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Towards a Strategic Framework on Climate Change and Development

for the World Bank Group

www.worldbank.org/climateconsult

June 4, 2008

Washington D.C.

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Climate Change is a Development Issue

• Developing countries are already being affected

• The poorest countries and communities stand to suffer the earliest and the most

• Development gains and achievement of the Millennium Development Goals are at risk

• Lower carbon and climate resilient growth offers opportunities for sustainable development with multiple benefits

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Developing Countries Most At Risk: 6 Climate Threats

Drought Flood Storm Coastal 1m Coastal 5m Agriculture

Malawi Bangladesh PhilippinesAll low-lying Island

StatesAll low-lying Island

States Sudan

Ethiopia China Bangladesh Vietnam Netherlands Senegal

Zimbabwe India Madagascar Egypt Japan Zimbabwe

India Cambodia Vietnam Tunisia Bangladesh Mali

Mozambique Mozambique Moldova Indonesia Philippines Zambia

Niger Laos Mongolia Mauritania Egypt Morocco

Mauritania Pakistan Haiti China Brazil Niger

Eritrea Sri Lanka Samoa Mexico Venezuela India

Sudan Thailand Tonga Myanmar Senegal Malawi

Chad Vietnam China Bangladesh Fiji Algeria

Kenya Benin Honduras Senegal Vietnam Ethiopia

Iran Rwanda Fiji Libya Denmark Pakistan

Middle Income

Low Income Source: World Bank

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Adaptation Challenges Over Time Will Depend on Mitigation Progress

Likely change already

“baked in”

Likely change with successful

mitigation action

Likely change without significant action on

mitigation

Risk of catastrophic events increases with temperature

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Potential Impact on Agriculture — Projected Percentage Change in Agricultural Productivity in 2080

Note: Scenario: SRES A2.Source: Cline 2007.

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Sources of GHG are cross-sectoral and most significant from energy and land use change

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Regional ImpactsAfrica

• Food security and risk associated with agricultural production

• Lack of access to safe water and increased water stress

• Low adaptive capacity and high vulnerability to climate variability and natural disasters such as droughts and floods

• Negative health impacts, especially increased risk of malaria

• Sea-level rise and its impact on low-lying coastal areas

*Source: Concept Paper Annex 1

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Regional Impacts East Asia and Pacific

• Decreased freshwater availability• Endemic morbidity and mortality due to diarrhoeal

disease associated with floods and droughts• Degradation of marine and coastal ecosystems by sea-

level rise and temperature increases• Sea-level rise potential results in displacement of millions

of people• Damage to aquaculture industry by sea water intrusion• Increased threats to the ecological stability of wetlands,

mangroves and coral reefs

*Source: Concept Paper Annex 1

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Regional Impacts Europe and Central Asia

• Increased climate-related hazards including prolonged droughts, more frequent storms and floods, and fire risk

• Coastal Floods and erosion due to sea-level rise• Increased health risks due to more frequent

heatwaves, flooding and greater exposure to vector- and food-borne diseases

• High water stress• Decline of forest productivity

*Source: Concept Paper Annex 1

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Regional Impacts Latin America and the Caribbean

• Decreased water availability in many water scarce regions and impact on high mountain ecosystems

• Reduction in agricultural productivity• Distortion of the functioning of ecosystems,

including coral reefs, wetlands and mangrove, and forests

• Large-scale displacement of populations due to increased extreme events and sea-level rise

• Health impacts e.g., heat stress mortality and greater exposure to vector-borne diseases

*Source: Concept Paper Annex 1

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Regional Impacts Middle East and North Africa

• Increased occurrence of droughts and water scarcity

• Greater fluctuation of agricultural yields, especially in rain-fed areas

• Worsening of public health due to heat waves, decreasing water and air quality, and ground ozone formation

• Sea-level rise and its impacts on agricultural, low-lying coastal areas and wetlands

*Source: Concept Paper Annex 1

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Regional Impacts South Asia

• Increased intensity and frequency of storm surges, cyclones, floods and droughts

• Negative impact on agricultural yields particularly in arid zones and flood-affected areas

• Decrease in river flows in the Himalayan countries, unreliable supplies of fresh water and the need for management of shared transboundary systems

• Sea-level rise and its impact on coastal livelihood through flood, damage to groundwater aquifers, loss of wetlands and ecosystems

• Lack of scientific information on the consequences of Himalayan snow melt and associated risks and climate change impact on biodiversity and ecosystems

*Source: Concept Paper Annex 1

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Climate Change is not new for the World Bank

• 1993 – Began implementing / leveraging GEF funding for climate change

• 1999 – Pioneered Carbon Finance through $180 million Prototype Carbon Fund

• 1999 – ”Fuel for Thought” Environment Strategy for the Energy Sector

• 2001 – Adopted Environment Strategy with climate change pillar

• 2006-08 – Clean Energy Investment Framework (CEIF):• (i) increased access to energy, especially in Sub-Saharan Africa; (ii)

accelerated transition to a low carbon energy economy; and (iii) adaptation to climate variability and change.

