will help some of Importantly, the scale of WBG support to priority the most vulnerable countries integrate climate risk actions outlined below will depend on its ability to management in development processes, on demand generate demand by providing additional financing, and with new financing. Major areas of focus will facilitating transfer of technology, and building include support to increasing resilience in agriculture knowledge and capacity. and its linkages with food security, water resource management including support to country-driven Priority attention will be given to strengthening the trans-boundary programs, and to coastal areas. On- resilience of communities and economies to climate going analytic work to improve understanding of the risks. The WBG will establish stronger operational nature and costs of adaptation processes will aid links between climate adaptation and disaster risk developing countries, the international community reduction, when appropriate. It will screen climate- and the WBG to better determine the incremental sensitive investments with long life spans for climate costs of adaptation measures and use this knowledge risks, starting with hydropower projects and selected for raising additional finance. BOX 2 SUPPORTING FORESTS, LIVELIHOODS AND CLIMATE ACTION THROUGH REDD The world loses about 13 million hectares of forests each year, much of it in tropical developing nations. Destruction of these forests, along with other land use activities, result in an estimated 20 percent of the annual global greenhouse gas emissions. The Forest Carbon Partnership Facility (FCPF) led by the World Bank aims at developing capacity for countries to participate in a system of positive incentives for Reduced Emissions from Deforestation and Degradation (REDD) and at piloting carbon payments for REDD in several countries. By credibly measuring, monitoring, and valuing forest carbon stocks of standing tropical forests, REDD may mobilize substantial funding for the forest sector. It is estimated that a 50 percent reduction in tropical deforestation (equivalent to avoiding the emission of 2.4 Gt CO2 per year) implies REDD financing requirements of up to US$15 billion a year. The FCPF will promote "readiness" activities in around 20 coun- tries, many of which in Africa. The Congo Basin countries could benefit substantially from REDD, but a strong effort of capacity development will be necessary. The FCPF is already working with some of these countries to strengthen their institutional capacity. In addition to the FCPF, the BioCarbon Fund (BioCF) is piloting three innovative projects with payment schemes for REDD in Colombia, Honduras and Madagascar. In Madagascar, a project in partnership with the national government and Conservation International is addressing deforestation through the promotion of sustainable livelihood activities in a new protected area. It is expected that this project would avoid the emission of 8 million tCO2 into the atmosphere. The BioCF also has a portfolio of over 20 projects, seven of which are in Africa, promoting afforestation and reforestation according to the Clean Development Mechanisms methodologies. Source: The WBG. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 14 14 D E V E L O P M E N T A N D C L I M A T E C H A N G E The WBG will help capture the full range of social, energy efficiency, the WBG will expand project economic, and environmental benefits, from local to screening for energy efficiency opportunities, already global, of country-led sustainable development pro- initiated by IFC, to include WB projects, starting grams. Recognizing the critical role of forests for with select energy sector projects in fiscal year 2009. sustainable development, rural livelihoods and cli- It will support country-led investment programs with mate action and in line with its Forest Strategy, the significant development and climate impacts with WBG will support forest management holistically, financing from new facilities, such as the Carbon including afforestation, reforestation, and restoration Partnership Facility and the Clean Technology Fund. of degraded forest, and sustainable use of bioenergy. The WBG also expects growing demand--due to It will give further attention to the enabling envi- innovative application and packaging of its existing ronment, including institutional and governance instruments with several climate finance instru- aspects, and financial resources for necessary invest- ments--for less GHG-intensive projects in energy, ments. Within this broader context, it will scale up transport, and urban sectors embedded in the coun- support to Reduced Emissions from Deforestation try strategies; for example, to create more energy effi- and Degradation (REDD), while improving the cient and cleaner transport networks. livelihoods of forest-dependent local and indigenous communities (see Box 2). It will also support activi- Building on progress with the CEIF and client ties that protect and utilize benefits provided by demand, the WBG estimates an increase in financ- ecosystems and biodiversity when applicable, such as ing for energy efficiency and new renewable energy coastal protection through mangrove and wetlands by 30 percent a year during fiscal years 2009­11.5 regeneration. The WBG will pilot a "sustainable This 50 percent faster growth than in the previous cities" program to support urban development five years, together with an expanded support to investments that improve municipal services and hydropower, will increase the share, by value, of finance while providing mitigation and/or adapta- low-carbon energy projects from 40 percent in fiscal tion co-benefits such as energy efficient well-insu- years 2006­08 to 50 percent in fiscal year 2011.6 It lated buildings, better landfills and sewerage, cleaner should be stressed that energy efficiency and renew- air, and convenient transport systems. able energy require different business models, oper- ational approaches and instruments. The WBG will The WBG will support its public and private clients take account of the distinct features of these two to take advantage of expanding low carbon growth important business lines in its operational planning opportunities. These opportunities can arise from and reporting. Further attention will be given to the synergies with national or local benefits (such as benefits stemming from the incentives for energy energy efficiency or reduced traffic congestion) and conservation and energy efficiency by consumers from the availability of additional climate financing. and suppliers. The rationalization of energy prices, Recognizing several benefits and cost-effectiveness of including reduction of subsidies, in combination 5 An increase of 30 percent is an annual average for FY08-12 compared to a baseline of US$600 million in average annual commitments in FY05-07. New renewable energy comprises energy from solar, wind, biomass, and geothermal energy, as well as hydropower facilities with capacities up to 10 MW per facility. 6 Low-carbon projects: renewable energy projects (including all sizes of hydropower projects), energy efficiency, power plant rehabilitation; district heating; biomass waste-fueled energy; gas-flaring reduction; high-efficiency coal-fired thermal plants (super-critical and ultra-supercritical, where they upgrade plant efficiency relative to the business-as-usual scenario). 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 15 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 15 with improving social safety nets for the poor and as part of a broader sector reform process in a par- ticular country context, will continue to be empha- sized in the Bank's country dialogue and operations due to its fiscal, economic, and environmental bene- fits. The upcoming Energy Sector Strategy (fiscal year 2010) will articulate the WBG's approach, includ- ing its role in supporting economic analysis and regulatory frameworks, to different renewable and non-renewable energy resources. International Energy Agency (IEA) projections point to the con- tinuing role of coal, oil, gas, and nuclear power in the future energy mix. Reflecting the importance of coal for electricity generation in many developing countries, the WBG could support client countries in developing new coal power projects based on the most appropriate technology and the analysis of alternatives.7 It will also work with donors to secure grant financing to identify and introduce emerging technologies, including new renewable technologies and carbon capture and storage for oil and coal order to provide predictable financing flows. The applications in interested client countries. additional resources needed to tackle climate change are unprecedented. Current climate-related financial flows to developing countries--including the GEF, ACTION AREA 2: MOBILIZE Clean Development Mechanism (CDM), and other ADDITIONAL CONCESSIONAL AND sources--cover only a tiny fraction of the estimated INNOVATIVE FINANCE amounts that developing countries would need over several decades (Annex 2). While a major share of The Strategic Framework stresses the need for ade- investment is expected to come from the private sec- quate global policies with clear rules and signals, in tor, additional needs for public sector investments 7 Through its traditional financing instruments, the WBG could support client countries to develop new coal power projects, by considering the following: (i) there is a demonstrated developmental impact of the project including improving overall energy security, reducing power shortage or access for the poor; (ii) assistance is being provided to identify and prepare low carbon projects; (iii) optimization of energy sources by considering the possibility of meeting the country's needs through energy effi- ciency (both supply and demand) and conservation; (iv) after full consideration of viable alternatives to the least-cost (including environmental externalities) options and when the additional financing from donors for their incremental cost is not available; (v) coal projects will be designed to use the best appropriate available technology to allow for high efficiency and therefore lower GHG emissions intensity; and (vi) an approach to incorporate environmental externalities in project analysis will be developed. The Clean Technology Fund could support the improved efficiency of new energy supply based on coal use if the proposed technology meets both of the following two criteria: (a) there are highly cost effective opportunities for significant GHG emissions reductions and (b) there is potential for developing readiness for carbon capture and storage. