IMO, MARCH 30, 2011

UPDATE ON FINANCING CLIMATE MITIGATION IN DEVELOPING

COUNTRIES AND THE ROLE OF THE WORLD BANK CARBON

FINANCE UNIT

INTERNATIONAL MARITIME ORGANIZATION

MARCH 30, 2011

SCOTT CANTOR

CARBON FINANCE UNIT

THE WORLD BANK

IMO, MARCH 30, 2011

I. Climate finance – the big picture

II. Recent updates on financing mitigation--outcomes from Cancun

III. Outlook – the future of carbon markets

IV. The World Bank’s involvement in Carbon Finance

V. World Bank responding to the needs of the carbon markets

Table of Contents

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IMO, MARCH 30, 2011 3

… to leverage

development

investments

Climate finance covers additional costs

and serves as a catalyst…

Total climate finance needed for developing

countries over 2010-20: US$ 180 bln to US$

250 bln p.a.* or 0.5 % of OECD GDP

Private Sector

Investments

National

Development

Budgets

International

Development

Assistance

Additional investment needs over 2010-20

(US$ bln p.a.)

Mitigation

Developing

countries

Adaptation

550 ppm 450 ppm

Global ~460~270

~150 ~220

~30

US$ 180

bln p.a.

US$ 4,620

bln p.a. (2008)Developing

countries

~30

Climate Finance: Additional costs and catalytic impact

* UNFCCC, IEA, McKinsey

IMO, MARCH 30, 2011 4

Finance & investment flows for climate action in developing

countries

Source: Atteridge et al. (2009). Bilateral Finance Institutions and Climate Change: A Mapping of Climate Portfolios, Stockholm Environment Institute.

IMO, MARCH 30, 2011 5

Recent news on financing mitigation – Cancun outcomes

Copenhagen commitment “anchored”:

Fast Start Finance of $30 billion (2010-12)

Parties to submit information to UNFCCC

annually on resources provided and how to

access them

Goal to mobilize Long-term Finance of $100

billion per year by 2020

Variety of sources including: public, private,

bilateral, and multilateral

Significant share of multilateral funding for

adaptation should flow through Green

Climate Fund

COP noted relevant reports on finance,

including that of High Level Advisory Group

Fast Start & Long Term Green Climate Fund

Decision to establish GCF – “accountable to

and under guidance of” Conference of

Parties

Governed by 24 member Board (with

equal representation from developing and

developed countries)

World Bank invited to be interim Trustee,

subject to review 3 years after establishment

Independent Secretariat

Transitional Design Committee

40 members (15 developed:25

developing); open to observers

Conveners: UNFCCC Executive Secretary

and Mexico

MDBs, UN, UNFCCC Secretariat and GEF

requested to second staff for design phase

Standing Committee to improve coordination

and coherence in delivery and MRV of

climate finance

IMO, MARCH 30, 2011

The future role of carbon markets in meeting the mitigation

challenge

Carbon markets catalyze private sector

resources and entrepreneurship

Report of the High-Level Advisory Group on

Climate Finance suggests a significant role

for carbon markets in meeting the $100

billion target of additional financing per year

by 2020:

Carbon offsets: $8-150 billion gross

per year

Auctioning of allowances: $2- 70 billion

per year

Offset levies: up to $15 billion per year

depending on carbon price

Amounts depend on carbon price and

volume of offsets (linked to ambition of

emission caps in developed countries)

Carbon markets are part of the equation for

funding climate change mitigation actions

This level of scaling up will require changes in

the regulatory environment

Carbon markets can leverage significant private finance to play a role in the GHG

mitigation and sustainable development challenges of the coming decades

1. Policy clarity

On the global post-2012 regime

On domestic use of offsets in cap-and-

trade systems

2. Reform of the Kyoto mechanisms

Streamline & simplify processes

Adapt mechanisms to allow rapid

scaling-up

Broaden eligible sectors: agriculture

(soil carbon), large hydro, carbon

capture & storage

3. Sustained capacity building

Enhance engagement from developing

countries in the evolution of

mechanisms

Strong host country policies &

complementary financial instruments

needed to leverage carbon finance for

low carbon development

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IMO, MARCH 30, 2011

Objectives

Pioneer: The Prototype Carbon Fund (2000)

established before there was a carbon market

Learning-by-doing approach & diversification

Model: create demand through the

establishment of carbon funds – and then

originate projects

Often purchase post-2012 vintages

WB’s environmental & social safeguards

Investing in capacity building

Carbon fund capital increased over time from

$160 million in 2000 to ~$2.5 billion now

19 public sector and 54 private sector

participants from 3 continents

Developer of – and contributor to – new

methodologies

The World Bank’s involvement in carbon finance

Means

Impact

An early mover which helped catalyze the carbon market and drive innovation

Global reach – 200 projects in 56 countries…

To pioneer flexibility mechanism 5 years

before entry into force of the Kyoto Protocol

To assist in building, sustaining & expanding

the reach of carbon markets

To experiment approaches and

methodologies beyond existing regulatory

framework

To strengthen capacity of developing

countries to benefit from carbon market

To ensure carbon finance contributes to

sustainable development

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IMO, MARCH 30, 2011

The World Bank has established public-private partnerships to

pioneer carbon markets (and still growing…)

19 public sector partners 54 private sector partners

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Carbon Finance Unit’s first generation of funds

PCF Country Funds Specialty Funds Aggregator Fund

Started in 2000—five

years before entry into

force of Kyoto Protocol

23 private & public sector

participants

Supporting capacity

building

Delivering emission

reductions since 2005

~$1.1 billion capitalized

funds and facilities

8 government and 22

private sector firms

participating

CDCF: focusing on CDM in

poorest communities

BioCF: afforestation &

reforestation pioneer,

along with soil carbon and

REDD

Tranche 1 provided

needed catalyst to the

fledgling carbon market

2 contracts for HFC-23

projects (~129 mtCO2e)

Helped China’s emergence

in CDM

Supported creation of

Chinese CDM governance

Tranche 2 closed in

February 2011 w/ €105 in

capital for purchases post

2012

T1 & T2

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The Carbon Finance Unit’s latest generation of product

offerings

Pioneer of Readiness and carbon

finance for REDD+

Partnership between developed and

developing countries and private

companies

Significant capacity building and

technical assistance

Forest Carbon Partnership

Facility

Carbon Partnership Facility

Forward-looking & transformative

Pioneer of PoAs – innovate to

broaden and deepen reach of CDM

Utilize carbon finance to scale up

systematic approaches to low carbon

growth

Public & private participants will gain

critical learning & experience

Partnership for Market

Readiness

Supporting countries’ development of

readiness component for market

instruments

Exploring, piloting and testing

domestic emissions trading and non-

GHG based schemes

Capacity-building and piloting that is

country-led and builds on country

priorities

Carbon Finance in the

Poorest Countries

Continuing the CDCF's pioneering

work of bringing the benefits of

carbon markets to the poorest

countries & communities

Continuing the BioCF that builds on

the funds ground-breaking work with

LULUCF

Open for participation by private sector

Under development

Open for participation by governments

IMO, MARCH 30, 2011

SCOTT CANTOR

CARBON FINANCE UNIT

THE WORLD BANK

1818 H STREET, N.W.

WASHINGTON, DC 20433

TEL: +1-202-473-3607

EDOPAZO@WORLDBANK.ORG