• 2007 – IDA and Climate Change Paper

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Recent progress in climate change• Share of support for low-carbon energy projects up from

28% in FY03–05 to 40% in Fy06-08, with an overall increase in energy lending from $6 billion to $11 billion– GEF and Carbon Finance (CF) contributed US$546 million, or 13

%, with significant leveraging

• RE and EE lending exceeded Bonn commitment 1.5 years ahead of schedule

• CF business grown to $2 billion, with two new facilities - CPF and FCPF- approved in September 2007

• Low carbon growth and adaptation studies • Pilot program to begin measuring GHG emissions of the

WBG lending portfolio is underway.• Strengthened partnership with MDBs

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Access and Low Carbon Energy

• Providing Energy Services for A Better Quality of Life.

• Worldwide, nearly 2.4 billion people use traditional biomass fuels—wood, agricultural residues, and dung—for cooking and heating

• Nearly 1.6 billion do not have access to electricity. • Four out of five people without access to electricity live in

rural areas• Without access to modern and sustainable energy

services, poor people are deprived of opportunities for economic development and improved living standards.

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GEF and WBG Synergies

• GEF grant funding to pilot innovative approaches and capacity building for mitigation

• GEF funding is necessary to proceed with adaptation mainstreaming in development and to build knowledge base

– GEF Trust Fund Strategic Priority on Adaptation $50 million (committed)

– Voluntary Funds: Special Climate Change Fund ($90 million) & Least Developed Countries Fund ($180 million)

• Adaptation Fund (GEF-administered): $500- 800 mlln by 2012

• GEF helped leverage progress with WBG low carbon investments

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Key message: Scaling up!

• Huge financing gap for developing countries, much beyond current funding under UNFCCC– mitigation: up to US$ 100 blln per year by 2030– adaptation: up to US$ 30-70 blln per year 2030– private sector to account for 80% at least of financial and

investment flows

• The challenges ahead in mobilizing financing at scale

• Massive technology, capacity and knowledge needs

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How we will develop a comprehensive Strategic Framework on Climate Change and Development (SFCCD)

Neutrality to UNFCCC Negotiations Flexibility to accommodate new

developmentsWorking with Multiple Partners Inclusive and Consultative Process

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Neutrality to UNFCCC Negotiations

– Neutral to any party position– Helping countries understand the impacts

Piloting innovative instruments and approaches that help inform the development of a future regime (e.g. IDA15 as a platform for mainstreaming adaptation, Carbon Finance, Climate Investment Funds)

– Advocacy and capacity building

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Flexibility to Accommodate New Developments

• The Strategic Framework will evolve as international negotiations and scientific knowledge and experience on the ground evolve

• It will pilot and test new approaches and benefit from learning and on-going consultations with various stakeholders

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Working With Multiple Partners

• UN agencies, UNFCCC Secretariat, Global Environment Facility (GEF)– A common UN-system approach to Climate Change– Building blocks: mitigation, adaptation, technology, finance

• Multilateral Development Banks– Have worked closely on Clean Energy Investment Framework

• Bi-lateral donors• Initiatives by countries, sub-national (city) governments,

private sector, Non-Governmental Organizations Scaling up World Bank Group engagement based on its

specific comparative advantages

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Sources of GHG Emissions in Developing Countries

GHG Emissions by Sector, IBRD-IDA Countries

Electricity & Heat20%

Industry13%

Other11%

Agriculture15%

Land-Use Change & Forestry

32%

Transportation6%

Waste3%

Total IBRD-IDA Lending by Sector, FY07

Financial & PSD8%

Energy & Mining5%

Transport19%

Urban Development

6%Water10%Agriculture &

Rural Development

12%

Other40%

World Bank lending is in sectors with largest opportunities for both adaptation and mitigation

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… similar situation in IFC & MIGA portfolios

Infrastructure 44%

Agribusiness 2%

Manufacturing 10%

Oil, gas & mining 12%

Financial 24%

Tourism, construction &

services 8%

IFC investment by Sector ($ mln), FY07 MIGA Guarantees by Sector ($ mln), FY07

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SFCCD is about development in the context of climate change

• Priority of growth, poverty reduction and MDGs

• Importance of meeting energy needs of developing countries

• Development imperative of helping to adapt to climate risks

• Resource mobilization in addition to the current ODA levels

Climate change: Role of the WBG

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6 Action Pillars

1. Make effective climate action – both adaptation and mitigation – part of core development efforts

2. Address the resource gap through existing and innovative instruments for concessional finance

3. Facilitate the development of innovative market mechanisms

4. Create enabling environment for and leveraging private sector finance

5. Accelerate the deployment of existing and development of new climate-friendly technologies

6. Step-up policy research, knowledge management and capacity building

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Integrating climate action in development