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 16 16 D E V E L O P M E N T A N D C L I M A T E C H A N G E appear comparable with and may exceed the entire instruments, in collaboration with other MDBs, the current ODA flows. Until an adequate global policy GEF, and other partners. This will provide practical and financial architecture is negotiated under the lessons and capacity for developing-country clients UNFCCC, it will be impossible to fully cover the and international financial institutions. financing gap. Slow progress with agreeing on and creating such architecture would delay undertaking Specifically, the WBG, including IDA, IBRD, of the needed climate actions in developing coun- IFC, and MIGA, will: tries. The extent of implementing this Framework is also dependent on the availability of additional I Operationalize, implement, and learn lessons resources, both for adaptation and mitigation efforts. from the CIF, which--with over US$6 billion in pledges--will provide new financing for both Recognizing the critical importance of additional mitigation and adaptation (see Box 3). financing for developing countries, the WBG respects the primacy of the ongoing negotiations. I Support strong performance and replenishment In the interim, it sees one of its key strengths in of IDA to ensure that new climate finance is supporting the development of the global financial additional to the core development finance for architecture by learning from implementation expe- meeting the MDGs. At the same time, a strong rience with a growing menu of climate financing IDA can also become a platform to leverage new BOX 3 AN OPPORTUNITY TO SCALE UP LEARNING AND IMPACT: CLIMATE INVESTMENT FUNDS Approved by the WBG's Board in July 2008, the CIF, comprised of the Clean Technology Fund and the Strategic Climate Fund, is an interim instrument, with specific sunset clauses. The Clean Technology Fund would scale up financing to contribute to demonstration, deployment, and transfer of low-carbon technologies with a significant potential for long-term greenhouse gas emissions sav- ings. It would provide grant elements tailored to cover identifiable additional costs necessary to make proj- ects viable. It would use a range of concessional financing instruments, such as grants and concessional loans, as well as risk mitigation instruments, such as guarantees and equity. The Strategic Climate Fund would provide financing to pilot new development approaches or to scale up activities aimed at a specific climate change challenge or sectoral response through targeted programs. The first program--the Pilot Program for Climate Resilience--would pilot national level actions for climate resilience in several highly vulnerable countries. The Forest Investment Program to support the investments needed to reduce deforestation and forest degradation and promote sustainable forest management is under design. An important objective is to maximize co-benefits of sustainable development, particularly in relation to the conservation of biodiversity, natural resources ecosystem services, and ecological processes. Another program under consideration would support energy efficient and renewable energy technologies to increase energy access in low income countries. Source: The WBG. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 17 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 17 climate financing, such as from the Adaptation of the global financial architecture for climate Fund, the Pilot Program for Climate Resilience action. The WBG is analyzing alternative global cli- (PPCR) under the CIF, and other additional mate policy and finance options focusing on distrib- funding, for strengthening resilience of the utional implications. It is working with several development processes to climate risks. developing countries on assessing the incremental costs of development programs that have greater I Better leverage its entire menu of instruments adaptation or mitigation benefits, as part of the eco- for development projects with mitigation and nomics of adaptation research program and low-car- adaptation co-benefits, including an innovative bon-growth country studies. In addition to use and packaging. Packaging of several instru- estimating ex ante the difference between climate- ments to enhance the effectiveness and com- friendly and least-cost project designs for the pur- petiveness of the WBG's financial products will pose of identifying the concessional finance element build on recent experiences with using a combi- in WBG-supported projects when applicable, the nation of complementary funding sources, such WBG will start to systematically collect, analyze, as IBRD, IFC, GEF, and carbon finance funds and report data on these incremental costs to (also see action areas 3 and 4). improve its information base and facilitate learning. Special emphasis will be given to helping mobilize The WBG will address the need for better monitor- additional resources for adaptation. The WBG rec- ing of climate-related finance by working with the ognizes that experience gained in mitigation and UNFCCC Secretariat, the UNDP, the UN mitigation finance, such as through GEF and Statistical Division, and the Development Assistance Carbon Finance, needs to be matched by a stepped- Committee (DAC) of the OECD on developing up response by global players to help developing consistent and comprehensive monitoring and sys- countries adapt to climate risks. The PPCR, in con- tematic reporting of financial flows to support devel- junction with IDA-supported programs, will be a oping countries' efforts in mitigation and adaptation, key tool for piloting and demonstrating climate- including the provision of new and additional financ- resilient development approaches in the context of ing for meeting the incremental costs imposed by cli- several most vulnerable countries. In parallel, assis- mate change. This work will build on and extend tance to other vulnerable countries will be provided, existing initiatives, such as the WBG's annual review per demand, with the help of traditional WBG of the carbon market and carbon revenue flows and instruments, including technical assistance and the recent inclusion by DAC of markers for mitiga- knowledge products, and bilateral funds, when tion-related funding in its reporting of bilateral aid. available. As the Adaptation Fund becomes opera- Particular attention will be given to clarifying the tional and grows, and an adequate global financing sources and flows of adaptation related financing. architecture for climate change develops, the WBG will be prepared to quickly scale up lessons and ACTION AREA 3: FACILITATE THE operations to support climate resilience in a larger DEVELOPMENT OF MARKET-BASED number of countries. FINANCING MECHANISMS The WBG will complement practical learning with Market mechanisms can mobilize significant analytical work that contributes to the development financing for development with environmental 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 18 18 D E V E L O P M E N T A N D C L I M A T E C H A N G E benefits. They have to be well designed, properly ket for long-term GHG reductions and offers a coordinated with domestic and international regula- platform for systematic collaboration of public and tory and policy decisions, and matched by adequate private sector partners from developed and develop- regulatory capacity of the public sector. They fur- ing countries. With the capacity to bring yet unex- ther require adequate private sector capacities and plored mitigation potentials to the market and institutions in both developed and developing operate in multiple marketplaces, the Bank will countries. Several barriers remain before climate- enhance the liquidity and scope of carbon trading. friendly markets can reach their potential in sup- The Forest Carbon Partnership Facility (FCPF) is porting both adaptation and GHG reductions. piloting systems for making success payments for Through its experience with market-based instru- reducing emissions from deforestation. The WBG ments, the WBG can offer practical lessons related will continue opening new carbon market opportu- to the performance and regulatory needs of some of nities through packaging carbon finance with Bank the financial instruments being considered by the operations, blending with other financing options UNFCCC negotiations. and enhancing carbon assets with value-adding fea- tures such as the IFC "Carbon Delivery Guarantee" or MIGA's noncommercial risk insurance. These The WBG is exploring and piloting avenues to risk management products increase the confidence deepen the reach of the carbon market. It is devel- of potential carbon asset buyers and potential oping new methodological approaches and funding investors in the underlying projects. vehicles to broaden and deepen the carbon market and its impact on long-term investment decisions The WBG will expand its work on climate risk and emission trajectories. The Carbon Partnership insurance and capital markets. It will customize a Facility (CPF) targets investment programs that series of new insurance and reinsurance products for have the potential to transform emission intensive catastrophic and climate-related risks to expand sectors in client countries. The CPF makes a mar- their reach (see Box 4). The World Bank Treasury BOX 4 HELPING MANAGE CLIMATE RISKS THROUGH INSURANCE AND REINSURANCE MARKETS The Index-based Livestock Insurance Program was established by Mongolia to protect herders against exces- sive livestock mortality. More than 550,000 animals are currently covered under this program. The Government of India, with technical assistance from the WBG, established a Weather-Based Crop Insurance Scheme, which currently protects more than 600,000 farmers against drought. Similar initiatives are under- way in Malawi, Thailand, and Ethiopia. The Bank's Catastrophe Risk Deferred Drawdown Option Facility pro- vides immediate liquidity during an emergency while other forms of assistance are being mobilized. The WBG is also investigating other financial services, including the intermediation of weather derivatives between the member countries and market counterparts. It is supporting the creation of the Global Index Reinsurance Facility, a multidonor trust fund linked with a specialized index-based reinsurance company, which will promote index-based insurance in developing markets. Source: The WBG. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 19 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 19 BOX 5 SUPPORTING CLIMATE ACTION BY THE PRIVATE SECTOR: IFC AND MIGA IFC's approach to climate change focuses on enhanced support for investments in renewable energy and energy efficiency, partnerships to address climate change mitigation and adaptation, and extending carbon finance activities. IFC will increase its investment support, with the aim for a catalytic role for facilitating the transfer of appropriate technologies and approaches to the private sector in developing countries. IFC's Cleaner Production program already actively analyzes opportunities for implementation of energy efficiency processes in IFC's pipeline and portfolio projects. With its flagship Carbon Delivery Guarantee product, IFC assures delivery of carbon credits from companies in developing countries to buyers in developed countries that can help clients maximize the potential for clean energy and other climate friendly and low carbon investments. The GEF/IFC Earth Fund with an initial funding of US$40 million, of which GEF provides US$30 million, will fund a portfolio of projects that contribute to climate-friendly market transformation. MIGA developed an innovative non-commercial insurance instrument to mitigate a series of risks to carbon finance project performance that was first applied for a landfill gas flaring project in San Salvador. It is increasing its support to clean and renewable energy. The current pipeline of applications is US$600 million, with about US$280 million expected to close in fiscal year 2009. MIGA plans to develop new products to address political and regulatory risks associated with climate change, and intensify awareness raising and capacity building. Source: The WBG. issued a carbon-linked "Cool Bond" in June 2008 tries, with a particular focus on increasing private and is exploring other innovative products to raise investment to Africa. It will give more attention to funds for climate friendly investments, both mitiga- improving the regulatory and investment environ- tion and adaptation, on capital markets. ment for renewable energy and energy efficiency. ACTION AREA 4: LEVERAGE With a leading role by the IFC and MIGA, the PRIVATE SECTOR RESOURCES WBG will innovatively apply or package its instru- ments to reduce barriers to private investments The private sector is the major investor in renew- with climate benefits. One example is using antici- able energy and energy efficiency worldwide and in pated carbon revenues streams from IFC- or developing countries. With adequate policies and IBRD-financed investments to reduce the borrow- incentives in place, it is expected to contribute the ing costs. A second is using IFC, MIGA, and larger share of mitigation-related financing and a IBRD guarantee instruments more effectively, significant share of adaptation financing. The including in combination with the CIF private win- WBG will continue its core support to improving dow. A third is addressing the needs of underserved the overall investment climate and the regulatory clients with significant potential for improved effi- capacity of the public sector in developing coun- ciency, such as municipalities and small and 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 20 20 D E V E L O P M E N T A N D C L I M A T E C H A N G E BOX 6 ACCELERATING CLEAN TECHNOLOGY AND ENERGY ACCESS IN AFRICA Less than five percent of the Rift Valley's geothermal resource potential is being used, primarily in Kenya. If developed, such potential would represent between one-quarter and three-quarters of current worldwide production from geothermal sources. The World Bank is preparing a GEF-funded African Rift Geothermal Development Facility project that will help bring down the necessary costs linked to the development of the technology. Compact fluorescent lamps (CFLs) can enable energy savings of up to 80 percent for residential customers. Bulk procurement and distribution of CFLs is the quickest way to assure load reduction and mitigate a power crisis at less than a tenth of supply costs. The WBG financed distribution of approximately 2,000,000 CFLs in Ethiopia, Rwanda, and Uganda, which can cut peak demand by 100 MW. In addition, Ghana distributed 6 million CFLs on its own as the short-term response to the power crisis last year, and South Africa distributed 7­8 million CFLs and plans to distribute 30 million more. Source: The WBG. medium enterprises, through sub-national applica- UNFCCC and the Bali Action Plan emphasize the tions of financial products. Both IFC and MIGA importance of effective mechanisms for scaling-up see support to climate-related business opportuni- the development and transfer of affordable and ties and technical assistance to managing climate environmentally sound technologies to developing risks as growth areas of their business (Box 5). countries, and accelerating their deployment and diffusion, including support to the development and enhancement of the developing countries' endoge- ACTION AREA 5: SUPPORT nous capacities and technologies. ACCELERATED DEVELOPMENT AND DEPLOYMENT OF NEW The WBG will play the following roles along the TECHNOLOGIES four stages of the technology cycle: I The IFC and WB will continue its support to New global partnerships to develop and deploy the deployment and dissemination of technologies next generation of technologies are essential for in the Commercial Stage through its policy advice reconciling growth imperatives in developing coun- and lending operations, with attention to the tries with climate constraints. Many existing com- needs and limitations of small and poorer coun- mercial technologies can be deployed more widely tries (Box 6). in developing countries with global and local bene- fits. But the scale of changes needed in the global I The WBG will encourage the early adopters of GHG emissions trajectory, and in agricultural pro- the technology and help grow the market for ductivity and water use, cannot be achieved with economically viable technologies in the Scale-Up technologies commercially available today. The Stage, building upon past initiatives of the GEF 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 21 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 21 and utilizing the resources made available ACTION AREA 6: STEP UP POLICY through the CTF and the recently established RESEARCH, KNOWLEDGE, AND GEF/IFC "Earth Fund." CAPACITY BUILDING I The IFC and WB support to the deployment For investments, markets, and technologies to of clean technologies in the Demonstration work, knowledge and capacity are crucial. The Stage will focus on creating the knowledge base WBG has already stepped up its analytical work to facilitate country-based decision making, across sectors, issues, and countries and at the drawing on lessons from early-stage demon- global level, with a significant focus on adaptation strations, with the help of the GEF, of several where knowledge gaps are particularly large. In technologies such as concentrated solar power, addition to capacity development through its ana- advanced