• Country-driven approach– Customized to adaptation needs and low carbon growth

opportunities in a country-specific context

• Multi-sector engagement based on demand• Tailor to the needs of both public sector (WB) and

private sector (IFC) clients• Focus on multiple benefits and development

opportunities of climate action• Attention to social dimensions: understanding the

needs of vulnerable groups, indigenous communities, e.g. support for recognition of ownership rights

• Support to local institutions

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Pillar 1

• Country-driven– Customized country-level approach balancing adaptation needs

and low carbon growth opportunities• Multi-sector engagement based on demand• Tailor to the needs of both public sector (WB) and

private sector (IFC) clients• Focus on multiple benefits and development

opportunities of climate action• Understand and address social dimensions• Strengthen local institutions

1. Make effective climate action – both adaptation and mitigation - part of core development efforts

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Pillar 22. Address the resource gap through existing and

innovative instruments for concessional finance

• GEF• Adaptation Fund• IDA as a platform for maintreaming adaptation• Carbon Finance

– Carbon Partnership Facility– Forest Carbon Parnership Facility

• Facilities by other MDBs, UN agencies, bi-laterals• Proposed Climate Investment Funds

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Available Resources

Sustainable Development @ The World Bank

GEF$ 0.25 bllnfor FY09

World Bank Group

(IBRD/IDA/IFC/MIGA)$1.9 billionfor FY09

Carbon Market: CDM&JI

< $ 8 billionfor FY09

UNDP$ 0.19 blln

for adaptation

GFDRR $ 0.07 blln

Adaptation Fund

$ 0.5-0.8 blln(2008-12)

Climate Investment Funds by MDBs$ 5 – 10 billion

for 3 years

FY09 estimates are projections

adaptation

mitigation both

GEF$ 0.25 blln

Main Resourcesto address

Climate Change

Other MDBs$3 billionfor FY09

EUGlobal Climate

Change Alliance€ 0. 3 blln

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Pillar 3

3. Facilitate the development of innovative market mechanisms

• Further engagament in carbon market• MIGA –carbon credit delivery guarantee• IFC- Structured financing packages blending CF with

loans and guarantees• Support to markets for energy efficiency services, green

products, etc.• WB Treasury - bonds at reduced rates to advance to

projects with climate benefits • Climate Risk Insurance products customized to different

needs

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Pillar 4

• MIGA guarantees; IFC leveraging• Partnering with private sector on sustainable

energy products• Advising private sector on climate mitigation and

adaptation• Regulatory frameworks conducive to climate

friendly investments• Mobilizing donor funding for innovative

investments – working with GEF and others

4. Create enabling environment for and leveraging private sector finance

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Pillar 55. Accelerate the deployment of existing and development

of new climate-friendly technologies

• Continue to accelerate technology deployment:– IFC clean production

programs – Proposed CIF envisages

clean technology window• Explore possible role in

technology R&D:– Assessment of models

from other sectors• Working with GEF and other

partners

Business as usual

Business as usual

Medium Tech Acceleration

Medium Tech Acceleration

High Tech Acceleration High Tech

Acceleration-40%

-20%

0%

20%

40%

60%

80%

100%

120%

2030 2050

% C

O2

Em

iss

ion

ch

an

ge

fro

m 2

00

5

CO2 Emissions from Energy

under Different Scenarios

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Pillar 66. Step-up policy research, knowledge management and

capacity building

• Growing regional and country programs – low-carbon growth studies in six countries; adaptation studies

• World Development Report 2010 on climate change• Global study on economics of adaptation• Social impacts of climate change• Economic and fiscal policy analyses• Diagnostic tools to support operations

– User-friendly software to screen for climate risks– Methodologies for carbon foot-printing of development projects

(starting with energy, transport, and forestry sectors FY08-09)– Guidance for economic analysis: discount rates, carbon pricing

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Consultations

SFCCD requested at Annual Meetings 2007 as evolution of CEIF

Through March 2008: Concept and issues development, early, informal consultations

April – July 2008: Global consultations on Draft Concept and Issues paper

Summer 2008: Consultations on full document tba October 2008 ~ beyond: SFCCD will remain flexible to

accommodate: Additional feedback New developments related to climate change regime and financial

architecture Most recent knowledge and lessons learned

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www.worldbank.org/climateconsult

1. What should the World Bank Group’s role on climate change be within the international development community?

2. The Concept and Issues Paper states that both mitigation and adaptation must be integrated into development efforts, where do you see the key areas of focus for the World Bank Group?

3. What role can the World Bank Group play to accelerate the development and deployment at scale of climate friendly technologies for energy, transport, agriculture and other sectors in developing countries?

4. Building capacity within countries, regions and institutions will be crucial to address climate change issues. How can the World Bank Group contribute?

5. What should be the role of the World Bank Group in mobilizing additional concessional financing and private sector investments to respond to climate change?

6. Other Comments?

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