biomass power generation, and sta- lytical and project work, the WBG has engaged tionary fuel cells. with UN partners to coordinate and scale up capacity building efforts in developing countries, I The WBG is exploring its appropriate role in taking lessons from existing initiatives such as its supporting technology Research and Carbon Finance-Assist program. To strengthen its Development, and particularly new technology internal capacity to provide necessary assistance, commercialization through accelerating move- the WBG developed and piloted in fiscal year 2008 ment from the R&D stage to the next stages of two new training programs--Climate Change for the technology cycle in developing countries. Development Professionals and the Sustainable Development Leadership Program--that will be The WBG is in the process of formulating several rolled out to cover a large number of staff in fiscal approaches for supporting clean technology devel- years 2009­11. opment and commercialization. The IFC and WB are cooperating on a corporate approach for sup- The WBG will expand its knowledge sharing, porting clean technologies. Through the GEF/IFC advice, and advocacy at the global level. It is "Earth Fund", IFC will explore the use of prize preparing a World Development Report on climate competitions for early clean technology innova- change, for release in calendar year 2009. It has tions. Drawing on a WB study of technology engaged and will work with other development development models in non-energy sectors, the partners, such as the UN Statistical Division and WBG is designing a program to help catalyze UNFCCC Secretariat, to improve and facilitate commercialization of clean energy technologies in systematic, consistent, and comprehensive moni- developing countries.8 The WBG will develop this toring and reporting on progress with global cli- proposal through further research and consultations mate action, including progress toward meeting with the private sector and developing country international climate agreements and financial partners by the end of calendar year 2008. With flows to developing countries in support of their respect to adaptation needs, it will support the adaptation and mitigation -related actions. This Consultative Group on International Agricultural work will build on its flagship annual global Research in fostering agriculture technology inno- reports with broad outreach, such as the World vation to ensure sustainable food production Development Indicators and the State and Trends of despite increasing climate risks. the Carbon Market. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 22 22 D E V E L O P M E N T A N D C L I M A T E C H A N G E The WBG will support strengthening technical climate risks and actions with fiscal and expenditure and policy expertise on development-climate link- policies, trade, competiveness, social safety nets, ages and decision-making capacity at the country governance, and decentralized decision-making. level. This includes the growth implications and the social, gender, and human development dimensions To improve the knowledge base, capacity, and of climate change, in both impacts and mitigation access to additional climate finance, the WBG is actions, to inform development policy and pro- developing methods to analyze climate risks and grams. The WBG will work with interested clients GHG emissions at the project level. Some of these on improving the understanding of how national tools, such as accounting for and valuing GHG policy responses to climate change can enhance emissions, are already used in GEF and carbon their development outcomes, including how to finance projects. Their application will extend, for make decisions that address trade-offs and manage learning and information purposes, to a larger pool uncertainties pertaining to both climate science and of projects. The Bank will select pilot projects on a economic costs, while dealing with the very long- demand basis, and will work in close cooperation term time horizon. In addition to traditional areas with clients and local institutions. The IFC will of policy advice that have climate implications, such progressively apply these tools to its projects to as energy and water pricing, the WBG will help inform the dialogue with its private sector clients interested countries to examine the links between on climate-related business opportunities and risks. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 23 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 23 This is an analytical exercise. It is neither a busi- CONCLUSION ness requirement, nor it will be used for decision- making about projects using traditional WBG Tackling climate change requires leadership, financing instruments. By the end of the piloting vision, capacity, and resources beyond the devel- period, a proposal will be prepared for Board con- opment experience to date. Yet the transformation sideration on the future applications of the tools to a more sustainable development path has for GHG analysis appropriate for Bank and IFC already started across the world. This transforma- business models, client needs, and available climate tion is driven largely by higher energy costs and financing instruments. growing concerns about adequate access to water, land, and mineral resources to support growth and MEASURING PROGRESS livelihoods. It is facilitated by an increasing value of a healthy and productive environment, and a The WBG has adopted a dual-track approach to stronger voice and participation of the civil socie- developing a results framework. A set of key ty. Many actions to address these immediate actions, deliverables, and indicators will be used to development pressures can also make growth less monitor the WBG's progress during fiscal years GHG-intensive and more climate-resilient. 2009­11 (Annex 3). A longer term process of Furthermore, a successful global climate policy developing a comprehensive results framework will can--and should--create new opportunities for extend, in a consultative manner, over the next two developing countries. years and will be flexible to accommodate new developments in the global climate negotiations and The World Bank Group is committed to work with knowledge. An interim progress report will be pre- its public and private sector clients to steer this pared in the second half of fiscal year 2010. It will global transformation in ways that are both efficient review and may update the key actions in the con- and fair, improve development outcomes, and con- text of new developments, if necessary. tribute to sustainable and inclusive globalization. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 24 D E V E L O P M E N T A N D C L I M A T E C H A N G E ANNEX 1 IMPACTS AND EMISSIONS KEY IMPACTS Water scarcity problems. Many of the drought-prone, semi-arid areas of the developing world are expected to become even drier. Low income countries are among the most vulnerable to water and other resource scarcities (Figure A1:1). In Africa, for exam- ple, by 2020, between 75 and 250 million people are projected to be exposed to increased water stress due to climate change. Regions facing potential long- term drying trends will likely need to reconfigure societal water use, particularly as related to agricul- ture, which accounts for approximately three-quar- ters of water withdrawals in developing countries. The developing countries are more vulnerable to the impacts of increased intense tropical storm activi- ty, storm surges, and hurricanes, which are heavily impacting many countries in Latin America and South-East Asia. Importantly, the population in some of the most exposed countries is clustered in low lying areas, which amplifies the economic and social impacts of even modest increases in storm intensity or sea-surge levels. Over time, sea-level rise presents an ultimate threat to small island states and low-lying densely populated coastal areas. Loss of the glacial meltwater sources for irrigated agri- culture and other uses in the Latin American Andes, Central Asian lowlands and parts of South Asia, and sea-level rise in cereal-producing river deltas of Asia and North Africa represent grave long-term climate risks, above and beyond tempera- ture rise and changes to the hydrologic cycle. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 25 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 25 FIGURE A1:1 WATER WITHDRAWAL IN RELATION TO WATER AVAILABILITY Water Stress Indicator Low < 0.3 0.3 ­0.4 0.4 ­0.5 0.5 ­0.6 0.6 ­0.7 0.7 ­0.8 0.8 ­0.9 High >= 1 0.9 ­1 No discharge Major River Basins Note: Water demand currently exceeds supply in regions that contain 40 percent of the world's population, and it is in some of these regions where both increased population growth and reduced runoff volumes from climate change are projected. Water scarcity index values >0.7 (yellow, orange and red areas) indicate over-appropriation relative to total availability of the resource. Source: Falkenmark and Rockstrom, 2006. Original map source: Smakthin et al., 2004. FIGURE A1:2 POTENTIAL IMPACT ON AGRICULTURE: PROJECTED PERCENTAGE CHANGE IN AGRICULTURAL PRODUCTIVITY BY 2080 n.a. < ­25 ­25 to ­15 ­15 to ­5 ­5 to 0 0 to 5 5 to 15 15 to 25 >25 Note: Scenario: SRES A2. Source: Cline 2007. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 26 26 D E V E L O P M E N T A N D C L I M A T E C H A N G E FIGURE A1:3 HISTORIC CUMULATIVE EMISSIONS Cumulative emissions, Billions tonnes CO2 Food security concerns. As little as a 1º C rise in tem- perature is estimated to result in a 5 to 10 percent 800 yield reduction of major cereal crops in low latitude regions. Rainfed agriculture, in particular, is highly 600 vulnerable to reduced rainfall and shifts in rainfall timing and distribution. Studies of semi-arid 400 economies in Africa and South Asia show that agri- culture GDP and farmers' incomes closely mirror 200 rainfall variations. Significant areas of semi-arid and dry sub-humid zones in Africa are projected to lose 5 to 20 percent of their growing season length by 2050. 1850 1875 1900 1925 1950 1975 2000 Similarly, productive rangelands in the Mediterranean basin could incur major losses in ecosystem services. Industrialized countries Developing countries Projections show that the main productivity losses Land-based Land-based emissions emissions will occur in developing countries (Figure A1:2). Fuel-based Fuel-based emissions emissions The health status of millions of people will be Source: Carbon Dioxide Information Analysis Center, www.cdiac.ornl.gov. adversely affected by extreme weather events, increased burden of diarrheal diseases, and altered FIGURE A1:4 PROGRESS TOWARD distribution of some infectious disease vectors. In THE KYOTO PROTOCOL TARGETS Africa, malaria is already creeping up into the high- Change in emissions from base year (1990­2005) lands of Kenya, Rwanda, and Tanzania. excluding LULUCF Annex I non-EITs, KP Parties -6% 5% EMISSIONS Annex I EITs, -35% -2% Historically, the cumulative emissions of carbon dioxide KP Parties from fossil fuels and cement production are almost Annex I, non-KP Parties three times higher from developed countries than 18% developing countries. Emissions from land-related activities in developing countries are double those of TOTAL KP Parties -14% -4% developed countries, but these data fail to capture the -40% -30% -20% -10% 0% 10% 20% 30% emissions from land clearing in the now developed Percent (relative to 1990) countries prior to 1850 (Figure A.1:3). Per capita emissions since the 1950s have remained approxi- Actual change as of 2005 mately four times higher in developed countries than Kyoto target to 2008-2012 in developing countries with the difference being Note: KP ­ Kyoto Protocol; EITs ­ Economies in Transition, LULUCF ­ Land Use, Land-Use Change and even greater for the least developed countries. Forestry. The aggregate GHG emissions reduction target of countries listed under Annex B of the Kyoto Protocol is 5.2% below 1990 levels. Given that not all countries listed under Annex B have ratified the Kyoto Protocol, the aggregate target of Parties to the Kyoto Protocol is slightly more than 4% below 1990 levels. Annex I non-EIT KP Parties: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, & United Kingdom. Annex I EIT KP Parties: Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russian Federation, Slovakia, Slovenia & Ukraine. Annex I non-KP Parties: Turkey & US. European Community, also a Party to the UNFCCC and the Kyoto Protocol, is not shown on this chart. Source: UNFCCC website (http://unfccc.int/ghg_data/ghg_data_unfccc/time_series_annex_i/ items/3814.php) 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 27 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 27 TABLE A1:1 EMISSION CHARACTERISTICS BY COUNTRY, 2005 CO2 CO2 CO2 CO2 GDP per CO2 intensity, intensity, growth, growth, CO2 per capita, Emissions, PPP, 2005 MER, 2005 1995- 2000- capita, PPP, 2005 Income 2005 (t CO2 per (t CO2 per 2000 2005 2005 ($ per group, Country (Mt CO2) Million $) Million $) (%) (%) (t CO2) annum) 2005 1 United States 5,957 480 480 1.9 0.5 20.1 41,813 High 2 China 5,323 998 2,372 0.5 12.8 4.1 4,088 Lower middle 3 Russian Federation 1,696 999 2,218 -0.5 1.4 11.9 11,861 Upper middle 4 Japan 1,230 318 270 2.0 0.7 9.6 30,290 High 5 India 1,166 478 1,441 2.9 3.2 1.1 2,230 Low 6 Germany 844 336 303 -0.7 -0.1 10.2 30,445 High 7 Canada 631 559 558 2.0 2.5 19.5 34,972 High 8 United Kingdom 577 305 259 0.0 0.8 9.6 31,371 High 9 Korea, Republic of 500 486 631 3.1 2.6 10.3 21,273 High 10 Italy 467 287 264 0.8 1.0 8.0 27,750 High 11 Iran, Islamic Republic 451 700 2,347 4.1 7.2 6.6 9,314 Lower middle 12 South Africa 424 1,066 1,751 2.2 2.0 9.0 8,478 Upper middle 13 France 415 223 194 1.5 0.8 6.8 30,591 High 14 Saudi Arabia 412 841 1,307 4.3 7.3 17.8 21,220 High 15 Australia 407 630 603 4.3 2.9 20.0 31,656 High 16 Mexico 398 339 519 3.6 0.9 3.9 11,387 Upper middle 17 Spain 387 328 344 5.4 3.7 8.9 27,180 High 18 Brazil 361 228 409 3.7 1.1 1.9 8,474 Lower middle 19 Indonesia 359 508 1,253 4.9 5.8 1.6 3,209 Lower middle 20 Ukraine 343 1,303 3,977 -5.1 1.2 7.3 5,583 Lower middle 21 Poland 285 550 936 -1.0 -0.4 7.5 13,571 Upper middle 22 Netherlands 270 479 429 2.4 1.6 16.5 34,492 High 23 Thailand 234 526 1,327 2.2 7.8 3.6 7,069 Lower middle 24 Turkey 230 308 475 5.7 2.8 3.2 10,370 Upper middle 25 Kazakhstan 198 1,503 3,466 -0.4 7.9 13.1 8,699 Lower middle 26 Egypt, Arab Rep. 162 486 1,804 3.9 6.3 2.2 4,574 Lower middle 27 Malaysia 156 519 1,134 4.6 6.9 6.1 11,678 Upper middle 28 Venezuela, RB 151 574 1,040 1.6 2.5 5.7 9,924 Upper middle 29 Argentina 147 350 800 2.9 1.3 3.8 10,815 Upper middle 30 United Arab Emirates 138 679 1,063 1.8 4.7 30.4 49,451 High 31 Belgium 136 409 366 2.1 -1.2 13.0 31,699 High 32 Singapore 134 724 1,118 5.3 4.6 30.8 43,334 High 33 Pakistan 121 357 1,110 4.4 2.3 0.8 2,184 Low 34 Uzbekistan 118 2,236 8,246 0.3 2.2 4.5 2,017 Low 35 Czech Republic 113 544 905 -1.6 0.3 11.0 20,280 Upper middle 36 Nigeria 105 430 937 -4.2 5.5 0.7 1,731 Low 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 28 28 D E V E L O P M E N T A N D C L I M A T E C H A N G E TABLE A1:1 CONTINUED CO2 CO2 CO2 CO2 GDP per CO2 intensity, intensity, growth, growth, CO2 per capita, Emissions, PPP, 2005 MER, 2005 1995- 2000- capita, PPP, 2005 Income 2005 (t CO2 per (t CO2 per 2000 2005 2005 ($ per group, Country (Mt CO2) Million $) Million $) (%) (%) (t CO2) annum) 2005 37 Greece 103 317 364 3.4 0.5 9.3 29,261 High 38 Romania 99 490 1,005 -5.4 1.4 4.6 9,368 Upper middle 39 Iraq 98 .. .. -0.9 6.1 .. .. Lower middle 40 Algeria 88 364 861 -1.0 1.1 2.7 7,370 Lower middle 41 Vietnam 80 451 1,514 6.9 11.1 1.0 2,143 Low 42 Austria 78 279 256 1.7 4.2 9.5 34,075 High 43 Philippines 78 312 791 4.2 2.1 0.9 2,956 Lower middle 44 Kuwait 77 669 915 8.3 5.3 30.2 45,198 High 45 Chile 66 334 560 6.8 3.7 4.1 12,173 Upper middle 46 Israel 65 410 495 5.1 0.9 9.4 22,886 High 47 Portugal 65 309 351 4.6 0.6 6.2 19,956 High 48 Belarus 61 735 2,033 -0.7 0.6 6.3 8,541 Lower middle 49 Hungary 60 349 541 -0.7 1.5 5.9 17,014 Upper middle 50 Colombia 59 223 478 1.5 0.4 1.3 5,867 Lower middle Note: The table presents top 50 countries ranked by total CO2 emissions from fossil fuel use. It shows that most countries rank differently by several measures, such as total CO2 emissions, emission intensity of GDP, and the rate of emission growth. CO2 intensities are tons of CO2 per unit of GDP in million US$. Source of CO2 emissions is US Energy Information Administration (EIA) website (as of Sept. 18, 2007). GDP PPPs (constant 2005 US$), GDP MER 2005, and Population data in 2005 are from World Development Indicators database (Sept. 08). Income groups for 2005 as follows: low income, $875 or less; lower middle income, $876 - $3,465; upper middle income, $3,466 - $10,725; and high income, $10,726 or more (GNI per capita in 2005, Atlas method). TABLE A1:2 CHANGES IN EMISSIONS FOR ANNEX I COUNTRIES OF THE KYOTO PROTOCOL EXCLUDING LULUCF INCLUDING LULUCF Percent Percent Gg CO2 eq Actual Gg CO2 eq Actual Percent 1990 Gg CO2 eq change 1990 Gg CO2 eq change as Kyoto target (base year) 2005 as of 2005 (base year) 2005 of 2005 2008-2012 Spain 287,366 440,649 53.3 244,603 390,972 59.8 15.0 Portugal 59,921 85,540 42.8 63,749 89,467 40.3 27.0 Greece 108,742 137,633 26.6 105,549 132,231 25.3 25.0 Ireland 55,374 69,945 26.3 55,495 69,288 24.9 13.0 Australia 418,275 525,408 25.6 499,903 522,189 4.5 8.0 Canada 595,954 746,889 25.3 473,310 729,710 54.2 -6.0 New Zealand 61,900 77,159 24.7 42,920 52,658 22.7 0.0 Austria 79,053 93,280 18.0 67,151 76,253 13.6 -13.0 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 29 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 29 TABLE A1:2 CONTINUED EXCLUDING LULUCF INCLUDING LULUCF Percent Percent Gg CO2 eq Actual Gg CO2 eq Actual Percent 1990 Gg CO2 eq change 1990 Gg CO2 eq change as Kyoto target (base year) 2005 as of 2005 (base year) 2005 of 2005 2008-2012 Italy 516,851 579,548 12.1 437,033 469,538 7.4 -6.5 Iceland 3,352 3,705 10.5 5,442 5,460 0.3 10.0 Norway 49,751 54,153 8.8 35,032 26,934 -23.1 1.0 Japan 1,272,043 1,359,914 6.9 1,179,935 1,263,872 7.1 -6.0 Switzerland 52,749 53,636 1.7 51,045 53,387 4.6 -8.0 Luxembourg 12,687 12,738 0.4 12,413 12,465 0.4 -28.0 Netherlands 212,963 212,134 -0.4 215,355 214,475 -0.4 -6.0 Belgium 145,766 143,848 -1.3 144,335 143,478 -0.6 -7.5 European Community 4,257,837 4,192,634 -1.5 4,040,425 3,877,452 -4.0 -8.0 France 567,303 558,392 -1.6 533,314 495,440 -7.1 0.0 Finland 71,000 69,241 -2.5 49,610 38,308 -22.8 0.0 Denmark 70,442 65,486 -7.0 70,993 64,033 -9.8 -21.0 Sweden 72,191 66,955 -7.3 68,652 63,042 -8.2 4.0 United Kingdom 771,415 657,396 -14.8 774,310 655,361 -15.4 -12.5 Germany 1,227,860 1,001,476 -18.4 1,199,619 965,400 -19.5 -21.0 United States* 6,229,041 7,241,482 16.3 5,529,241 6,431,935 16.3 .. Slovenia 18,537 20,391 10.0 15,351 14,961 -2.5 -8.0 Croatia 31,552 30,481 -3.4 25,271 22,702 -10.2 -5.0 Poland 485,407 398,952 -17.8 452,685 366,848 -19.0 -6.0 Hungary 98,108 80,219 -18.2 94,230 75,743 -19.6 -6.0 Czech Republic 196,204 145,611 -25.8 194,493 140,966 -27.5 -8.0 Russian Federation 2,989,833 2,132,518 -28.7 3,166,421 2,289,167 -27.7 0.0 Slovakia 72,051 47,866 -33.6 69,662 47,017 -32.5 -8.0 Romania 248,734 153,654 -38.2 212,887 116,233 -45.4 -8.0 Bulgaria 116,611 69,995 -40.0 110,692 51,958 -53.1 -8.0 Belarus*** 127,361 75,594 -40.6 105,333 50,662 -51.9 .. Estonia 42,625 20,939 -50.9 33,262 12,843 -61.4 -8.0 Lithuania 49,370 22,682 -54.1 38,631 13,581 -64.8 -8.0 Ukraine 923,844 418,923 -54.7 872,377 360,358 -58.7 0.0 Latvia 26,442 10,880 -58.9 5,772 (3,552) -161.5 -8.0 Turkey** 170,059 296,602 74.4 126,527 222,528 75.9 .. Liechtenstein 230 271 17.4 223 264 18.4 -8.0 Monaco 107 104 -3.1 107 104 -3.2 -8.0 Source: UNFCCC website (http://unfccc.int/ghg_data/ghg_data_unfccc/time_series_annex_i/items/3814.php). Notes: * The United States, although a signatory to the Kyoto Protocol, has not ratified the Protocol and has no binding target. ** Turkey has no reduction target assigned since it was not a party to the UNFCCC at the time of signing the Kyoto protocol. *** The amendment to the Kyoto Protocol with an emission reduction target for Belarus adopted by decision 10/CMP.2 has not entered into force yet. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 30 FIGURE A1:5 CO2 AND GHG INTENSITY BY REGION CO2 emissions / GDP (PPP) (excluding land use, 2005) GHG emissions / GDP (PPP) (including land use, 2000) 0.90 3.50 0.80 SSA EAP 3.00 0.70 ECA 2.50 0.60 MNA /GDPppp) SSA 2.00 2 0.50 SAR EAP 0.40 1.50 (kgCO 0.30 1.00 ECA LAC SAR MNA 0.20 High LAC Income Intensity 0.50 0.10 High Income 0.00 0.00 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Cumulative income (billions US$, constant 2005 PPP) Note: The charts show significant variations in energy-related CO2 and total GHG intensities per GDP by region and a significant shift in ranking when a measure of emissions changes from CO2 to GHG. The ECA region has the highest energy-related CO2 emission intensity per GDP, while LAC has the lowest. High-income countries generate by far the largest volume of CO2 emissions. Taking into account all GHG emissions, including those arising from land use, land use change, and forestry would tend to increase SSA, EAP, and LAC intensities and contributions to global GHG since land degradation and deforestation has been progressing at a rapid pace in these regions. Source: CO2 emissions (emissions from energy use) from EIA website (as of September 18, 2007); GDP PPP (constant 2005 US$) from World Development Indicators database; GHG emissions from Climate Analysis Indicators Tool (CAIT) Version 5.0. (Washington, DC: World Resources Institute, 2008). Comprehensive (as many countries and GHG as possible) data for emissions are only available up to 2000. FIGURE A1:6 CO2 INTENSITY TRENDS BY REGION, WITH PPP AND MER CO2 Intensity Trends by Region (PPP) CO2 Intensity Trends by Region (MER) kg CO2 per GDP, PPP (constant 2005 int$) kg CO2 per GDP (constant 2000 US$) 1.5 5 4 1.2 3 0.9 2 0.6 1 0.3 0 '90 '92 '94 '96 '98 '00 '02 '04 '90 '92 '94 '96 '98 '00 '02 '04 AFR EAP ECA High Income AFR EAP ECA High Income LAC MNA SAR LAC MNA SAR Note: The charts show that the dramatic decline in CO2 intensity during 1990s in highly intensive regions has been reversed (EAP) or slowed down (ECA). Meanwhile, CO2 intensity in other regions remains relatively stable. The use of PPP or MER measures does not change the relative ranking of different regions, except for high income countries that have the lowest intensity when MER is used. Source: CO2 emissions (emissions from energy use) from EIA website (as of September 18, 2007), and GDP, PPP (constant 2005 US$) from World Develop- ment Indicators database. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 31 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 31 ANNEX 2 COSTS AND FINANCING SOURCES TABLE A2:1 GLOBAL ESTIMATES OF COSTS AND INVESTMENT REQUIREMENTS FOR MITIGATION Study Estimate Basis WBG, Clean Energy US$30 billion/ annum for Investment estimate, assuming stabilization at 450 ppm, Framework 9 power sector in developing on top of US$160 billion per year for electricity supply in 04/2006 countries developing countries over 2010­30, of which currently only half is financed Stern Review10 US$1,000 billion/annum Annual global macroeconomic cost; central estimate by 11/2006 2050, consistent with stabilization at 550 ppm; represents 1% of global GDP by 2050, ranging from net gains of 1% global GDP to reduction of 3.5% UNFCCC11 US$200-210 billion/annum Estimate of annual global investment and financial flows by 08/2007 2030, broadly consistent with stabilization at 550 ppm IPCC12 5.5% to -1% (gain) Estimate of annual macroeconomic costs to global GDP, 11/2007 reduction in global GDP ranging from 3% to small increase by 2030 and from 5.5% to 1% gain by 2050 for targets between 445 to 710 ppm OECD Environmental US$350-3,000 Annual global macroeconomic cost, central estimate, Outlook to 203013 billion/annum consistent with stabilization at 450 ppm; represents a 0.5% 05/2008 loss to global GDP by 2030 and 2.5% by 2050 or an average 0.1% slow down of growth IEA Energy Technology US$400-1,100 Global cumulative additional investment needs between now Perspectives 200814 billion/annum and 2050 for energy sector estimated at US$17 trillion, or 06/2008 for energy sector 0.4% of global GDP (~550ppm) and US$45trillion, or 1.15 of global GDP (~450ppm) 9 See World Bank (2006). Clean Energy and Development: Towards an Investment Framework, available at http://siteresources.worldbank.org/ DEVCOMMINT/Documentation/20890696/DC2006-0002(E)-CleanEnergy.pdf 10 Nicholas Stern (2007). The Economics of Climate Change: The Stern Review. Cabinet Office - HM Treasury, at http://www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/stern_review_Report.cfm 11 Source: "Dialogue on long-term cooperative action to address climate change by enhancing implementation of the Convention" Dialogue work- ing paper 8 (2007), at http://unfccc.int/files/cooperation_and_support/financial_mechanism/financial_mechanism_gef/ application/pdf/dialogue_working_paper_8.pd 12 See the IPCC Fourth Assessment Report Synthesis Report, at http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr.pdf 13 See OECD (2008). OECD Environmental Outlook to 2030, at http://www.oecd.org/environment/outlookto2030 14 IEA (2008). Energy Technology Perspectives 2008: Scenarios and Strategies to 2050, at http://www.iea.org/w/bookshop/add.aspx?id=330 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 32 32 D E V E L O P M E N T A N D C L I M A T E C H A N G E TABLE A2:2 ESTIMATES OF COSTS AND INVESTMENT REQUIREMENTS FOR ADAPTATION IN DEVELOPING COUNTRIES Study Date released Estimate Basis Total adaptation costs Various academic 1990s on Various Usually sectoral and long term--for instance, end of century-- and with widely differing assumptions World Bank (CEIF) 04/2006 US$4­37 Investment to "climate proof" all adaptation-related activities in as revised by the billion/annum developing countries Stern Review 11/2006 IPCC 4/2007 No new estimates, but argue that most studies show a high benefit-cost ratio for adaptive actions Oxfam 5/2007 US$8­33 Costs of immediate priorities similar to those in national billion adaptation programs of action (NAPAs) applied to all developing countries UNFCCC 10/2007 US$28­67 Investment needs for adaptation activities in developing countries billion in 2030 in 2030--all sectors, private and public UNDP (HDR 2007­08) 01/2008 US$86 "New and additional" finance for adaptation through transfers billion/annum from rich to poor by 2016 to protect progress towards the MDGs by 2016 and prevent post­2015 reversals in human development Note: It should be noted that the adaptation estimates are less advanced and reliable, and cannot be directly compared with the mitigation cost estimates. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 33 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 33 TABLE A2:3 EXISTING RESOURCES AND FINANCING INSTRUMENTS DEDICATED TO CLIMATE CHANGE Financing Source Role/Scope MITIGATION CDM Improves financial returns through long-term purchase agreements for the Value of Primary CDM transactions: GHG emissions reductions resulting from climate-friendly projects US$7.4 billion in 2007, estimated to leverage US$36 billion15 GEF TF Finances incremental costs of removing barriers to market development of US$250 million p.a. near commercial technologies, institutional development, innovation, (2006-2010) piloting, and demonstration Other Trust Funds and Partnerships housed Grant financing for climate change knowledge products, capacity building, in MDBs upstream project work or pilots ADAPTATION Adaptation Fund--US$80 million Funding for the Adaptation Fund will mainly come from a 2 percent levy on to US$1 billion million per annum revenues generated by the CDM by 2012 (best estimate: US$300 to US$500 million) UNFCCC Special Funds LDCF helps in the preparation and financing of implementation of national (administered by GEF) adaptation programs of action (NAPAs) to address the most urgent Least Developed Countries Fund (LCDF) adaptation needs in the least developed countries US$180 million Special Climate Change Fund (SCCF) SCCF supports adaptation and mitigation projects in all developing US$90 million countries, with a large emphasis on adaptation GEF TF Strategic Priority to Pilot an Operational SPA is a funding allocation within the GEF Trust Fund whose objective is to Approach on Adaptation (SPA)-- support pilot and demonstration projects that address local adaptation US$50 million till 2010 needs and generate global environmental benefits in all GEF focal areas Global Facility for Disaster Reduction Partnership within the UN International Strategy for Disaster Reduction and Recovery (GFDRR) (ISDR), focusing on building capacities to enhance disaster resilience and US$8 million FY07+US$40 million FY08 adaptive capacities in changing climate UNDP Adaptation facilities for Africa: US$90-120 million 15 At this stage, estimates for the future size of the carbon market and potential flows to developing countries are unreliable as they depend on the ongoing UNFCCC negotiation process. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 34 34 D E V E L O P M E N T A N D C L I M A T E C H A N G E TABLE A2:3 CONTINUED Financing Source Role/Scope MITIGATION ADAPTATION Other Grants for climate change knowledge products, capacity building, ADB: US$40 million initial capitalization upstream project work or pilots Bilateral resources (e.g., adaptation programs run by national development assistance institutions) CGIAR: Climate-related research for agriculture US$77 million ( 50 million) Trust Funds and partnerships housed in MDBs BLENDED RESOURCES FOR MITIGATION & ADAPTATION Climate Investment Funds US$6 billion Two trust funds will be created under the Climate Investment Funds: I The Clean Technology Fund will provide new, large-scale financial resources to invest in projects and programs in develop- ing countries which contribute to the demonstration, deployment, and transfer of low-carbon technologies. The projects or programs must have a significant potential for long-term greenhouse gas savings. I The second fund, the Strategic Climate Fund, will be broader and more flexible in scope and will serve as an overarching fund for various programs to test innovative approaches to climate change. The first such program is aimed at increasing climate resilience in developing countries. EC Global Climate Change Alliance (GCCA) US$450 million ( 300 million) I Thematic Program for Environment and Sustainable Management of Natural Resources (including Energy)--managed by the European Commission DG Development/ EuropeAid ( 110 million) I European Development Fund--managed by DEV/AIDCO--budget framework 2008­13 ( 280 million) Notes: I The GEF is the largest source of grant-financed mitigation resources, with about US$250 million per year going to mitigation activities over 2006­10. 16 I The CDM unambiguously dominates the project-based market, with more than 1.5 billion Certified Emissions Reductions (CERs) transacted from 2002 onward for a cumulative value exceeding US$16 billion, estimated to have leveraged US$59 billion. JI and AAU/GIS transactions could also contribute to leverage financing for climate action, particularly in Europe and Central Asia countries. There are currently at least 17 funds and facilities managed by MDBs totaling close to US$3 billion, of which a large part (about two-thirds) is already committed. I With respect to adaptation, multilateral funds are expected to contribute slightly more than half a billion US dollars over the next few years. Financial resources that will be made available through the Adaptation Fund are difficult to quantify, and could be in the range of US$300­500 million per year until 2012. Adding all possible sources of financing (including bilateral funds and the EC GCCA fund) is difficult due to lack of firm estimates from many new sources, but the total amount appears unlikely to exceed US$1 billion per year in the next several years. 16 In addition, some US$15 million from the Special Climate Change Fund (a GEF-administered UNFCCC Special Fund) are available for technology transfer. With respect to World Bank engagement against climate change, cumulative GEF resources committed to mitigation projects reached US$1.64 billion at mid-FY08, with a leverage (on IBRD/IDA resources) of roughly 2.2. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 35 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 35 TABLE A2:4 WBG INSTRUMENTS FOR CLIMATE ACTION Financial product Adaptation Mitigation Description Status Carbon Funds I The World Bank, through its Carbon Finance Unit (CFU), Ongoing and Facilities manages US$2.1 billion, through 10 funds and facilities pooling (CDM, JI, stakes from 16 governments and 66 private companies, and AAU/GIS) is currently establishing two new facilities the Forest Partnership Facility (FCPF), to pilot an output-based market mechanism to provide incentives for reducing emissions from deforestation and land degradation, and the Carbon Partnership Facility (CPF), to use carbon finance to catalyze a transformation toward low- carbon economic development. IFC also gained significant experience from managing Dutch governmental carbon funds (US$135 million committed in 12 transactions). IFC Carbon I IFC essentially provides a credit enhancement and guarantees Ongoing Delivery the delivery obligation of projects for a risk-based guarantee Guarantee fee. The premium in pricing obtained by an AAA-rated seller in the secondary markets is passed on to the projects net of guarantee fees. MIGA Carbon I MIGA developed an innovative instrument to mitigate a series Ongoing Insurance Product of risks to carbon finance project performance, including host country political risk (such as administrative/regulatory decisions by the government that may affect a project's operations, expropriation, withdrawal from the Kyoto Protocol, inability of auditors to enter the project site due to politically motivated violence). Climate I I Two trust funds will be created under the Climate Investment Approved Investment Funds: Funds -- The Clean Technology Fund will provide new, large-scale financial resources to invest in projects and programs in developing countries which contribute to the demonstration, deployment, and transfer of low-carbon technologies. The projects or programs must have a significant potential for long-term greenhouse gas savings. -- The second fund, the Strategic Climate Fund, will be broader and more flexible in scope and will serve as an overarching fund for various programs to test innovative approaches to climate change. The first such program is aimed at increasing climate resilience in developing countries. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 36 36 D E V E L O P M E N T A N D C L I M A T E C H A N G E TABLE A2:4 WBG INSTRUMENTS FOR CLIMATE ACTION Financial product Adaptation Mitigation Description Status Global Facility I Partnership within the UN International Strategy for Disaster Ongoing for Disaster Reduction (ISDR), focusing on building capacities to enhance Reduction and disaster resilience and adaptive capacities in changing climate. Recovery Climate Risk I The WBG has been assisting countries develop risk financing Ongoing Management strategies, increase penetration of insurance and access to / under Products re-insurance markets. Select examples include index-based development insurance schemes for farmers or catastrophe property insurance as well as the Caribbean Catastrophe Risk Insurance Facility (CCRIF), offering parametric insurance against hurricanes and earthquakes, or the Global Catastrophe Mutual Bond, pooling risks of several countries and transferring them to capital market (on going). Bonds Issuance I I Examples of recent initiatives include the first Certified Ongoing Emissions Reductions (CER)-linked Uridashi Bond, nicknamed / under the "Cool Bond," with Daiwa Securities Group, and the World develop- Bank Eco-3Plus Note - by ABN AMRO for investors in the ment Netherlands, Belgium, and Luxembourg. Trust Funds I I Examples of trust funds that can support climate-related Ongoing activities include: ESMAP, Japan PHRD, Norwegian TF for Private Sector and Infrastructure, Bank Netherlands Partnership Program, Public-Private Infrastructure Facility, TF for Environmentally and Socially Sustainable Development, Japan Social Development Fund, Institutional Development Fund. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 37 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 37 ANNEX 3 KEY ACTIONS AND DELIVERABLES FOR FISCAL YEARS 2009­11 Objective Action Products/Processes/Indicators 17 Timeline Action Area 1: Enhance cooperation Collaboration with the UN and its agencies on a coordinated FY09­11 Support Climate with development approach to climate change, particularly financing , capacity Actions in Country-led partners to facilitate building and monitoring Development Processes global action [Note: Climate actions Joint implementation of CIFs with other MDBs FY09­10 are supported by all six action areas, so this New partnerships established, particularly to facilitate the work FY09­10 section focuses only on on technology and adaptation products and activities not covered by the other Support climate Actions to strengthen climate resilience are supported by several FY09­11 sections.] actions by CASs , with an estimated demand by at least 10 countries with operational high vulnerability to climate risks strategies Support to climate actions included in business strategies for FY09 WBregions, MIGA and IFC Strategy updates for relevant sectors include consideration of climate risks and support to climate actions --Urban FY09 --Energy, Social Development FY10 Support climate A plan for strengthening synergies between support to disaster FY09­10 actions in lending risk management and support to adaptation developed and programs implementation started Screening of relevant projects for climate risks introduced --starting with hydropower projects FY09 --extending to other vulnerable sectors within regional context FY10­11 Screening for EE opportunities in infrastructure projects introduced --starting energy sector projects FY09 --extending to transport, water and urban projects FY10­11 Increase in WBG financing for RE and EE by an avg. of 30% FY09­11 per annum WBG low carbon energy projects share reaches 50% FY11 17 Specific indicators for WBG operations, when provided, are based on existing pipeline and estimated demand. 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 38 38 D E V E L O P M E N T A N D C L I M A T E C H A N G E ANNEX 3 CONTINUED Objective Action Products/Processes/Indicators Timeline Action Area 1: Support climate Increased demand for and lending in support of modal shifts FY09­11 Support Climate actions in lending in freight and public transport (as compared to FY06-08) Actions in Country-led programs Development Processes An program to assist with sustainable urban investments is FY09­11 developed and piloted in at least 5 cities Develop an A set of definitions and outcomes developed by the WBG FY09 outcome-based results framework Improved climate-related portfolio tracking, with the focus on FY10 projects addressing climate risks and vulnerability in IDA countries Action Area 2: Mobilize Increase access to Maintained or increased IDA replenishment levels, and improved FY11 Additional Concessional additional finance to tracking of ODA to climate-related actions, mitigation and adaptation and Innovative Finance cover higher costs (with DAC) and risks Climate Investment Funds operational with a target of US$6 billion FY09 Increased leverage of GEF funds through programmatic approaches FY09­11 Guidelines to help access various financing instruments and reduce FY09 transaction costs prepared Action Area 3: Facilitate Increase access to FCPF rolled-out: the Development of market products, --at least 18 readiness grants provided FY09 Market-based Financing including for REDD --at least 5 countries having successfully built FCPF capacity FY10 Mechanisms and adaptation CPF operationalized: --initial capitalization of at least 350 million FY09 --12-16 CPF Emission Reduction Programs developed FY11 Access to climate risk management products and reinsurance FY10 markets increased Action Area 4: Leverage Increase leveraging of MIGA guarantee instruments increasingly used for low carbon FY09­11 Private Sector Resources private investments (RE/EE) investments - at least 10 guarantees provided over FY09-11 Innovative financing packages combining CF, GEF and/or CIF to FY09­11 leverage private investments structured and applied by IFC - at least 10 during FY09-11 IFC leverage of low carbon private investment is at least 4 to 1 in FY11 dollar values Sub-national level application of financial tools is tested for projects FY09 with climate co-benefits ­ at least 3 in a pilot phase (further estimates to be provided if/when post-pilot stage approved) 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 39 A S T R AT E G I C F R A M E W O R K F O R T H E W O R L D B A N K G R O U P 39 ANNEX 3 CONTINUED Objective Action Products/Processes/Indicators Timeline Action Area 5: Support Develop new Proposals for supporting clean energy technology innovation FY09 accelerated development partnerships and prepared by IFC and WB and deployment of approaches for new technologies technology Program to support technology innovation piloted FY10 cooperation Work by CGIAR on climate resilient agriculture technologies scaled FY09­11 up (measured by increase in funding) Action Area 6: Advance The global economics of adaptation study completed and improved FY10 Step up policy research, knowledge the knowledge of adaptation processes, costs and benefits knowledge, and capacity on climate and building development Low carbon growth studies provided knowledge of the incremental FY09 costs and benefits of development programs with lower GHG emissions - at least 5 studies completed in FY09 WDR2010 on climate change launched and contributed to global FY10 knowledge and dialogue Monitoring on global climate action improved, through join effort with FY10 the UN and OECD, and reported in flagship WBG knowledge products (such as WDI). Develop and test Good practice guidelines to help relevant operations account for FY09 new analytical social and gender dimensions of climate change prepared tools Toolkits and decision-making guides for adaptation to climate change FY09­10 in agriculture and water sectors developed and applied GHG analysis is developed and applied in IFC real investment portfolio FY09-11 and select WB energy, transport, and forestry sector projects Capacity building Country-level expertise and capacity to manage development - FY09-11 climate linkages and access additional finance strengthened Potential of existing programs reviewed and enhanced, and a FY09 coordinated program with UN agencies developed Wide coverage of staff and managers by specialized training programs FY09-11 on development and climate change; climate issues included in other training programs, as appropriate Enhanced skill mix to support climate actions FY10 Outreach and Communication and outreach plans for the implementation phase FY09­10 communication developed and implemented GHG emissions for all WBG offices enrolled in the carbon-neutral FY 11 program reduced by 7% by 2011 & remaining emissions offset by purchase of carbon credits 375533_TEXT.qxd:375533_TEXT 1/16/09 12:17 PM Page 40 40 D E V E L O P M E N T A N D C L I M A T E C H A N G E ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Assistance IFC International Finance Corporation ADB Asian Development Bank IPCC Intergovernmental Panel on Climate Change AAU Assigned Amount Units ISDR International Strategy for Disaster Reduction BNPP Bank Netherlands Partnership Program JI Joint Implementation CO2 Carbon Dioxide LAC Latin America and the Caribbean Region CAIT Climate Analysis Indicators Tool LDCF Least Developed Countries Fund CAS Country Assistance Strategy LULUCF Land Use, Land Use Change and Forestry CCRIF Caribbean Catastrophe Risk Insurance Facility MDB Multilateral Development Bank CDM Clean Development Mechanism MDGs Millennium Development Goals CEIF Clean Energy for Development Investment MER Market Exchange Rate Framework MFI Multinational Financial Institution CER Certified Emissions Reductions MICs Middle-Income Countries CF Carbon Finance MIGA Multilateral Investment Guarantee Agency CFL Compact Fluorescent Lamps NAPA National Adaptation Programs of Action CFU Carbon Finance Unit NEPAD The New Partnership for Africa's Development CGIAR Consultative Group on International ODA Overseas Development Assistance Agricultural Research OECD Organization for Economic Co-operation CHUEE China Utility-Based Energy Efficiency and Development Finance Program PHRD Policy and Human Resources Development CIF Climate Investment Fund PPM Part Per Million CPF Carbon Partnership Facility PPCR Pilot Program for Climate Resilience CTF Clean Technology Fund PPP Purchasing Power Parity DAC Development Assistance Committee RE Renewable Energy DFID UK Department for International Development RE/EE Renewable Energy and Energy Efficiency EAP East Asia and Pacific Region REDD Reduced Emissions from Deforestation EC European Commission and Degradation ECA Europe and Central Asia Region SCCF Special Climate Change Fund EE Energy Efficiency SDLP Sustainable Development Leadership Program EIA Energy Information Administration SDN Sustainable Development Network (US Department of Energy) SPA Strategic Priority to Pilot an Operational EIT Economies in transition Approach on Adaptation ESMAP Energy Sector Management Assistance Program SSA Sub-Saharan Africa Region FCPF Forest Carbon Partnership Facility TF Trust Fund GDP Gross Domestic Product UN United Nations GEF Global Environment Facility UNDP United Nations Development Program GFDRR Global Facility for Disaster Reduction UNEP United Nations Environment Program and Recovery UNFCCC United Nations Framework Convention on GHG Greenhouse Gas Climate Change GoM Government of Mexico VPUs Vice-Presidential Units IBRD International Bank for Reconstruction WB World Bank and Development WBG World Bank Group IDA International Development Association WDR World Development Report IEA International Energy Agency DCC_bookCovs_CRA .qxd:Layout 1 1/16/09 11:59 AM Page 5 Photo Credits Front cover, top: Mosista Pambudi/Shutterstock Front cover, bottom: Armin Rose/Shutterstock Page 2: Dominic Sansoni/World Bank Page 3: Dominic Sansoni/World Bank Page 4: Amit Dave/Reuters/Corbis Page 6: Jose AS Reyes/Shutterstock Page 15: Lucian Coman/Shutterstock Page 22: Anna Dzondzua/Shutterstock Page 24: Triff/Shutterstock DCC_bookCovs_CRA .qxd:Layout 1 1/16/09 11:59 AM Page 2 The World Bank Group 1818 H Street, NW Washington, D.C. 20433 USA Tel: 202-473-1000 Fax: 202-477-6391 Internet: www.worldbank.org/climatechange